Western governments, large retailers and consumers should put pressure on the Bangladeshi government to ensure a fair deal for the 1.2 million workers and their dependents in the lucrative shrimp industry, campaigners have said.

Bangladesh is among the top 10 exporters of farmed shrimp; it is its second largest foreign currency earner after the garment industry.

However, those working in the industry in Bangladesh are poor and being pushed further into poverty. This is a result of exploitative and often abusive practices, according to a report by the Environmental Justice Foundation (EJF), Impossibly cheap: abuse and injustice in Bangladesh's shrimp industry.

The EJF says the industry is plagued by hazardous working conditions, child labour, bonded labour, withholding of pay, excessively low wages, health and safety violations, restricted union activities, verbal abuse and excessive hours. "There is a massive, valuable international trade in seafood providing billions of dollars in income, but there are appalling working conditions and a small minority is getting the vast benefits of the industry," EJF's executive director, Steve Trent, said.

"Consumers in Europe and the US should be aware of the hidden cost to the impossibly cheap shrimp we consume that involves the brutal treatment of workers," he added. "In the 21st century, food produced by forced or bonded labour should not be on our plates."

It is estimated that the industry directly provides a livelihood to nearly 1.2 million people, while about 4.8 million indirectly depend on the sector. Many work on small, family-owned farms. A high percentage of undocumented workers, unregistered farms and unregulated processing plants means many work beyond the reach of official records.

While the shrimp industry contributes roughly 4% of the Bangladesh's GDP, at a local level it has done little to reduce poverty and hunger or boost development, the EJF said.

Consumer demand in rich countries has driven the expansion of Bangladesh's shrimp industry, with 97% produced for export to foreign markets. More than two-thirds of shrimp are imported by the EU, notably by Belgium, the UK and the Netherlands. The global shrimp industry was worth more than $16.7bn (£9.7bn) in 2010, the most valuable fisheries product in the world, accounting for about 15% of the total value of internationally trade seafood products that year.

The EJF reported clear violations of the 2006 Bangladesh Labour Act in the shrimp-processing industry, including substandard pay, excessive working hours, unpaid overtime and delayed payments.

Taslisma, 20, a contract worker at a Bangladeshi shrimp-processing factory, said: "I don't wear any gloves. My hands get swollen while working and sometimes my fingers bleed. If they had a first aid box, it would have been OK for us, it would have helped, but they don't have any and we have to buy our own medicine. When I come out from work my fingers are still swollen, I cannot touch anything. It's painful."

Poor working conditions affect all facets of the industry: from collecting fry (larvae) from wild stocks or from hatcheries to supply ponds to those working in processing plants. Small shrimp farmers lack access to credit, transport and remain under the control of middlemen and buyers.

The report states: "The financial pressures put on farmers and shrimp fry collectors by this system can be extreme … many are locked into cycles of debt and dependence, making them vulnerable to poverty and hunger. With no opportunities for livelihood diversification or financial support, the future is often bleak."

Trent said external pressure should be brought to bear on the Bangladeshi government to ensure workers are protected by domestic labour laws. "DfID [the Department for International Development] should be exerting behind the scenes diplomatic pressure, major brands should exert downward pressure ... we're not asking Tesco to police what is happening in Bangladesh, but we are asking major retailers to require that people involved in the shrimp industry be treated better," he said.

Western legal requirements for imports are concerned with food safety, hygiene and consumer health protection and offer little consideration to potential labour and human rights abuses in the supply chain of the producer country, the EJF said.

Trent believes there is scope for improvement, given the changes in the garment industry after a factory collapse last April killed more than 1,100 workers. "There is scope for action," he said. "After the intensity of media coverage, the government felt it had to act and that has filtered down. People we are talking to are saying things have definitely got better."