The ‘Black Value Chain’ in Bangladesh’s Readymade Garments Industry: Ethical, Legal, and Governance Dimensions : Sharif As-Saber
Abstract
The global value chain (GVC) of the readymade garments (RMG) industry is a complex, multi-stage network that has repeatedly been criticised for unethical and, at times, illegal practices. Workers around the world across different stages of the chain frequently endure low wages, unsafe workplaces, and weak labour rights, while environmental degradation remains severe.Drawing on the concepts of the black economy, black markets, and ‘black international business’, this article advances the notion of a ‘black value chain’ to describe the darker side of RMG value creation.Using post-Rana Plaza Bangladesh as a case, it attempts to examine ethical, legal, and governance dimensions of the RMG GVC and argues that strengthening governance, rather than inventing new models, is essential to address entrenched loopholes and unethical practices.
- Introduction
The vertically integrated global-local RMG value chain, from raw material sourcing to retail and disposal, is widely associated with poor working conditions, low wages, restricted unionisation, child labour, unsafe buildings, and inadequate occupational health and safety.Similar concerns extend upstream to textile and fibre production and downstream to retailing, where powerful brands demand lower prices and higher quality while retaining high margins. Many such practices are unethical but not always illegal under existing domestic or international frameworks, and the complexity of the GVC poses major governance challenges.
This paper argues that a significant proportion of firms operating within the RMG value chain engage in shadowy practices that fall within an ethical-legal grey zone. Building on the concept of ‘black international business’, it proposes the term ‘black value chain’ to capture these systemic problems. The Bangladesh RMG industry, particularly in the post-Rana Plaza era, provides an illustrative case for examining how ethics, law, and governance interact within a globally fragmented production system.
- Ready-to-Wear Garments: A Brief Historical Context
Prior to the mid-nineteenth century, garments were largely handmade. The Industrial Revolution and the invention of the sewing machine enabled mass production, giving rise to ready-to-wear clothing.Early garment factories in Europe and North America were characterised by low wages, long hours, child labour, and unsafe conditions. Catastrophes such as the Triangle Shirtwaist Factory fire in the USA in 1911 exposed these abuses and eventually led to regulatory reforms in developed economies.
As labour regulations tightened and wages rose in the West during the mid-twentieth century, apparel production was progressively offshored to developing economies with weaker regulatory oversight. Countries such as Hong Kong, South Korea, Taiwan, and later China, Vietnam and Bangladesh became major exporters. Bangladesh entered the RMG export market in 1978 and is now the world’s second-largest exporter, employing around four million workers and generating close to US$40 billion in annual export earnings.
- Global/Local RMG Value Chain: An Overview
The concept of the value chain, popularised by Professor Michael Porter of Harvard University, explains how value is created through a sequence of activities from inputs to final consumption. In a globalised economy, these activities are geographically dispersed, forming global value chains (GVCs).The RMG industry has long relied on such fragmentation to minimise costs by locating labour-intensive process-based stages in low-wage countries. The following Figure (Figure 1) provides a snapshot of the global RMG value chain.
The RMG GVC is highly labour intensive, employing tens of millions globally across cotton farming, textile production, garment manufacturing, retail, and ancillary services. Despite its economic significance, the chain is marked by severe social and environmental costs.Cotton farmers and garment workers often receive unfair compensation, while unsafe factories, toxic chemicals, excessive water use, and waste generation cause long-term harm to people and ecosystems.
Retailers play a critical role by exerting downward pressure on prices while demanding higher quality and faster turnaround. Ethical sourcing commitments are frequently undermined or compromised due to the unwillingness to pay fair ex-factory prices, limiting manufacturers’ capacity to improve wages, safety, and environmental concerns.
- Ethics, Law, and Regulation in the RMG Value Chain
Ethics refers to moral norms guiding behaviour regarding rights, duties, and well-being. In the RMG sector, ethical standards are articulated through various codes, notably the Clean Clothes Campaign model code and ILO conventions. These emphasise freely chosen employment, non-discrimination, prohibition of child labour, freedom of association, living wages, reasonable working hours, and safe working conditions.
International initiatives such as the UN Global Compact, OECD Guidelines for Multinational Enterprises, ISO 26000, IFC Performance Standards, and the UN Guiding Principles on Business and Human Rights provide additional frameworks for responsible business conduct. Some national laws, including extraterritorial anti-corruption and human rights legislation in the US and EU, can hold companies accountable for overseas abuses.
In Bangladesh, however, legal and regulatory enforcement remains uneven. Although labour law reforms followed the 2013 Rana Plaza disaster, gaps persist in union rights, strike protections, and inspection capacity. Post-Rana Plaza initiatives, namely the Accord on Fire and Building Safety and the Alliance for Bangladesh Worker Safety, have improved conditions in many factories but left significant numbers uninspected or non-compliant ones.
- Ethics, Legitimacy, and the ‘Black’ RMG Value Chain
The concept of ‘black international business’ highlights the darker side of the globalisation of markets and production, where power, profit maximisation, and weak governance enable unethical or illegal practices. Applying this lens to the RMG sector reveals how ethics and legitimacy intersect across the value chain.
RMG Value Chain Perspective
- Type 1 actors exhibit high ethical standards and high legitimacy. In Bangladesh, this includes a growing number of LEED-certified green factories that provide decent wages, safe working conditions, environmental management, and fair sourcing practices.
- Type 2 actors comply with minimum legal requirements but maintain low ethical standards. Many factories fall into this category, having made partial safety improvements under Accord or Alliance oversight and beyond while continuing to offer low wages and limited worker rights.
- Type 3 activities involve ethically motivated but legally questionable actions, such as protests, strikes, and whistleblowing by workers, unions, and NGOs. Although sometimes unlawful, these actions often possess strong moral justification in contexts of weak governance and corruption.
- Type 4 actors are low in both ethical orientation and legitimacy. These include unregulated subcontracting factories producing for less-regulated markets, using unsafe buildings, forced labour, toxic materials, and illegal copying of designs, while evading effective oversight.
Together, these categories illustrate how the RMG value chain operates as a largely non-transparent system characterised by ethical ambiguity, regulatory gaps, and uneven accountability, justifying its description as a ‘black value chain’.
- Conclusions and the Way Forward
The global–local RMG value chain remains prone to unethical and illegal practices despite extensive ethical codes and legal frameworks. The Bangladesh case demonstrates how profit maximisation, weak governance, and fragmented accountability undermine worker welfare and environmental sustainability across the chain.
Addressing these challenges requires a coordinated, multi-level governance approach rather than new governance models. Key priorities include ethical sourcing of raw materials, comprehensive factory inspection and remediation, stronger labour law enforcement, and genuine commitment by retailers to fair pricing and shared responsibility.
Retailers and brand owners must align sourcing practices with the UN Guiding Principles on Business and Human Rights, ensuring due diligence and remedy for abuses. Importing-country governments, international organisations, unions, and civil society should play a more active role in monitoring and enforcement. The proposed idea of a global garment governance platform could help coordinate dispersed initiatives and enhance transparency.
Ultimately, transforming the black RMG value chain into an ethical and legitimate system depends less on formal rules and more on the spirit of governance through sustained commitment, accountability, and collaboration among all stakeholders.
References:
As-Saber, S. (2018). The Issue of Global ‘Black Value Chain’ in Readymade Garments (RMG) Industry: An Ethics, Legal and Governance perspective, South Asia Journal Special Issue: 28-44.
As-Saber, S. and Cairns, G. (2015). ‘Black International Business’ – Critical Issues and Ethical Dilemmas’, in Pullen, A. and Rhodes, C (eds.), The Routledge Companion to Ethics, Politics and Organizations, Routledge, London, pp.119-131.
(A detailed version of the article was previously published in the South Asia Journal)
