May 15, 2013 in Business

Global retailers sign Bangladesh safety pact

Others work on separate plans
Anne D’Innocenzio Associated Press

NEW YORK – While several more global clothing chains on Tuesday were announcing that they agreed to a historic pact to improve factory conditions in Bangladesh, U.S. retailers were scrambling to come up with their own safety plans.

A total of more than a dozen brands this week announced plans to sign a five-year, legally binding contract that requires that they help pay for fire safety and building improvements in Bangladesh. Notably missing from the pact are U.S. firms, except for PVH, the New York-based parent company of Calvin Klein and Tommy Hilfiger.

But in the latest sign that there’s a clash between what U.S. companies and overseas firms think should be done to solve the issues in Bangladesh, several North American retail groups led by the National Retail Federation on Tuesday said they are working on a separate factory safety plan. The groups declined to give details on Tuesday, saying they’re still being hashed out.

Meanwhile, Wal-Mart said late Tuesday that it wasn’t in the position to sign the legally binding pact, but the world’s largest retailer announced steps that it believes meet or exceed the contract.

The company said it will make public the names and inspection information of the 279 factories it uses in Bangladesh, starting on June 1. It will be using an inspection company to provide fire safety training to factory workers. It also is contracting with a hotline call center run by an organization called Labor Voices so that factory workers in Bangladesh can report safety concerns.

“Transparency is vital to make progress in improving factory conditions,” Rajan Kamalanathan, vice president of Ethical Sourcing for Wal-Mart, said in a statement.

The moves come as the world’s largest retailers face pressure to increase their oversight of factory conditions in Bangladesh following a building collapse on April 24 that killed more than 1,110 workers there. The tragedy, the deadliest garment industry incident in history, came months after a fire in another garment factory in Bangladesh in November killed 112 workers.

Labor groups have pushed retailers to sign the legally binding plan, a lengthier version of a pact that was proposed about two years ago. In fact, many workers’ rights groups have threatened protests and other increased pressure on clothing brands that do not sign the agreement by today.

In addition to requiring that retailers pay for safety upgrades, the plan calls for the companies to pay up to $500,000 annually to run the program, to stop doing business with any factory that refuses to make safety upgrades and to allow workers and their unions to have a voice in factory safety.

This week, numerous European companies have announced plans to sign the agreement. Bangladesh is especially important to European retailers because clothes made there are not subject to import taxes as part of a program to encourage economic development in poor countries.

Conversely, industry experts said that many U.S. firms may be hesitant to sign the contract. They say the companies worry that they’ll open themselves up to legal action since people and companies in the U.S. are generally more likely to sue than in Europe. Indeed, Gap Inc., which had been close to signing the agreement last year, said Monday that while the pact is “within reach,” the company is concerned about the possible legal liability involved.

But in order for the pact to have a significant impact on working conditions in Bangladesh, experts say it needs more big U.S. companies to join. So far, based on the dozen or so companies that have signed up, more than 1,000 of the 5,000 factories in Bangladesh would be covered, according to Scott Nova, executive director of the Worker Rights Coalition, a worker rights group that helped to negotiate the contract.

On Tuesday, Italian fashion brand Benetton, Spanish retailer Mango and Canadian retailer Loblaw were among those that said they would sign the pact. Those announcements came a day after Swedish retailer H&M, C&A of the Netherlands, British retailers Tesco and Primark and Spain’s Inditex, owner of Zara, agreed to sign.

The holdouts include big American firms, including Gap. Inc., Sears and J.C. Penney, which all have said they are studying the pact.

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