Primark has pledged to pay workers in developing countries affected by its decision to cancel orders, in a move that was dismissed by critics as a public relations exercise.
The company, part of conglomerate Associated British Foods, said on Friday that it had established a fund to cover the wages component of orders that had been cancelled.
It will “fund payment of the wages that relate to this product, taking into account adjustments for government support packages provided in each country”.
Payments will go to workers in Bangladesh, Cambodia, India, Myanmar, Pakistan, Sri Lanka and Vietnam.
Last month, the company asked suppliers to stop production as it already had £1.6bn of paid-for stock in stores, depots and in transit. It has also committed to take finished product still at factories, albeit on payment terms extended from the usual 30 days to 180 days.
However, it refused to pay for the cancelled orders, unlike European rivals such as H&M and Inditex. According to a report by the Global Center for Workers Rights at Penn State University, both they and US retailers Target and PVH — owner of Calvin Klein and Tommy Hilfiger — have agreed to pay for orders in production, rather than just those that have completed.
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Paul Lister, who oversees ethical trading across the entire AB Foods group, said it had always been the group’s intention to look after the affected workers but that working out the best way to do so had taken time.
“How we do it is the issue. It is not straightforward,” he said. “We haven’t put a sum of money against it. We will do whatever it takes.”
Rosey Hurst, founder and director of ethical trade specialists Impactt, said she was “absolutely delighted to see Primark putting its shoulder to the wheel of reducing impacts of Covid-19 on the most vulnerable in its supply chains”.
But Scott Nova, executive director of the US-based Worker Rights Consortium, said he was “very sceptical” that most of the affected workers would ever actually see any of the promised cash and questioned why the company did not simply pay for the orders it had cancelled.
“By refusing to pay for the orders, it will be doing so much financial damage to the factories that they will fire a lot of these workers anyway,” he said.
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He added that the labour costs represented about a tenth of factory prices. “Even if Primark paid every penny of labour cost, which I’m certain it will not come close to doing, it would still be paying 10 cents on the dollar.”
“This pledge is intended primarily to protect the company’s reputation,” he concluded.
Primark said it would “explore mechanisms to ensure that this money reaches workers” and Mr Lister said the company’s decisions had to be seen in context.
“We didn’t cancel orders on a whim. We have no means to sell. Every one of our shops is closed and we have no online presence.” He acknowledged that the company had come in for criticism. “But we took our time and this is where we got to,” he said.
According to the GCWR, more than 1m garment workers in Bangladesh alone have been dismissed or furloughed since the coronavirus pandemic began. Of those dismissed, four-fifths were sent home without the legally required severance pay.
Source: Economy - ft.com
