November 20, 2016
SHADOW FACTORIES: A FASHION NIGHTMARE

We all know sweatshops are bad news – after all those documentaries in the 90s everyone got mad and things started to change. Right? Maybe not. It turns out the fashion industry has an even darker secret. When modern and law-abiding garment factories over-commit to contracts they can’t possibly fill, they turn to their sketchy little brothers: the sub-contracted ‘shadow’ factories.

Over the last couple of decades, a lot of prominent brands have made commitments to big, positive changes in the industry. In the wake of shocks like the 2013 collapse of the Rana Plaza factory in Bangladesh, when 1,129 workers died, it became obvious that producing clothing like this was bad for business. It had a lot of us hoping that we were on the way towards a more responsible fashion world. 

But the unfortunate reality is that many brands continue to push manufacturers for lower and lower prices. In economies like China, Cambodia and Bangladesh, competition in garment manufacturing is fierce, and contracts with the big brands are incredibly valuable. If you’re in the game to win, you have to get two things right: hit a low price point, and deliver on time.

The result? Exactly what you’d expect. Faced with unmanageable pressure, factories cut corners to deliver on price and on time. This means lower wages, less commitment to environmental standards, and poorer-quality clothes. No matter how many commitments big apparel retailers make to keep their production chains responsible, the numbers don’t lie: you can’t produce that much clothing for such low prices and still play fair. Something’s gotta give.

A young boy works at an unregistered garment factory in Jakarta. (Photo: ©ILO/Asrian Mirza)

There is one easy way to make clothing at an unbeatable, rock-bottom, bargain-basement price: offload work to places so informal that they can’t be traced. These are the shadow factories. Acting as subcontractors, shadow factories operate illegally: closed to visitors and usually unregistered, often they don’t officially ‘exist’. The fatally dangerous Rana Plaza was full of factories like this, but some of the brands produced there actually had no idea they were buying from them. Some very large mainstream retailers have outright denied that they have anything to do with sub-contracted factories – but then had to backtrack when their products were found in the wreckage of major fires and building collapses.

A boy combs through the rubble of the Rana Plaza collapse, which killed 1,129 people. The building housed several subcontracted ‘shadow factories’. (Photo: NYU Centre for Business and Human Rights)

With the dangerous implications of an unregulated industry exposed, some of the biggest brands in Europe and North America formed “the Alliance for Bangladesh Worker Safety”, and “The Bangladesh Accord on Fire and Building Safety”, committing over $100 million to the cause. These two groups have similar goals of inspecting and improving factories, but a recent NYU report showed that they are only focusing on direct contractors. The inspections by the two groups account for a mere 27% of factories in the country, leaving nearly 3 million shadow factory workers invisible to the system.

Shadow factories are the workplaces with no toilets, cramped and dirty places to sleep, exhausting working hours, and non-existent or blocked fire escapes. Staff are usually young women, often miles away from their families, and very vulnerable to harassment. One practice we have seen in Bangladesh is the labeling of employees as ‘apprentices’ or ‘trainees’, allowing employers to pay them less than half the minimum wage.

A factory that doesn’t officially exist in Bangladesh. (Photo: NYU Centre for Business and Human Rights)

Most importantly, big fashion buyers can keep driving prices down, while pretending that they have nothing to do with this bad behaviour – it’s off the books. When auditors from the big brands come along, checking up on conditions for workers and ‘innovations’ to improve sustainability, what they’re shown is the showcase factories that meet all the high standards. This isn’t the dirty, everyday reality, it’s the industry in its Sunday Best: the squeaky-clean version that makes the factories – and their customers – look as good as they possibly can.

Unfortunately, many fast fashion brands and their auditors don’t want to be told that they’re asking the impossible. They don’t want to hear managers say, “Sorry boss - we can’t make that many garments at those prices and still have good conditions.” Something about having tons of money on the line makes us prone to hearing what we want to hear.

As that wise old crustacean Sebastian the Crab would remind us, ‘When you want something done, you gotta do it yourself’. If we want answers, we have to start asking the right questions. The sad truth is, if a brand really can’t tell you where their clothes were made, there's something to hide. 

For more information on the problem of sub-contracting in Bangladesh’s garment industry, we highly recommend reading this report by the NYU Stern Centre for Business and Human Rights, published in April 2014.