Retailers around the world react to Bangladesh fire

Bangladeshi family members hold up portraits of missing relatives as they march demanding the wages of missing workers and the death sentence for the building owner, at the nine-storey building collapse in Savar, on the outskirts of Dhaka on May 14, 2013.

How are retailers in the U.S. and abroad responding to last month's clothing factory collapse in Bangladesh, one of the worst industrial accidents ever? So far, the answer has been piecemeal.

More than fifteen major retailers in Europe have signed on to a legally binding plan to help pay for safety improvements at facilities in Bangladesh. But in the U.S., many companies are coming up with their own individual approaches to making the factories they use safe.

So what's keeping these companies from all joining together in one plan? Two key factors are the question of unions, and the question of liability.

Let’s start with the the union question. The factory safety proposal that has the most traction so far -- though not in the U.S. -- was launched by a global federation of trade unions, known as IndustriALL and Uni. A broad coalition of European retailers has joined the plan, including the world’s second largest retailer, Carrefour, as well as Benetton, H&M and the parent company of Zara. Together, these brands work with more than a fifth of the factories in Bangladesh, according to the plan’s sponsors. 

Known as the Accord on Fire and Building Safety in Bangladesh, the plan would be legally binding, and require retailers to finance key safety measures like fire escapes, which many Bangladeshi factories don’t have. Factories would have to submit to independent monitoring that includes input from workers themselves, and unions. 

And that last point, about the unions, is key, says Judy Gearhart, executive director of the International Labor Rights Forum, an advocacy group based in Washington that has worked on overseas garment factory safety issues for years.

In last month’s tragedy, there were reports that some workers were told they must come to work even after cracks appeared in the building. “Half of the problem is the fact that workers are not able to speak up,” says Gearhart. “Having trade unions at the table makes all the difference.”

But trade unions may be a big part of why most of the big U.S. retailers, including Wal-Mart, the Gap, Target and J.C Penny,  have not signed on to the Accord.

On Tuesday, Wal-Mart issued a statement saying that while it agreed with much of the Accord, it did not feel comfortable with “requirements, including governance and dispute resolution mechanisms, on supply chain matters that are appropriately left to retailers, suppliers and government.”

Marshall Cohen, a retail analyst with NPD Group, put it more bluntly. “Any time you use the word union in retail, they get nervous.”

“It’s a dilemma for retailers,” says Cohen. “They want to be responsible.  They want to do the right thing. But their model in many cases is based on providing the consumer with the lowest priced product and means that they have to carefully assess union shops, and using union rules and regulations.”

Another issue some U.S. retailers have raised with the Accord is liability. A spokesman for Gap told the New York Times “the U.S. is quite litigious,” expressing concerns that American lawyers could use a legally binding agreement to sue American companies on behalf of factory workers in Bangladesh.

Gap has proposed changes to the Accord that would replace language making it legally binding with a provision to expel any company from the factory safety plan that violated the agreement.

Meanwhile, Wal-Mart has come up with its own plan for factory safety in Bangladesh. It would not be legally binding. Instead, Wal-Mart would hire an outside auditor to inspect factories, and immediately stop working with factories that did not address safety issues. 

Under the plan Wal-Mart, a company known for hard-driving negotiations with suppliers to get the lowest prices possible, would not finance safety upgrades at the factories it uses, saying it expects those costs “to be appropriately reflected in its costs of goods purchased.”   

About the author

Krissy Clark is the senior reporter for Marketplace’s Wealth & Poverty Desk.

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