How eco-labels mask the human cost of cheap fashion

As the world transitions towards a greener future, the ready-made garment (RMG) industry of Bangladesh has left an imprint on the global sourcing industry, proving the potential for Least Developed Countries (LDCs) to incorporate sustainable practices into their export-orientated sectors with minimal transition costs. 

Yet, there's a debate on whether green garments are truly a means to incentivise corporate social responsibility or if they have been reduced to a form of symbolic action to greenwash consumers and regulators. This article examines whether Bangladesh's green garment revolution is truly sustainable or just another corporate illusion to evade tax and customs.

The Rana Plaza disaster in 2013 marked a turning point, highlighting the urgent need for sustainable practices in the industry. Now, Bangladesh boasts over 200 LEED (Leadership in Energy and Environmental Design)-certified green garment factories, including 89 Platinum and 123 Gold-certified establishments. 

A case-study on Envoy Textiles Limited, a platinum-certified green factory in Mymensingh, shows a 50% reduction in energy consumption with the use of solar panels and LED lighting, 80% reduction in water use with the use of closed water loop systems, and 90% reduction in waste disposal with the use of recycling plants. Similar figures have been noted in other Gold and Silver-certified factories, such as Remi Holdings Limited and Plummy Fashions Limited.

However, on closer inspection of the certification process, it's evident that this distinction, as offered by the U.S. Green Building Council (USGBC), does not account for the myriad of existing procedural loopholes. To illustrate, the certification is not mandated for annual audits. While recertification is encouraged after 3-5 years, factories may opt out of recertification and still use the green label. This no-audit policy leaves ample space for greenwashing, a corporate strategy to enhance brand image by marketing compliance to green principles on paper while neglecting critical issues such as proper chemical waste management and fair labour practices. 

This is not to say that most green factories in Bangladesh do not adhere to Green Supply Chain Management (GSCM) practices. The aforementioned Envoy Textiles is a prime case-in-point to note that most green factories in Bangladesh abide by green principles to some extent. 

According to the website of Envoy Textiles Limited, the factory operates on sustainable production processes, such as fibres from sustainable sourcing like Organic, PCW and BCI, Ozone finishing process which reduces environmental impact, Effluent Treatment Plant (ETP) saving 100 million liters of natural water every year, and E-Lab which is equipped with eco-friendly Laser and Ozone Wash machines.

Nevertheless, there is a tendency toward selective disclosure in the annual reports and the corporate websites. For instance, a 2022 study by Transparency International Bangladesh suggests that 40% of LEED-certified factories in Bangladesh disclose environmental (ergonomic, infrastructural, etc) metrics in their annual reports but omit labour rights data, creating an incomplete picture of their social responsibility. 

A peer-reviewed study in Environmental Science & Policy (2023) explicitly critiques this practice by stating: "The decoupling of environmental and social reporting in Bangladesh's RMG sector allows factories to leverage green certifications for reputational gains while sidestepping accountability for labour rights. This 'sustainability asymmetry' is a form of institutionalised greenwashing." 

The Government of Bangladesh offers tax incentives to LEED-certified green factories, with the National Board of Revenue (NBR) noting: "Industries with LEED certification (Gold or above) are eligible for a 2% reduction in corporate tax rates, subject to annual compliance audits." 

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) claims: "Tax benefits are performance-based, not blanket exemptions. Factories must maintain LEED standards to retain incentives." But these claims are not difficult to discount when Transparency International Bangladesh states: "Tax incentives for green factories lack transparency in auditing, enabling selective compliance with environmental metrics while ignoring social responsibilities."

From this discussion, it's evident that annual reports often exclude metrics on wage compliance, worker safety audits, or unionisation rates. While the LEED certification focuses on environmental metrics, it does not mandate transparency on labour conditions, enabling factories to cherry-pick disclosures. Moreover, the institutions tasked with ensuring checks and balances are often subject to political biases and corporate lobbies. 

But before pointing fingers, it is crucial to consider the barriers for GSCM practitioners in Bangladesh. 

The single most distinct feature of the shipments from Bangladesh to foreign clients is its low cost. As a result, when sanctions are placed on factories because of their environmental performance, they find the transition fairly difficult. 

The initial cost of establishing a green factory is 20-30% higher due to investments in energy-saving technologies, solar panels, and water conservation systems. The time required to accrue return on investment (ROI) for initial costs is typically 2–5 years. For larger corporations, this transition is easier. But for small and medium enterprises (SMEs), this transition poses an existential threat due to the lack of funds. That is when environmental sustainability and labour rights become a luxury. 

Furthermore, the export market is concentrated on a few big players. This lack of competition allows larger corporations not only to monopolise the internal and external markets but also to lobby government officials to compromise accountability and transparency standards. 

According to Human Rights Watch: "The Bangladeshi government prioritises appeasing large garment exporters, which account for 84% of export earnings. Regulatory agencies routinely ignore labour violations in LEED-certified factories to avoid disrupting a critical economic pillar."

For SMEs, getting a green label is the only way to survive. For big corporations, it's just a badge with no accountability. As a 2023 World Bank Report states: "Many (SMEs) resort to superficial certifications to meet buyer demands while avoiding systemic changes, turning sustainability into a competitive marketing tactic rather than a transformative practice."

If the larger corporations and SMEs still decide to remain accountable, it's difficult to sustain such an attitude. Alluding to the massive devaluation of Bangladeshi export prices, there have been frequent calls for 'green prices' by BGMEA in recent times: "Foreign buyers demand greener practices but refuse to pay fair prices, devaluing Bangladeshi exports by 5-7% annually. Without 'green prices,' factories cannot offset the costs of sustainable transitions."

This creates an excuse for corporations to take to greenwashing tactics, even if they do not inherently wish to do so with the benefit of the doubt. 

According to Oxfam International: "Western brands demand greener practices from suppliers but refuse to pay higher prices, forcing factories to absorb costs. This 'green squeeze' perpetuates a cycle of low wages and underinvestment in genuine sustainability."

This cycle ends with the blatant disregard for labour rights and welfare—a structural flaw in the globalised production network. Yet, the global sourcing industry has failed to address the systemic barriers that prohibit any real incentive for green factories to remain green in practice and not only on paper. 

In a world that advocates relentlessly for ethical sourcing and industrial reform, it is high time states and organisations addressed these complexities if they really wish to create a fashion industry that values lives over labels.

Md Jarif Mahmud is a contributor. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.