The 2013 tragic collapse of the Rana Plaza Textiles Factory in Bangladesh caused outrage and an unprecedented sense of urgency to improve the lives of factory workers. Investors joined forces to call on textiles brands to take action. Find out more about our role in this collective initiative and the power of momentum.

Inciting action

In 2012 and 2013, two tragedies occurred in Dhaka, Bangladesh: a fire in the Tazreen Fashion factory causing the death of more than a hundred people and the collapse of the Rana Plaza building, killing more than a thousand people. Both incidents caused outrage in the industry and a sense of urgency after years of smaller incidents in Bangladesh. The tragedies caused enormous momentum for companies in the garment industry to take action. Immediately following the Rana Plaza incident, major textiles companies signed the ‘Accord on Fire and Building Safety in Bangladesh’ (the Accord), including those in the Triodos sustainable investment universe, such as H&M and Inditex. A combination of investor pressure, public outrage, and reputational risk contributed to the signing of the multi-stakeholder Accord by textiles companies.

The Accord outlined a very concrete five-year work program to address fire and building safety in Bangladesh’ garment factories. Immediately following, a donor trust to compensate the victims was set up, with the aim to attract USD 30 million in compensation.

Active participation among investors

Over 200 global institutional investors formed the Bangladesh Investor Initiative organised by the Interfaith Center on Corporate Responsibility (ICCR) to actively engage apparel manufacturers and retailers on worker safety issues. The investors have contributed to the success of the Accord and the Trust Fund by publicly supporting these initiatives and repeatedly calling upon companies to sign the Accord and to provide funding to the established trust fund. Voluntary commitments made by companies to finance the trust fund did not come into fruition until investors upped the pressure with a collaborative letter featuring various signatories, inciting committed action.

Triodos Research led the collaborative engagement with Inditex. The company replied that it had donated generously to the donor fund and wrote a separate letter with an update on the efforts made as a result of the Bangladesh Accord. For instance, the company is working on a pilot project concerning a number of factories, where it is setting up health and safety committees.

Progress of the Accord

Since the drafting and signing of the Accord, a total of over 1600 factories have been or will be inspected, leading to new protection systems in case of an electrical or structural problem, or fire. The importance of these protection systems became clear during a recent fire in a Dhaka factory. Due to inspections and the subsequent installation of a sprinkler system, damage was minimal and there were no personal injuries or fatalities.

Labour rights are part of our minimum standards

At Triodos Bank, we have our minimum standards and beliefs when it comes to sustainable supply chain management and labour rights. This is especially important for the textile manufacturing industry; therefore we’ve designed a set of policies and measures specifically for their supply chain. Labour rights are key components to a decent quality of life and are constantly evaluated to ensure companies within the sustainable investment universe are doing what they can to support this basic right.

When tragedies such as those in Bangladesh do occur, it is important to evaluate our approach and role in the engagement process. Joining forces with other investors can be part of such an engagement approach. What we see from this example in Bangladesh is that without the support of the investors, the Accord may not have had the same direct impact and reaching the targeted USD 30 million to compensate victims and families would have been more difficult, if not impossible.

To read more about collaborative engagement in 2015, please refer to the Company Engagement Report

Note: The issues explored in this article are relevant for sustainable investments on the stock market. Triodos Bank believes that our socially responsible investments are a powerful means of promoting our values and working for greater sustainability, while enabling us to offer a complete range of attractive investment options to customers who choose to invest on the stock market.