LONDON — H&M told Reuters it is following up on 20 alleged instances of labor abuse at Myanmar garment factories that supply the world’s second-largest fashion retailer, just weeks after top rival Zara owner Inditex said it is phasing out purchases from the Southeast Asian country.

A UK-based human rights advocacy group tracked 156 cases of alleged worker abuses in Myanmar garment factories from February 2022 to February 2023, up from 56 in the previous year, indicating a deterioration of workers’ rights since a military coup in February 2021.

Wage reduction and wage theft were the most frequently reported allegations, followed by unfair dismissal, inhumane work rates, and forced overtime, according to a report by the NGO, the Business and Human Rights Resource Centre (BHRRC) seen by Reuters and set to be published on Wednesday.

“All the cases raised in the report by BHRRC are being followed-up and where needed remediated through our local team on the ground and in close cooperation with relevant stakeholders,” H&M said in a statement.

“We are deeply concerned by the latest developments in Myanmar, and we see increased challenges to conduct our operations according to our standards and requirements,” the Swedish retailer said.

The BHRRC has been tracking allegations of workers’ rights abuses in garment factories since the military junta took power in Myanmar, plunging it into political and humanitarian crisis. The tracker includes abuse cases at 124 separate factories.

The BHRRC said it tracks cases of alleged abuses through sources including union leaders, international media, and local media such as Myanmar Labour News, and seeks to verify reports by checking with brands and interviewing workers. Reuters did not independently verify its findings.

There have been 21 cases of alleged abuses linked to Inditex suppliers, according to the report. Inditex declined to comment on the report.

A spokesperson for Myanmar’s military government did not reply to a request for comment on the findings. The Myanmar Garment Manufacturing Association did not reply to a request for comment.

MADE IN MYANMAR
Spanish group Inditex was the latest brand to  say it would cut ties with Myanmar suppliers, after Primark and Marks & Spencer last year, in a trend that some say could ultimately leave garment workers worse off.

Some brands have instead ramped up monitoring of suppliers in Myanmar, the survey conducted by the BHRRC found. Field offices in the country, for example, enable brands to conduct their own inspections instead of relying on external audits.

Dublin-based Primark has doubled its number of Yangon-based staff even after announcing last September it would stop sourcing from Myanmar, the survey found, while Danish fashion company Bestseller increased its number of staff on the ground from three to 11 since the coup.

H&M and Bestseller are among 18 brands that are part of the European Union (EU)-funded MADE project aimed at improving labor conditions in Myanmar’s garment factories.

The EU’s stance is that companies should continue sourcing garments from Myanmar, where the industry is a key employer, with more than 500 factories producing clothes and shoes for big brands.

“By engaging as a company in discussions with local labor rights groups and trade unions on wages and labor conditions you can have leverage,” said Karina Ufert, CEO at the European Chamber of Commerce in Myanmar.

“By leaving the country, it is difficult to see how you can have an influence on local conditions.”

Vicky Bowman, former UK ambassador to Myanmar and director of the Myanmar Centre for Responsible Business, said the international brands under pressure to stop buying from Myanmar are also the most likely to provide stable jobs and take additional steps to guard against rights abuses.

“If they leave, either the jobs disappear entirely, or factories scrabble to receive orders from footloose buying agents who care only about cheap labor and do not worry about factory conditions,” Bowman told Reuters. — Reuters

OSLO — Norway’s $1.4-trillion wealth fund, the world’s single largest stock market investor, is urging firms it invests in to engage with artificial intelligence (AI) as a way to drive profits, but to do so responsibly, top officials told Reuters.

Fund Chief Executive Officer Nicolai Tangen said it was crucial for all firms in its portfolio to engage with AI, as it is “potentially a massive driver for productivity and efficiency” that is becoming an everyday business tool like power, computers or the internet.

“We of course expect them to use AI for the best possible benefit of the business,” Mr. Tangen said in an interview. “AI is a huge opportunity for companies and for society, but we need to make sure that it is used in the right way.”

Tangen said a company that would not engage with AI “would disqualify themselves as being complete morons.”

The fund invests in 9,200 firms worldwide, for which it sets expectations on a range of issues, from children’s rights to climate change.

Its latest document, to be published Wednesday, is on consumers’ interests, with a heavy focus on AI.

When talking to firms about responsible AI, the fund will concentrate particularly on the healthcare, finance and large tech sectors, because their use of the technology will have an especially strong impact on consumers.

Companies must be able to explain why they are developing particular AI systems and how they have been designed, trained and tested, according to the document. There should also be effective human oversight and control.

That is so “people (who) are affected by the outcomes can actually go back to the company and ask ‘how does your algorithm work? Why did I not get the loan?’”, said Carine Smith Ihenacho, the fund’s chief governance and compliance officer.

Among other expectations set in the document, the fund said companies must be proactive in their management of AI-related risks, and have systems in place if or when things go wrong.

Special responsibility lies with the top tech companies that develop AI technology since they are driving the change, said the fund, a top ten investor in Microsoft, Amazon, Alphabet and Nvidia.

“They have to take responsibility for their development and use of AI,” said Smith Ihenacho, adding the fund had already discussed AI with the large US tech companies in its portfolio.

“We have done it and we will continue to do it,” she said.

She welcomed recent self-regulation moves by US tech giants as “a good start” but noted that there were “no proper regulations in place yet” and that more was needed.

In July, US AI companies made voluntary commitments to the White House to implement measures such as watermarking AI-generated content to make the technology safer.

“That is where there is room for investors like us to come in and fill the gap,” said Smith Ihenacho.

Tech is the largest sector in the fund’s equity investments, representing 11.9% of its total value at end-2022, its data showed.

Dialogue with companies and voting at annual general meetings is the focus of its environment, social and governance (ESG) approach, but the fund can, and does, divest from companies that do not comply with its requirements. Last year it divested from 74 firms on those grounds. — Reuters