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Bangladesh: Fair Action reports that Nordic banks fail to hold H&M and other brands accountable to living wage promises

Bangladesh_Garment Industry_Living Wage_Fair Action Report_Credit_BD Apparel News_04.02.2019

 

In February 2019, Fair Action released a report exploring, among other things, the role of Nordic banks (as shareholders) in holding H&M accountable to its promise to ensure living wages for garment workers in its supply chain by 2018, particularly in Bangladesh. Fair Action studied 14 banks, finding that "none of the banks are doing enough to push for living wages" and, specifically, that "the banks have not demanded that the garment companies set concrete objectives in terms of measurable wage increases." 

We invited Länsförsäkringar, Skandia Mutual Life; Handels Banken; Danske Bank, Swedbank, Nordea, SEB Group, DNB, Storebrand, KLP, Sparebank 1 Nord-Norge, Sparebank 1 SR-Bank, Sparebank 1 SMN, Sparebank 1 Østlandet, Sparebank 1 Østlandet to respond to the allegations.

Nordea and Danske Bank chose not to respond. 

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Company response
3 March 2019

Storebrand’s response to the Fair Action report “Broke in Bangladesh”

Author: Tulia Machado-Helland, Senior Legal Adviser ESG, Storebrand, Norway

Thank you for contacting us regarding the Fair Action's report on the garment industry in Bangladesh with focus on Nordic companies and banks.

Since Storebrand Asset Management is not invested in either KappAhl or the Stockmann Group, which Lindex is part of, our answer will focus on our dialogue with Hennes & Mauritz (H&M).

Storebrand has been engaging with H&M over the years regarding labor conditions in general and child labour in particular. In 2012, Storebrand started to focus more on wages policies and purchasing practices at suppliers. In 2013, Storebrand visited H&M at its headquarters in Stockholm before H&M announced its Fair Living Wages roadmap. Organisations applauded H&M's announcement, as H&M was taking a leading role regarding this issue within the textile industry. After the announcement, Storebrand continued the dialogue regarding labour conditions and followed up on the actual implementation of H&M's commitment on living wages until 2015.

After the first years of implementation, our sustainability data provider was showing how the company was making progress. It highlighted that overtime had been reduced 40% and there had been an improvement in payment structures. Therefore, at that time, we decided to allocate resources to more pressing engagement initiatives. After the summer of 2018, we resumed our engagement with the company since it seemed the company was not meeting its objectives.

H&M has been helpful in explaining its Fair Living Wage strategy and how it has met the objectives that it set out in 2013. As the Fair Action's report states: H&M committed to make sure that the company's strategic suppliers should have pay structures in place to pay a fair living wage to 850 000 workers by 2018. The company's focus has been on working towards creating the mentioned pay structures together with 20 other brands by engaging via ACT (Action, Collaboration, Transformation) initiative with trade unions, governments and suppliers. Although, the company means they have been successful in creating these structures, it also admits that they have not been able to test its effectiveness in terms of raising wages across H&M group’s supply chain. It takes time to effect long-term societal structural changes. These are suppliers that are not used to engaging in collective bargaining with unions. All stakeholders need to learn the basics.

The strategy covers Cambodia, India, China, Indonesia, Turkey, Vietnam, Myanmar, Pakistan and Bangladesh. The company has explained that its progress should not be determined against the measure of whether 850,000 workers at strategic suppliers’ factories achieved a living wage in 2018. H&M group was explicit that it was not going to establish specific wage levels or rates at the outset of this work.

However, the company shows in its website how the average take-home wage has been higher for the suppliers that are enrolled in their wage-management systems during 2017 and 2018 compared to those that are not. It also admits that these wage improvements are still well below where a fair living wage should be.

Storebrand's dialogue with the company has focused on the implementation of purchasing practices that should lead to an increase in wages, ultimately living wages. The company so far, has not been able to provide to what extent it is sharing the cost of raising wages though the implementation of these practices. The company does not calculate if it is paying more for products coming from suppliers enrolled in wage-management systems. However, they do mention that they remove labour cost from price negotiations and that they are willing to pay more..

At this point, Storebrand will continue engaging with the company regarding this issue. Although, it seems that the company has made progress regarding wage-management systems or pay structures, it is still not clear to us to what extent the company is sharing the cost of raising wages with its suppliers. We will continue to engage with H&M to make the company accountable and make sure it does its very best to raise the standards in the textile industry. H&M considers itself a leader within the industry regarding this issue. We would like to make sure that it actually is. Their work could be used as an example for other textile companies that may still think that living wages are not an achievable proposition. To be that example, it is urgent that H&M continues to work for meaningful change. Storebrand will, together with other investors, continue its dialogue with the company as long as we believe it can make a difference going forward.Finally, we are extremely grateful to Fremtiden i våre hender and Fair Aciton for bringing attention to this issue, and for providing information to investors. This also makes us better responsible investors. 

 

Article
3 March 2019

Swedbank’s response to the Fair Action report “Broke in Bangladesh”

Author: Katarina Heissenberger, Analyst, Responsible Investments, Swedbank, Sweden

Swedbank Robur outperforms the other investors in the report by Fair Action, both in the total comparison as well as regarding engagement per company. Swedbank is also the most active owner with own, direct engagement dialogues with textile and apparel brands specifically targeting wage.

 However, we are not satisfied at this level. Human Rights and labour standards are central in Swedbank Robur’s company analyses. In textile production these issues are extra exposed and we follow the development closely. Already in 2002 Swedbank Robur raised directly with apparel brands, the need for social risk assessments in their supply chains. Swedbank early identified wage as a material sustainability issue in apparel and included it in engagement dialogues with companies starting 2012. Thereby we have contributed to bringing these issues to the agenda of companies and we have pushed them further regarding open and transparent communication of their actions and results. We have a responsibility and we will continue our engagement with companies around fair living wages.

Article
4 March 2019

Bangladesh: Banks fail to hold H&M accountable to living wage promises, says Fair Action report

Author: Fair Action (Sweden), Fair Finance Guide International, The Future in Our Hands (Norway)

"Shareholders of H&M fail to take responsibility for garment workers’ wages", 31 January 2019

H&M did not keep the promise to make it possible for 850 000 garment workers to earn a living wage by 2018. Several Nordic banks are among H&M’s largest owners...However, the banks have not used their influence to hold H&M accountable for its living wage commitment, a new report by Fair Action and Fair Finance Guide shows...

The report outlines the investments of Danske Bank, DNB, Handelsbanken, KLP, Länsförsäkringar, Nordea, SEB, Skandia, Storebrand and Swedbank as well as four savings banks (Sparebank 1 Nord-Norge/ SMN/SR/Östlandet) in the Nordic brands H&M, KappAhl, Lindex and MQ. The four fashion companies all buy clothes from Bangladesh, where employees in the factories are among the lowest paid in the world. H&M is the world's largest buyer of garments from Bangladesh. Around 80 percent of the work force in the country's garment sector is female. 

The report shows that none of the banks are doing enough to push for living wages in the four companies’ supply chains. More specifically, the banks have not demanded that the garment companies set concrete objectives in terms of measurable wage increases.

[Full report attached below]

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