Rana Plaza: How did financing play a part?

The third anniversary of the Rana Plaza disaster (where 5 garment factories fell, killing 1,135 people) is just around the corner.

It’s easy to disconnect the fashion brands we love from that problem in another land.

The news focuses on the factory conditions and blames the factory owner.

They don’t focus on the major clothing brands that use those factories to produce their luxury clothing lines. They have a direct influence over the worker’s wages and working conditions.

These brands influence how the factories run, based on how they pay for the goods they order. When they order a batch of natural cotton T-shirts, for instance, they give no cash in advance. It is left to the factory owners to come up with the funding to buy the raw materials, pay for production and shipping, and then wait 30 to 120 days to receive a payment to cover all of those expenses. In the mean time, they have to come up with more cash to fund yet another batch of clothing.

The major brands take on none of this risk. The burden of their production rests on the head of a small factory owner. If the factory owner refuses and insists that the brand pay for supplies up front, the brand will just hop to another competing factory in another country.

While there have been some improvements, a full 86% of brands still have no interest to make sure workers are paid fairly.

A better question for the journalists to ask is how are productions financed and what are the payment terms. As a consumer, it’s important to ask if a company practices ‘fair trade principles’ even if the company is not registered with any fair trade organization.

One of the most important principles is that the financing of production is not on the shoulders of the producers and advances are paid.

We’re paying a much larger price for that lovely silk blouse than we realize. If we don’t ask if a company practices ‘fair trade principles’ then we are contributing to the problem!

At Indigo Handloom we are dedicated to sustainable fashion and fair treatment of workers. If we receive a “special order” from a company that will take extra resources, we ask them for an advance.

We won’t force our weavers to finance a company’s production and that means we often have difficult conversations with our customers.  When I first started working with large companies, they refused to give an advance and so I was forced to take out loans, as were my partners in India.

But without an advance, we would have to finance production without a single payment for 5 to 7 months.  Guess who doesn’t get paid on time if the money runs out? It’s always the people at the bottom of the food chain. Even with my best intentions, it has happened that weavers did not get paid on time.

Now, we do not make a move without an advance payment.

Recently I was in a conversation with a well-known, highly successful fashion brand based in New York City. When I broached the subject of an advance, they recoiled. They admitted that in their 10 years of building an empire, they never once gave any of their suppliers an advance - not even one.

I insisted on the advance as part of the terms of keeping ‘fair trade’ principles. Finally, they agreed that if we end up working together, they will pay an advance.

It’s a tiny change but the retraining of the fashion industry has to start somewhere.