Background on the situation 

On February 1st, 2021, the Myanmar army seized power in a military coup, detaining recently elected leader Aung San Suu Kyi along with the chiefs of her party and declaring martial law in several areas of the country. Hundreds of thousands of citizens took to the streets to oppose the army takeover. The military reacted violently, repressing human rights, limiting civil freedoms, and detaining human rights defenders, including labor rights activists. Due to the escalation of violence and repression, many of them have left the country.  
 

Even before the coup took place, the political history and context in Myanmar were complicated. A military junta led the country from 1962 until the first free elections in 2015. International trade had already begun to grow a couple of years back, Chinese and Korean companies built factories and invited Western brands to consider producing in Myanmar. When we decided to start the collaborations in the country, due to the particular risks present, we added “heightened due diligence” measures to the usual procedures for onboarding new suppliers, to better address the risk of child labor and rule out connections between the factories and the military. 

Our presence in Myanmar 

Our collaboration with factories in Myanmar started in 2014 and currently, part of our production is made in two manufacturing facilities in the city of Yangon. Like all factories with whom we have relationships, these partners have signed our Code of Conduct and are committed to providing safe and decent working conditions.    

It is beyond discussion that brands that are producing in Myanmar are incentivized by the advantages that the country offers, in economic terms. It is equally indisputable that sourcing in Myanmar is not “business as usual”.  

As all European brands sourcing in the country, we benefit directly from economic advantages extended to Myanmar exports under the EU’s EBA program.  

The objective of the benefits offered by the EBA is to foster development through international trade, and as we understand them, these privileges go hand-in-hand also with important obligations.  

Our responsibility entails carrying out heightened due diligence within the factories that make our products, under the UNGPs on Human Rights and OECD Due Diligence Guidance for Responsible Supply Chains in the Garment & Footwear Sector, through exceptional measures. This to make sure that workers’ rights are being respected and their situation improved: under the particular circumstances in Myanmar, where personal safety is at greater risk than in other countries and workers may be generally afraid to speak up about issues. It is under our responsibility to ensure that we do not expose them to even more danger, or that business is done at their expense. 

In this context we need to have a closer look into the factories, ensure that they are aligned with us and willing to cooperate, and actively participate in the realization of workers’ rights in collaboration with other factories and local stakeholders; and this is what we are doing.  

Monitoring the situation 

After the coup, some NGOs called for an exit from Myanmar, which means that we were asked to stop production there. They are arguing that due diligence was no longer possible given the escalation of the internal conflict. Some brands that are finding it difficult to carry out due diligence in their own supply chains, followed these instructions or are planning to. We are closely following these developments and reading the research, and, of course, we asked ourselves whether we needed stop our production in Myanmar too.  

Despite the difficult circumstances, we opted to continue our collaborations. Our decision is the result of careful consideration and based on 3 pillars: first, how our operations work; second, what organizations working in Myanmar are reporting and the projects they are currently carrying out to improve workers’ lives; and third our partnerships. 

The bottom line is, that the due diligence is more difficult than it used to be, but it is still possible. 

Our operations 

Our suppliers have informed us that it is possible to do business without interference from the military. Furthermore, based on our long history of working with them and careful assessment, we can say that they already have good social compliance systems in place. Through open and transparent conversation, they assure us that it is possible to continue producing in the country and that they will continue to respect and improve workers’ conditions in the company, provide all necessary information, and grant access to third party experts to carry out audits.  They are willing to study and implement improved measures to better the situation of workers, including wages, improve planning to eliminate or reduce overtime and stress, support worker organizations and grievance mechanisms, and also to cooperate with local stakeholders to enable skills development and empowerment. 

Over the past few months, they have proven to be reliable partners, able to provide all requested information in a prompt and transparent manner. 

They have manifested that fellow factories in the area– and their current and former workers - are suffering because of the exit of other brands and the crisis of the local market. 

Our sourcing staff are in permanent contact with the factory.  We also have two Myanmar Quality Controllers who are visiting the facilities almost daily and confirm that it is still possible to work in the country if efforts are stepped up to deal with the difficult conditions. 

Research & external reports 

Reports that address the situation for workers and economy of the country confirm that due diligence is more difficult than it used to be, but it is still possible. The data also clarify doubts about the financing of the armed forces as a result of operations in the country by international brands, showing that the garment sector is not a significant source of income for the military junta. It can therefore be excluded the indirect link between us, our partners, and the military.  

Furthermore, the factories we work with are not owned (either wholly or partially) by either of the two military-owned economic conglomerates; and the land where the two factories operate is located on industrial zones that do not belong to the military either. 

Our partnerships 

Local stakeholders and projects with years of experience on the ground, who have collaborated with factories and especially with workers, and conducted interviews with both, are urging us not to leave. “By engaging as a company in discussions with local labor rights groups on wages and labor conditions you can have leverage. By leaving the country, it is difficult to see how you can have an influence on local conditions” (Karina Ufert – CEO EuroCham Myanmar). 

As brands, we cannot monitor factories alone and fully understand the objective and perceived risks; we need intermediaries and trusted, local partners to help us analyze the situation and act with greater precision and impact. 

Our main local stakeholder for carrying out the enhanced due diligence required in Myanmar is the MADE Project, co-funded by the European Union and staffed by professionals with extensive experience in the field. It brings together local stakeholders and international sourcing brands committed to strengthening and safeguarding responsible business practices, that focus on establishing and maintaining high social, environmental, human rights, and gender equality standards.  

The largest component of MADE is the SMART Factories Program, which enables us to better assess social compliance and chemicals management and make progress in promoting dialogue at the workplace.  The SMART Program has been operating in Myanmar since 2019 and both factories we work with have been and will continue to be monitored under this scheme. We will communicate the results of these assessments and the improvements achieved transparently and continuously. 

Another valuable stakeholder and partner that gives us regular updates on the situation of the country and the industry is the European Chamber of Commerce (EuroCham) Myanmar. In meetings with its members and at international events, it advocates for companies to stay in Myanmar under the premise that “in the current situation, it is more essential than ever that all those who source from Myanmar focus on ensuring decent work including safety, a living wage, and freedom of association for all workers, including women who represent the vast majority of workers”. 

Its 151 European company members receive daily updates on the situation on the ground (security, economic, and political updates) and have the opportunity to participate in monthly industry meetings and thematic events with external stakeholders, such as the EU Ambassador, OECD, World Bank. As we are active in the textile industry, we participate in the EuroCham Myanmar Garment Advocacy Group, which brings together 35 European brands sourcing in the country. 

We are a member of MADE and EuroCham Myanmar, and thanks to their regular updates and guidance on the factories and country situation, we are able to undertake a heightened due diligence on our Myanmar factories, incorporating the latest information and recommendations fit for the evolving local context and risks. 

Fair Wear Foundation, our long-term and main partner in Social Compliance in factories, has carried out its own assessment of the current political situation and is setting additional requirements to brand members who want to stay in Myanmar.  

FWF is requiring that those who continue to source in the country explain how they intend to carry out heightened due diligence in these difficult circumstances, to ensure that workers feel free to complain through freedom of association or grievance mechanisms, that their rights are respected i.e. there is no forced labor or excessive overtime, their contracts are clear and they receive fair wages, and that they are not exposed to safety risks. In addition, they are required to identify and address the risks on workers‘ rights, provide evidence on credible information gathering, and report constantly on progress. As we have decided to stay in Myanmar, we will follow this very demanding and difficult process, but we are confident that it is worth it. 

Additional information 

The situation is complex, and many risks are involved, but we want to keep our relationships with factories and continue to source from Myanmar. We are convinced that it is worth it and that through our due diligence work, and cooperation with our partners, we will be able to have a positive impact on the workers inside the factories. 

If you would like more information on the results of the monitoring activities, the specific actions implemented or the local stakeholders involved, please send your questions to contribute@oberalp.com or to martine.riblan@oberalp.com