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Abandoned?
e Impact of Covid-19 on Workers and Businesses
at the Boom of Global Garment Supply Chains
Mark Anner, Ph.D., Director, Center for Global Workers’ Rights
in Association with the Worker Rights Consortium
Research
report
March 27, 2020
Updated Addendum on buyer commitments
to pay for in production orders,
April 1, 2020. See page 8.
Executive Summary
e global Covid-19 pandemic has had a devastating impact on global garment supply chains, and the situation
will get far worse before it gets beer. As clothing outlets have been shut by lockdowns in developed market econ-
omies, sinking demand for apparel, brands and retailers have moved quickly to cancel or postpone production
orders – refusing, in many cases, to pay for clothing their supplier factories have already produced. e result has
been the partial or complete shutdown of thousands of factories in producing countries. As a result, millions of
factory workers have been sent home, oen without legally-mandated pay or severance.
is Research Brief draws from responses from an online survey of Bangladesh employers, administered between
March 21 and March 25, 2020, to document these trends. It reveals the devastating impact order cancellations
have had on businesses and on workers. Crucially, it illustrates the extreme fragility of a system based on decades of
buyers squeezing down on prices paid to suppliers: factory closures, unpaid workers with no savings to survive the
hard times ahead, and a government with such a low tax revenue that it has very limited ability to provide meaning-
ful support to workers and the industry.
1. Since the coronavirus pandemic took hold, more than half of Bangladesh suppliers have had the bulk of their
in-process, or already completed, production canceled (45.8% of suppliers report that ‘a lot’ to ‘most’ of their
nearly completed or entirely completed orders have been canceled by their buyers; 5.9% had all of these orders
canceled). is is despite the fact that buyers have a contractual obligation to pay for these orders. But many
are making dubious use of general force majeure clauses to justify their violations of the terms of the contract.
2. When orders were canceled, 72.1% of buyers refused to pay for raw materials (fabric, etc.) already purchased
by the supplier, and 91.3% of buyers refused to pay for the cut-make-trim cost (production cost) of the suppli-
er. As a result of order cancellations and lack of payment, 58% of factories surveyed report having to shutdown
most or all of their operations.
Center for
Global Workers’
Rights (CGWR)
3. More than one million garment workers in Bangladesh already have been red or furloughed (temporarily
suspended from work) as a result of order cancellations and the failure of buyers to pay for these cancellations.
Suppliers in the survey reported that 98.1% of buyers refused to contribute to the cost of paying the partial
wages to furloughed workers that the law requires. 72.4% of furloughed workers were sent home without pay.
97.3% of buyers refused to contribute to severance pay expenses of dismissed workers, also a legal entitlement
in Bangladesh. 80.4% of dismissed workers were sent home without their severance pay. is is despite the
fact that many brands have “responsible exit” policies, in which they commit to support factories in mitigating
potential adverse impacts to workers should they decide to exit.
4. e survey ndings presented in this report depict the most comprehensive evidence to date on the depth of the
crisis in Bangladesh. e essential dynamics presented here are evident in garment exporting countries worldwide.1
Recommendations
All parties are feeling the extreme burden caused by Covid-19. However, not all parties are equally situated to nd
the liquidity needed to cover their expenses. As shops, outlets, and malls are ordered shut, retailers and brands are
taking an enormous hit to their boom line and cash reserves. However, the hit on supplier factories, who generally
operate on paper-thin margins and have far less access to capital than their customers, is that much more extreme.
And the burden on workers – who very rarely earn enough to accumulate any savings and who still need to put
food on the table and possibly cover unforeseen health expenses – is enormous.
1. It is incumbent on the parties with the greatest ability to procure loans and benet from government bailouts to
share those benets down the supply chains. In this regard, we call upon all buyers to respect the terms of their
purchasing contracts and pay suppliers for orders already in production or completed. See Addendum, page 8.
2. Suppliers, for their part, must ensure that payments received from these buyers are used to cover all legally-
mandated wages and benets, including severance payments to dismissed workers.
3. e government of Bangladesh must continue to mobilize all the resources at its disposal to subsidize suppliers
and provide wage support to all workers during the crisis.
4. Going forward, buyers should learn from this crisis to revise purchasing practices to ensure proper social and
environmental sustainability. ese changes include order stability that allows for proper planning, timely pay-
ments of orders, and full respect for workers’ rights. It also includes a costing model that covers all the costs of
social compliance: living wages, benets, severance pay, building safety, etc. One way to cover some of these
expenses is an additional charge levied on freight on board (FOB) prices.
5. Given present realities, adequate protection for the vast numbers of garment workers aected by the crisis, in
Bangladesh and across the global supply chain, will require the mobilization of international nancial resourc-
es. e cost of maintaining income for the world’s garment workers represents a small fraction of the trillions
in nancial stimulus and rescue now being brought to bear on behalf of businesses and workers in wealthy
countries.
Abandoned? page 2
1 For example, see Chua, Jasmin Malik. “10,000 Cambodian Garment Workers, 27 Factories Caught in Covid-19 Chaos.” Sourcing Journal.
March 16, 2020; Russell, Michelle. “Myanmar’s Garment SMEs Feeling Covid-19 Impact.” Just-Style, March 16, 2020; and Chua, Jasmin
Malik, “Central American Factories Accused of Exploiting Workers During Covid-19 Crisis.” Sourcing Journal, March 26, 2020.
Abandoned? page 3
Apart from the tremendous human tragedy le in its
wake, the coronavirus pandemic will have profound
economic repercussions for workers everywhere. e
eects of the global economy’s collapse will worsen
before they ameliorate and will continue to be felt for
years to come. e International Labour Organization
predicts that 25 million jobs will be lost worldwide as
a result of Covid-19.2 Workers in global supply chains
are particularly vulnerable to termination and econom-
ic destitution.
As governments in wealthier countries order lock-
downs to control the pandemic, demand for apparel
is plummeting, leading many brands and retailers to
halt production. As a result, factories around the world
are shuering, rendering millions of garment workers
in Bangladesh and beyond jobless. ese are workers
who, prior to their termination, were making extremely
inadequate wages and for whom saving up for a safety
net was never an option.
While anecdotal accounts in the media have already
begun to paint a disheartening picture of the eects
of Covid-19 on the global garment workforce, this re-
search brief provides strong empirical evidence expos-
ing the breadth and depth of the problem in Bangla-
desh’s garment sector.
e next section discusses the methods employed in
this study. is is followed by a section outlining the
three phases of the Covid-19 crisis for the garment sec-
tor in Bangladesh, aer which the profound impact of
the crisis upon garment workers is examined. e gov-
ernment’s response to Covid-19 in Bangladesh follows,
before concluding with a set of recommendations.
Methods and Data
is report draws on a survey of Bangladesh suppli-
ers conducted online between March 21 and March
25, 2020. ere are approximately 2,000 suppliers in
Bangladesh and 4,000 factories (many suppliers own
multiple factories). Of these, 316 suppliers completed
the survey. is puts the sample size within the ap-
proximate connes of a 95% condence level and a 5%
condence interval.
Of the respondents, 15 are owners of small factories
(250 or fewer workers), 104 are owners with medium-
sized factories (between 251 and 750 workers), and
197 have 751 or more workers. Most of the buyers
of these suppliers (67.7%) are European; 15.8% are
American, 4.8% are Asian, and the remainder are “oth-
er” or a mix of American, European, and Asian rms.
ree Phases of the Crisis
e current crisis facing the garment sector in Ban-
gladesh developed in three phases. First, there was the
crisis of ‘raw materials’ procurement. Second, there was
the crisis of buyer late payments. ird, there has been
the crisis of buyer cancellations of in-process orders.
e culmination of these three phases has been dev-
astating on businesses and over 1 million workers. e
survey covers these three phases.
Crisis Phase One: Raw Materials
On December 31, 2019, the government of China
alerted the World Health Organization (WHO) to a
health emergency in Wuhan City in the Hubei prov-
ince. Just over three weeks later, the government placed
Abandoned?
e Impact of Covid-19 on Workers and Businesses
at the Boom of Global Garment Supply Chains
2 See: International Labour Organization, “Almost 25 million jobs could be lost worldwide as a result of COVID-19, says ILO,” March 18,
2020, hps://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_738742/lang--en/index.htm.
Wuhan’s 11 million inhabitants on lockdown. Other
cities in the province followed suit soon aerwards.
For garment global supply chains, this impacted not
only Chinese exports of nal products, but it dramati-
cally impacted Chinese raw materials (notably fabric)
needed by exporters elsewhere, from Bangladesh and
Cambodia to Honduras.
According to our survey ndings, 93% of Bangladesh
suppliers reported delays in raw material shipments
Crisis Phase Two: Delayed Payments
As the Covid-19 pandemic began to hit the boom
line of buyers, suppliers reported increased delays in
payments.3 Our survey conrms these reports. 10.9%
of suppliers said they experienced delays of 1 to 10 days
in payments, relative to contractually stipulated terms,
and 68.8% said they experienced delays of more than
10 days. [See Figure 2.] Indeed, according to Mostaz
Uddin, some buyers were pushing back payments by
30 days or more.4
Abandoned? page 4
Figure 1
91.85%
Did Buyers Adjust Prices to Help Cover Cost of
Raw Material Increase?
5.19%
2.96%
Figure 2
Have Buyers Delayed Their Payments to You
for Completed Orders?
68.84%
20.29%
10.87%
from China. Of these, 53.4%
indicated that buyers subse-
quently penalized them for
the resulting delays in their
shipments. In addition to the
delays in receiving raw mate-
rial, 38.3% reported that the
price of their raw material in-
creased by ‘a lot,’ and 47.7% re-
ported prices increased ‘some’
as a result of the crisis in Chi-
na. When asked if buyers ad-
justed their prices in response
to a large increase in raw mate-
rial prices, 91.9% said no. [See
Figure 1.]
3 See Abdulla, Hannah. “Rise in Payment Delays Weighs on Bangladesh Factories.” Just-Style, March 17, 2020.
4 Ibid.
Crisis Phase ree: Cancellation of
Orders in Progress
By mid-March 2020, an even deeper crisis began to hit
the industry. Buyers began to abruptly cancel (or put
on hold) not only future orders, but orders already in
process. Some of these orders were entirely nished
and ready to be shipped, but the buyers refused to ac-
cept order shipments or honor their contractual obliga-
tions to pay for these orders. At the time of the survey,
23.4% of suppliers indicated that “a lot” of in-process
orders had been canceled, 22.3% had “most” of their
in-process orders canceled, and 5.9% had all of their in-
process orders canceled. [See Table 1.]
According to press reports, Primark – which last year
posted operating prots of $1.07 billion5 – is one ex-
ample of a buyer that canceled all its orders with its
suppliers. is includes “orders already in production at
factories” (emphasis mine).6 Many buyers are evok-
ing the force majeure clause in their contracts to justify
the breaking of their binding obligation to pay for or-
ders in production. But, for fashion law expert Alan
Behr, this appears to be an unjustied use of the force
majeure clause since most force majeure clauses do not
specif y pandemics as a reason for failure to pay.7 More
importantly, according to Article 7.1.1 of the Vienna
Convention for International Commercial Contracts,
force majeure claims should apply to the party with the
most relevant contractual obligation, which in this case
would be the Bangladeshi factories producing items,
not the buyers that have agreed to pay for them.8
Press reports show that, as of March 22, 2020, buy-
ers had canceled $1.44 billion worth of Bangladesh
garment exports.9 e survey results show that in the
majority of cases (72.1% of cases), when in-process
Abandoned? page 5
Since the Outbreak of the Coronavirus, Have
You Had In-Process Orders (e.g., Orders That Are
-
celled Prior to Shipment?
Table 1
Factories
All 16 5.9%
5 Wright, Beth. “Low-Price Focus Drives Protable 50th Year for Primark.” Just-Style, November 5, 2019.
6 Russell, Michelle. “Primark Cancels all Orders as UK Stores Close.” Just-Style, March 23, 2020.
7 Cited in Young, Vicki M., “inking about Canceling on Your Factory? Here’s What You Need to Know.” Sourcing Journal, March 23, 2020.
8 See: International Institute for the Unication of Private Law, UNDROIT Principles 2010, Article 7.1.7 (Force Majeure), hps://
www.unidroit.org/instruments/commercial-contracts/unidroit-principles-2010/404-chapter-7-non-performance-section-1-non-per-
formance-in-general/1050-article-7-1-7-force-majeure.
9 Donaldson, Tara. “Fashion Retailers Cancel Nearly $1.5 Billion in Orders from Bangladesh.” Sourcing Journal, March 23, 2020.
Figure 3a
When buyers have cancelled orders,
have they agreed to pay for raw
already purchased?
Figure 3b
orders have been can-
celed, buyers have
refused to pay for the
cost of raw material
(fabric, etc.) that was
already purchased by
the suppliers. Buy-
ers also refused to
pay the suppliers’ cut
and make production
costs in 91.3% of the
cases. [See Figures 3a
and 3b.] e impact
Yes
Some Cases
Yes
Some Cases
When buyers have canceled orders,
have they agreed to pay for
When asked if buyers agreed
to assist suppliers with the
cost of furloughing workers
as a result of buyer in-process
order cancellations, 98.1%
of suppliers indicated no
such support was provided.
When asked if buyers agreed
to assist suppliers with sever-
ance pay costs when workers
were dismissed as a result of
buyer in-process order can-
cellations, 97.3% of suppliers
responded that buyers pro-
vided no such support. [See
Figures 6a and 6b.]
Abandoned? page 6
10 Ibid.
11 Cited in Wright, Beth. “Brands Urged to Shield Global Garment Workers from Covid-19.” Just-Style, March 19, 2020.
12 Ibid.
of these abrupt cancellations of in-process orders has
been severe; 53.4% of suppliers report shuing down
most of their operations and 4.5% of suppliers report
having already closed their facilities. [See Figure 4.]
Impact of the ree Crises on Workers
e impact of these developments on workers has
been devastating. At least 1.2 million workers had al-
ready been aected by the order cancellations.10 e
question now is what sort of support, if any, workers
19.9% 22.2%
4.5%
Figure 4
As noted by Kalpona Akter, executive director of the
Bangladesh Center for Workers Solidarity, “Garment
workers live hand to mouth. If workers lose their jobs,
they will lose their monthly wages that put food on
the table for them and their families.”11 She adds, “If
workers are laid o, brands should ensure immediate
payments to factories so that workers receive their full
legally-owed severance.”12 As Covid-19 starts to gain a
foothold in Bangladesh, workers and their families also
will be burdened with considerable health care expens-
Figure 5
Some income for furloughed workers Severance pay for dismissed workers
27.56%
19.60%
80.40%
72.44%
can be expected to receive. For
suppliers who abruptly lost
buyer in-process contracts
with no compensation, 72.4%
said they were unable to pro-
vide their workers with some
income when furloughed
(sent home temporarily),
and 80.4% said they were un-
able to provide severance pay
when order cancellations re-
sulted in worker dismissals.
[See Figure 5.]
Yes
the moment employment shutdown
es, making the payment of wages and severance all the
more urgent.
Covid-19 in Bangladesh and the Govern-
ment Lockdown
On March 25, 2020, the situation reached an entirely
new level when the government announced a country-
wide lockdown.13 e lockdown includes a ban on pas-
senger travel via waterways, rail, and domestic ights.
Public transportation on roads also has been suspend-
ed. However, it appears that, given the importance of
garment exports to the economy, at this writing, gar-
ment export production is permied. e challenge for
those factories still receiving orders will be providing
transportation to workers while fully ensuring that they
are kept safe with appropriate social distancing and
other measures.
Conclusions
e global apparel industry is undoubtedly in its great-
est crisis in over a generation. Store closures in Europe,
the United States, and beyond has shut much of the in-
dustry down. While online shopping is an option, given
rising unemployment, declining incomes, and remote
have le many suppliers with minimal capital and now
mounting debts. Years of low wages with no savings
and lile hope sustained government support will
leave workers in dire situations. And chronic low tax
revenues from buyers have le exporting country gov-
ernments with weak social safety nets to assist workers
in this time of crisis.
e responsible approach is for brands and retailers
to nd ways to access lines of credits or other forms of
government support to cover their obligations to sup-
plier factories so that they can cover their expenses and
pay their workers in order to avoid sending millions of
workers home with no ability to put food on the table
let alone cover medical expenses.
Going forward it is necessary to re-think how the in-
dustry does business. Purchasing practices must be
reformed for social and environmental sustainability.
is includes stable orders, timely payments, and pric-
ing mechanisms that cover the total cost of sustainable
production, from living wages and proper benets to
tax revenues that allow governments to build proper
social safety nets. And it includes allowing worker par-
ticipation to be an integral part of this process through
full respect for the right to form unions and bargain
collectively.
Abandoned? page 7
13 Donaldson, Tara. “BREAKING: Bangladesh Follows India in Country-Wide Lockdown, Leaving Factories Facing ‘Indenite Shut-
down.’” Sourcing Journal, March 25, 2020.
Figure 6a Figure 6b
working, shopping for
new clothes is either
not an option or not
a priority. us, the
crisis of brands and re-
tailers is real and pro-
found. However, the
way the brands and
retailers are managing
the crisis is envisaging
damage far more dire
on suppliers and their
millions of workers.
Decades of low prices
Yes
Yes
Buyers Helping with Worker
Furlough Costs
Buyers Helping with Worker
Severance Costs
Abandoned? page 8
Addendum
Updated April 1, 2020
Major buyers of Bangladesh-made apparel
Current position on payment for orders in production or completed
Commitment to pay for all orders in production or completed:*
1. H&M
2. Inditex
3. Kiabi
4. PVH (with deferred payments)
5. Target (USA)
6. VF
Top buyers that, at this writing, have not made such a commitment:
1. Bestseller
2. C&A
3. JCPenney
4. Kohl’s
5. LLP
6. Marks & Spencer
7. Mothercare
8. Primark
9. Tesco
10. Wa lm a r t
* Determination of status based on public statements made by brands and/or communications to suppliers or to
the authors.
