Tackling unethical purchasing practices

Transparency and sustainability are two topics which constantly appear regarding the global apparel industry. As has been much publicized, all of us involved in the Bangladesh RMG industry are fully aware that, as suppliers, we must take a leading role and responsibility for providing a safe, ethical working environment for the people we employ and ensure that we adopt environmentally-sound business practices.

But the efforts made by the Bangladesh RMG industry to improve in terms of compliance, sustainability, and transparency are undermined by the unexpected purchasing practices of some buyers. Though such buyers may be few, but in many cases they are continuing unethical purchasing practices with impunity.

A Bangladesh manufacturer, trading with a European buyer, very recently faced an impossible situation: The buyer in question first declared himself bankrupt then acquired new shares in the company and began pressurising suppliers to ship goods at highly discounted rates versus the agreed purchase price, under the threat of refusal to accept any of the finished production.

The manufacturer in question had the finished product for the buyer, both at his factory and at the port waiting to ship. After a prolonged series of negotiations, the customer offered to pay 50% of the original purchase price but with the additional instruction that the goods be air-freighted at the manufacturer’s expense.

This placed the manufacturer in an unenviable position -- should he relinquish the goods and pay for the air-freight, with no solid guarantee of settlement, even though the exercise would eat into the meagre profit margin that he was making, or should he retain the goods and try and dispose of them by some other means to recoup some of his losses?

Either option would mean that the manufacturer would face substantial losses, through no fault of his own -- all goods were manufactured on time, to the required standard specified by the buyer. 

Without any alternative recourse for action, the manufacturer now faces a waiting game in the (I suspect) vain hope that the customer will improve his offer.

This handful of unscrupulous brands are also tarnishing the image of the whole gamut of buyers who are doing business with Bangladesh. So, I would raise the question: Should such brands and retailers, who adopt such underhanded tactics, be allowed to conduct business?

As an industry, the RMG sector needs to consider ways in which these unacceptable business practices can be curtailed to safeguard the interests of both factory owners and the long-term effects on the nation’s economy.

One approach to consider would be our government -- together with non-government bodies representing the RMG sector (the BGMEA and the BKMEA, for example) and leading representatives from the sector -- drawing up a list of criteria defining probity for customer’s purchasing practices. Probity, as defined in a recent memorandum from the Australian government’s department of finance regarding procurement practices, is “the evidence of ethical behaviour and can be defined as complete and confirmed integrity, uprightness, and honesty in a particular process.”

Once agreed, these criteria could form the basis of terms that need to be agreed by buyers before embarking on orders from Bangladesh. If the industry unites and adopts this policy of probity, stipulating conditions before a contract is agreed with a buyer need not incur lengthy bureaucratic hold-ups.

Another approach to consider, which could be too radical for some, is the compiling of a “blacklist” of the buying companies whose previous purchasing practices have been proven to be suspect. This list should be made widely available to all involved in the garment industry and also to international agencies and governments.

If a manufacturer were to consider trading with a company on the blacklist, he could then negotiate more favourable terms and guarantees to ensure that the necessary payments are made before goods are shipped or released at port of entry to the customer. 

It is now also the time for the entire buying community to unite and take a stand against the black sheep in the community who are staining their overall reputation while there exists a good number of buyers who follow ethical purchasing practices and business norms. 

It is a known fact that buyers, through their purchasing practices, can have the most far-reaching impact on human rights and the general well-being and financial security of the manufacturers and their workforces whose services they use. 

So, ethical purchasing practices in the apparel supply chain is not an option but an imperative, for which all the stakeholders have to work together for the mutual benefit of all. 

Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE). He can be reached at [email protected].