Better Work Nicaragua Thematic Synthesis Report: Fire Safety Produced on: October 2014

Better Work Nicaragua is funded by the US Department of Labor

Page 1 of 17

Copyright © International Labour Organization (ILO) and International Finance Corporation (IFC) (2014) First published (2014) Publications of the ILO enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to the ILO, acting on behalf of both organisations: ILO Publications (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email: [email protected]. The IFC and ILO welcome such applications. Libraries, institutions and other users registered with reproduction rights organisations may make copies in accordance with the licenses issued to them for this purpose. Visit www.ifrro.org to find the reproduction rights organization in your country.

ILO Cataloguing in Publication Data Better Work Nicaragua: Thematic Synthesis Report: Fire Safety / International Labour Organization; International Finance Corporation – Geneva: ILO 2014 1 v. ISSN 2227-958X (web pdf) International Labour Organization; International Finance Corporation clothing industry / textile industry / working conditions / workers rights / labour legislation / ILO Convention / international labour standards / comment / application / Nicaragua 08.09.3

The designations employed in this, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the IFC or ILO concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the IFC or ILO of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the IFC or ILO, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. ILO publications can be obtained through major booksellers or ILO local offices in many countries, or direct from ILO Publications, International Labour Office, CH-1211 Geneva 22, Switzerland. Catalogues or lists of new publications are available free of charge from the above address, or by email: [email protected] Visit our website: www.ilo.org/publns Copyright © International Labour Organization (ILO) and International Finance Corporation (IFC) (2014) First published (2014)

Page i of 17

Acknowledgements Better Work Nicaragua is supported by the following (in alphabetical order): The United States Department of Labor The Better Work Global programme is supported by the following (in alphabetical order): • • • • •

Australian Government Netherlands Ministry of Foreign Affairs State Secretariat for Economic Affairs, Switzerland (SECO) Levi Strauss Foundation The United States Council Foundation (funds provided by The Walt Disney Company)

This publication does not necessarily reflect the views or policies of the organizations or agencies listed above, nor does mention of trade names, commercial products, or organizations imply endorsement by them.

Page ii of 17

Table of Contents Acknowledgements ..................................................................................................................................ii Table of Contents ....................................................................................................................................iii Executive Summary ................................................................................................................................. 4 Introduction......................................................................................................................................... 5 Better Work Methodology for Thematic Reports ............................................................................... 7 Section II: Findings................................................................................................................................... 8 2.1 State of Fire Safety in Nicaragua ................................................................................................... 8 2.2 Trends in Fire Safety Non-Compliance ........................................................................................ 10 Section III: Fire Safety Initiatives to Date .............................................................................................. 13 Section IV: Conclusions and Policy Recommendations ......................................................................... 14 Annexes ................................................................................................................................................. 16 Annex A: Factories Covered in this Report........................................................................................ 16

Page iii of 17

Executive Summary The Better Work Nicaragua programme, a partnership between the International Labour Organization (ILO) and the International Finance Corporation (IFC) aims to expand decent work opportunities in the textile and apparel sector in Nicaragua and improve the industry’s competitiveness by advancing compliance with Nicaraguan labour law and the principles of the ILO Declaration on Fundamental Principles and Rights at Work. It does so by conducting independent assessments of apparel factories, identifying areas where there are gaps in compliance, and offering advisory services and training to address those gaps and work towards improvement. Better Work Nicaragua began formal assessments in February 2012. In addition to the annual public synthesis reports that provide aggregated information regarding working conditions in the factories participating in the programme, like all Better Work country programmes Better Work Nicaragua will produce a thematic synthesis report each year on a theme relevant to the garment industry. The purpose of the thematic report is to provide stakeholders and the programme with a more detailed, in-depth view of salient issues in the industry. This is the first such thematic report for Better Work Nicaragua, the focus of which is fire safety. Better Work Nicaragua is not aware of any significant incidents of factory fires since the inception of the program. In the two years since the beginning of factory assessments and of Better Work advisory services and training, fire safety measures and practices in most garment factories have seen improvement. The data shows that there are a few areas in which efforts can be strengthenedstengthened and focused. These are: * While all assessed factories complied with the required number of exits, aisles, fire safety exits, and factory escape routes were found to have been blocked in 46 percent of factories. At the same time, improper or insufficient marking of emergency exits and escape routes was found in 27 percent of assessed factories. This suggests that many factories have yet to introduce a streamlined system for monitoring, maintaining and improving fire safety measures. The introduction and strengthening of such systems will be a focus of Better Work Nicaragua advisory services over the next assessment, advisory and training cycles. * Ten of the assessed factories had not obtained their Occupational Safety and Health licences as required by law. However, 9 of these 11 factories had set up the legally mandated joint worker/manager OSH committee. * Twenty-seven percent, or 7 assessed factories were found to improperly store chemicals and hazardous substances. A number of initiatives are already underway by Better Work Nicaragua and others to address and improve fire safety in the industry. The existence in Nicaragua of extensive labor legislation and OSH regulations for companies operating under the Free Trade Zone regime offers much potential for improvement. The final section of the report contains recommendations for different stakeholders to help ensure the Nicaraguan garment industry to ensure safety for workers and low-risk and therefore attractive for foreign investors.

Page 4 of 17

Section I: Introduction and Methodology Introduction Better Work, a partnership between the International Labour Organization and the International Financial Corporation (IFC) has worked with national and international stakeholders to design and launch the Better Work Nicaragua programme in July 2010 and began in-country operations in February 2011. It was established as a cooperative agreement between the Nicaraguan government and the US Department of Labor, which is the principal donor. The goal of the programme is to contribute to the competitiveness of the sector by improving working conditions through enhanced compliance with Nicaragua’s labour legislation and international labour norms. In this manner, the programme aims to reduce poverty in Nicaragua by expanding decent work opportunities in the apparel producing sector. Nicaragua’s modern export apparel industry began in the 1990s, and experienced rapid growth particularly after Nicaragua was granted Tariff Preference Levels (TPLs) for the industry under the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA). TPLs, which are set to expire in December of 2014, have been a key factor in the industry’s growth and competitiveness1. There are currently 45 apparel firms located in export processing zones and industrial parks that operate under the Free Trade Zone regime. These employ approximately 66,000 workers, 53% of whom are women. The industry represents an important part of Nicaragua’s export economy, with U$ 1.54 billion in exports, almost all of it to the US market. In 2012, Nicaragua was the 11th largest supplier of apparel into the US.2 Better Work Nicaragua was adopted as a voluntary model, with a commitment from the government and national stakeholders to roll out its implementation sector-wide, in order to maximize the programme’s impact and contribute to building the country’s credible reputation as an ethical sourcing destination. There are currently 27 factories3 participating in the Better Work Nicaragua Programme, representing 66 percent of the industry, and covering 40,800 workers, approximately 58 percent of the total industry work force. The programme engages these factories by conducting independent assessments and providing advisory services and training, aimed at encouraging continuous and sustainable improvement. As part of Better Work’s mandate of sharing information with all programme stakeholders, Better Work Nicaragua uses aggregated factory assessment data to produce yearly public synthesis reports that review the performance of all participation factories in the reporting period. Similar to all Better Work country programmes, Better Work Nicaragua will also produce thematic synthesis reports issue relevant to the garment industry. This allows the programme and stakeholders to look at a particular issue in more detail. This is the first thematic report by Better Work Nicaragua, and its focus is on fire safety. As well as the obvious human cost, the financial cost of fires can be significant and can deeply damage a national apparel industry as a whole in terms of international reputation and subsequent 1

Tariff Preference Levels (TPLs) are a special provision in DR-CAFTA that allows Nicaragua to export tariff-free a quantity of specific types of garments with flexible “rules of origin”, i.e. exempted from the requirement that garments manufactured in Nicaragua destined to the US market be made with fabric from the DR-CAFTA region. This allows Nicaraguan companies to use lower-cost fabrics from other regions of the world, and still benefit from duty-free entry into the US market. 2 Information acquired from the National Free Trade Zone Commission and ProNicaragua, www.pronicaragua.org. 3 Two factories have ceased operations since their last assessment reflected in this report.

Page 5 of 17

opportunities. The issue of fire safety has surfaced and become a concern to stakeholders and international buyers in the garment industry, following devastating and tragic fires in both Bangladesh and Pakistan. Better Work Nicaragua is not aware of the occurrence of any fires in the factories it assesses and advises. Nicaragua has an extensive Occupational Safety and Health legislation and regulations regarding prevention for companies operating within the Free Trade Zones. At the same time, much remains to be done to strengthen both prevention and response to fires. This report provides a snapshot of non-compliance in the sector, what is being done as well as some recommendations for further improvements.

Page 6 of 17

Better Work Methodology for Thematic Reports Better Work carries out factory assessments to monitor compliance with international core labour standards and national labour law. Following an assessment, a detailed report is shared with the factory and with its buyers. An aggregated industry-level report is issued once a year. In its factory and industry-level reports, Better Work highlights non-compliance findings. It reports these figures to help factories and other stakeholders easily identify areas in need of improvement. Collecting and reporting these data over time will help factories demonstrate their commitment to improving working conditions. In its factory assessments and in traditional synthesis reports, Better Work organizes reporting into eight areas, or clusters, of labour standards. Four of the clusters are based on fundamental rights at work (Child Labour, Discrimination, Forced Labour and Freedom of Association and Collective Bargaining) and four are based on national labour law relating to working conditions (Compensation, Contracts and Human Resources, Occupational Safety and Health and Working Time). The theme explored in the present report is Fire Safety, comprising questions cutting across different subcategories under the Occupational Safety and Health cluster: Compliance Points and Questions Chemicals and Hazardous Substances Are chemicals and hazardous substances properly stored? Emergency Preparedness Are emergency exits and escape routes clearly marked and posted in the workplace? Are the emergency exits accessible, unobstructed and unlocked during working hours, including overtime? Are there enough emergency exits? Does the employer conduct periodic emergency drills? Does the workplace have a fire detection and alarm system? Does the workplace have adequate fire-fighting equipment? Has the employer elaborated and implemented an emergency plan? Has the employer trained an appropriate number of workers to use the fire-fighting equipment? OSH Management Systems Does the employer have an OSH license? Does the employer have an steam generator license? Has the employer set up a functioning joint worker/management OSH committee? Worker Protection Are appropriate safety warnings posted in the workplace? Are electrical wires, switches and plugs properly installed, grounded, and maintained? In this thematic report, Better Work presents non-compliance findings at the question level. Answers to each questions are recorded in binary format, and then averaged across factories in consideration. For example, an average 100% non-compliance finding for the question pertaining to storage of chemicals and hazardous materials means that all participating factories were found to have a violation in that area.

Page 7 of 17

Section II: Findings This section describes non-compliance at the question level on issues of fire safety in factories participating in Better Work Nicaragua. The findings are divided in two parts. Section 2.1 provides a snapshot of the areas of non-compliance in the most recent assessment of all assessed factories. Section 2.2 seeks to identify changes in non-compliance over the entire duration of the programme for those factories that have been assessed more than once. Main findings: • • •

• •

All assessed factories were found, during the second visit, to be compliant with legal requirements on number of emergency exits, and appropriate safety warnings Twelve factories (46%) had gaps in compliance regarding accessible, unobstructed and unlocked emergency exits. Although the majority of factories assessed had the proper Occupational Safety and Health License, 10 factories (38%) did not. All but 3 factories had constituted joint worker/manager OSH committees. Seven factories (27%) did not have properly marked and posted exit and escape routes Improper storage of chemical and hazardous substances was found in seven factories (27%).

2.1 State of Fire Safety in Nicaragua Chart 1 provides an overview of non-compliance findings at the question level from the most recent assessment for the 27 assessed factories by Better Work Nicaragua. Among these, 10 received their first assessment, and 17 factories have been assessed twice. The number of factories that were found to be non-compliant is shown in parentheses.

Page 8 of 17

Chart 1 : State of Fire Safety in Nicaragua

Page 9 of 17

2.2 Trends in Fire Safety Non-Compliance This section seeks to identify changes in non-compliance related to fire safety since the establishment of Better Work Nicaragua. It includes only the 17 factories that have received two visits. A detailed analysis of non-compliance for each question is shown in Table 1. Chart 2 is a visual representation of the numbers from this table. Given that the figures show non-compliance, higher percentages indicate a greater number of issues. For the purpose of space, the chart only includes those indicators which experienced a change of 5% or more in non-compliance between the first and second visit. Table 1 : Percentages and number of factories in non-compliance at the question level, by visit Visit 1

Visit 2

Proper storage of chemicals and hazardous substances

29%

(5)

24%

(4)

Emergency exits and escape routes clearly marked and posted in the workplace Emergency exits accessible, unobstructed and unlocked during working hours, including overtime Enough emergency exits

24%

(4)

18%

(3)

24%

(4)

29%

(5)

6%

(1)

0%

(0)

Employer conducts periodic emergency drills

24%

(4)

6%

(1)

Workplace has a fire detection and alarm system

29%

(5)

0%

(0)

Workplace has adequate fire-fighting equipment

6%

(1)

18%

(3)

Employer has elaborated and implemented an emergency plan Employer has trained an appropriate number of workers to use the fire-fighting equipment

24%

(4)

12%

(2)

12%

(2)

0%

(0)

Employer has an OSH license Employer has an steam generator license Employer has set up a joint worker/management OSH committee

41% 6% 6%

(7) (1) (1)

24% 12% 6%

(4) (2) (1)

0%

(0)

0%

(0)

18%

(3)

18%

(3)

Appropriate safety warnings are posted in the workplace Electrical wires, switches and plugs properly installed, grounded, and maintained Note: The number of factories is indicated in parenthesis.

Page 10 of 17

Chart 2 : Non-compliance at the question level, by visit

Page 11 of 17

The findings from Table 1 and Chart 2 show that there have been encouraging downward trends in the non-compliance rates for areas related to fire safety. Out of 10 questions related to fire safety, we see a marked decrease in 7 out of 10 questions. The most striking improvement has been in fire detection and alarm systems. During the first visit, five factories (29%) did not have adequate systems to detect and alert workers to possible fires. Noncompliance in the initial visit was mostly related to fire alarm systems not including audible and visual alarms. In the second visit, all factories were in compliance with this requirement. Another area in which the second visit yielded no evidence of non-compliance was in the training of the appropriate number of workers in the use of fire-fighting equipment. This is one area in which Better Work Nicaragua has placed significant effort and resources. It has established an agreement with the local fire deparment (Cuerpo Benemérito de Bomberos) to conduct trainings on fire safety and prevention, the use of fire-fighting equipment, first aid, and evacuation drills. The number of assessed factories that were not conducting the proper number of periodic emergency drills dropped from four to only one. The number of factories that lacked proper fire-fighting equipment, however, increased from 1 to 3. Two other important areas showing relatively high levels of non-compliance witnessed slight improvement: the storage of chemicals and hazardous substances (from 29% of assessed factories with gaps in compliance to 24%); and the marking and posting of emergency exit and escape routes (from 24% to 18% of assessed factories with gaps in compliance). In both areas, Better Work Nicaragua has working with factories on these issues, with the introduction of ‘best practices’ sheets, in addition to the treatment of these topics in training. The percentage of assessed factories that that did have the required Occupational Safety and Health license also saw an improvement: from 41% (7 factories) to 24% (4 factories). Better Work Nicaragua is monitoring improvement on this, by working with management members of the Performance Improvement Consultative Committees (PICCs) to follow through in this requirement.4 An area which showed an increase in non-compliance is the accessibility of emergency exits. One more assessed factory was found to have this issue in the second visit, compared to the first. This could be related to a number of reasons. One is the greater specification of the Better Work assessment guidance on this question, resulting from the review of the Compliance Assessment Tool (CAT) to strengthen the identification of fire safety and prevention aspects. Another reason is that it is common for management to resolve the issue of blocked exits in the short term, but without a system for monitoring it continuously and ensuring that it does not occur. Moreover, during peak production periods, aisles and areas near the doors and emergency exits are used to place boxes, finished product or raw material. In the first semester of this year, management at several factories claimed to have accumulated inventories of finished products, given that there were logistical problems at Puerto Corinto, a situation that impacted several of the factories that ship their product through that port on the Pacific.

4

The requirements to obtain the occupational safety and health license are extensive, and include aspects such as the conducting a study to identify industrial health and safety risks, as well as medical exams for all workers, which require significant investment on the part of the factory.

Page 12 of 17

Section III: Fire Safety Initiatives to Date Better Work Nicaragua has undertaken a number of initiatives to strengthen fire safety in the apparel industry. Among these are: · Collaboration with the Fire Department (Benemérito Cuerpo de Comberos): Better Work Nicaragua has an agreement to collaborate with the Nicaraguan Fire Department to train all participating factories in the programme on Fire Safety, First Aid and Emergency drills. So far, 26 factories and over 1000 thousand workers have received this training.

·

Compliance Assessment Tool (CAT): Questions related to fire safety in the OSH and other sections were reviewed and strengthened by adding more detailed guidance

· Fire Safety Handbook: Better Work Nicaragua developed a Fire Safety handbook which it distributed to the workers in all Better Work Nicaragua factories. Some twenty thousand handbooks have been distributed. · Fire Safety Checklist and Good Practice sheets: The programme has developed resources, such as an extensive fire safety checklist and good practice sheets (e.g on proper chemical storage, formation of a fire brigade in the factory) based on international standards, national legislation and national sectoral regulations · Occupational Safety and Health Fair: Once a year Better Work Nicaragua sponsors an OSH fair that includes training and exercises on Fire Safety and Emergency Drills, as well as training and exercises on the use of fire extinguishers. · Electrical hazards Training Program: Better Work Nicaragua collaborated with the Ministry of Labor to develop and conducted a Learning Seminar focused on existing electrical hazards in apparel factories, since electrical issues are a main case of fire-related acidents. Over 40 participants from 16 Factories - including Compliance Managers and Mechanics – took part in the seminar. This represents almost 36 percent of the industry. · Trained EAs: All the Enterprise Advisors receive continuous reinforcement of their training on issues of Fire Safety and First Aid. All Better Work Staff perform the legally required Emergency Drills at least four times a year. All 4 EAs participate twice a year in Fire Prevention and Fire safety trainings. Four times a year, 4 AEs and 8 more Better Work Nicaragua representatives practice Emergency drills. All 4 AEs participated in the Electrical hazards training program and OSH management systems trainings.

Page 13 of 17

Section IV: Conclusions and Policy Recommendations Since the inception of the programme, Better Work Nicaragua is not aware of any incident with regard to factory fire safety, including significant loss of property, or human life and/or significant injury. Nicaragua has substantial national labor legislation and standards for companies operating in the Free Trade Zone that contain provisions for prevention and safety regarding fires and other emergencies. While there have been clear trends reflecting promising improvements from the first assessment visits to the second, there is more that can be done to close the compliance gaps in several areas. Some of these areas, such as the accessibility of emergency exits, can be addressed with low-cost solutions with the help of training and implementation of systems that ensure that these requirements are met continuously. Better Work Nicaragua will continue to strengthen its work on fire safety, including further training of Enterprise Advisors and strengthening the guidance in the compliance assessment tool (CAT). The data reflected in this report helps to identify those areas needing focus for advisory services and training (e.g. accessibility of exits, obtention of OSH licenses, storage of chemical and hazardous substances). The IFC is also conducting a fire and building safety study across Better Work country programmes. Experts recently conducted a field study of a sample of participating factories, and the findings and recommendations will also serve to focus attention in areas needing it. In addition to its own efforts, Better Work Nicaragua recommends its national stakeholder partners to prioritise this area as follows. Government: * Emphasize fire safety when issuing permits and licences for construction * Strengthen the guidance, inspection and particularly enforcement of fire safety laws (including the need for all factories to attend fire safety training, have appropriate exits doors and automatic fire-fighting equipment such as sprinklers for certain areas) * Prioritise efforts to address electrical safety as a cause of fires * Develop joint initiatives between the relevant government institutions (e.g MITRAB and the National Free Trade Zone Committee) on fire safety and prevention Trade Unions: * Train union representatives so they can adequately fulfil their enterprise level responsibilities related to fire safety * Take a proactive role in fire prevention strategies in enterprises, particularly through the joint worker/manager OSH committees * Educate workers on the risks, prevention strategies, and emergency responses for fires (including working with management to include this in induction since the worker turnover is too high to rely only periodic trainings alone) * Encourage workers to identify risks and to communicate them to management Industry : * Assign a representative from the employers’ association to work directly with factories on fire safety issues * Raise awareness among factories of the need and benefit, in terms of human risks, financial implications, and reputation, of prioritising fire safety * Seek joint initiatives with government institutions and technical training institutes to promote fire safety and prevention. * Ensure factories a) identify and train a responsible person for fire safety and b) invest in proper training of workers c) invest in necessary equipment and maintenance

Page 14 of 17

Better Work looks forward to working on fire safety with national stakeholder partners, to ensure that the Nicaraguan garment industry continues to be a safe place for workers and a vibrant a low risk industry for international investment.

Page 15 of 17

Annexes Annex A: Factories Covered in this Report AALFS UNO, S.A. CAMBRIDGE INTERNACIONAL S.A COTTON ACE DE NICARAGUA, S.A DASOLTEX, S.A EINS, S.A FORMOSA TEXTIL (NICA), S.A GILDAN ACTIVEWEAR Gildan Activewear Rivas, S.A GRACE FASHION INDUSTRY S.A GUANICA, S.A HANDSOME NICA, S.A. HANSAE MANAGUA HANSAE NANDASMO HANSAE-NIQUINOHOMO IRENE, S.A. Istmo Textil Nicaragua S.A. Kaltex Argus S.A New Holland Apparel Nicaragua PRISMA, S.A SAE-A TECNOTEX, S.A SERATEX NICARAGUA, S.A TEXNICA, S.A TEXTILE UNLIMITED, S.A TEXTILES VALIDOS, S.A USLC APPAREL, S.A WELLS APPAREL DE NICARAGUA, S.A

Page 16 of 17