Unlike in Europe, US retailers won’t sign Bangladesh safety pact

Companies cite concerns of increased litigation from signing the accord, but aversion to greater labor union power may play a role.

The landmark fire and building safety agreement for Bangladesh factories that 31 apparel retailers have signed so far this week is providing an opportunity for investors and other stakeholders to look at distinctions in how US and European companies may view their responsibility for ensuring workplace safety in their supply chains.

Signatories to the joint memorandum, which had been under negotiation for two years prior to the collapse of a factory complex in Rana Plaza outside Dhaka on April 24 that killed more than 1,100 workers, commit to finance and implement a program that entails third party inspections of suppliers’ factories and improvements where necessary. The agreement assigns all suppliers producing products for signatory companies to one of three categories defined by the percentage of annual production in Bangladesh the terms by which suppliers agree to accept inspections, fire and safety training, and remediation of any problems.  

Of the 31 signatories, three have headquarters outside of Europe -- PVH, the parent company of Calvin Klein, Tommy Hilfiger and Izod, and Abercrombie & Fitch in the US and Canadian supermarket owner Loblaw.

While big European companies such as Carrefour, Benetton and H&M have signed on, the biggest US retail names, including Wal-Mart, JCPenney and Gap, are notably absent. Wal-Mart and Gap have both expressed concerns about the enforcement and legally binding nature of the agreement, with Gap the most vehement in its refusal to expose itself to increased litigation. Wal-Mart announced plans this week to pursue its own course to improve workplace safety in Bangladesh, promising to immediately stop production at factories at which dire safety failures were found, and advocate for improvements to both factory owners and government agencies. But it made no mention of helping to underwrite the costs of any improvements.    

‘There’s a real question of why US companies are not signing on to the safety agreement,' says Liana Foxvog, organizing director of the International Labor Rights Forum, which helped initiate negotiations for a safety accord in early 2011 after a earlier factory fire in Bangladesh trapped and killed 29 workers. Foxvog believes the statements issued on May 15 by the two major retail trade associations offer some clues. ‘[Both statements] fall far short of what is truly needed to save workers’ lives in Bangladesh.’

Indeed, the National Retail Federation seemed to go on the attack in its brief release, which said the global labor consortium’s plan ‘gives no practical and immediate solutions to the challenges facing the Bangladeshi garment industry’ and is actually geared toward advancing labor unions’ interests.  

In a New York Times opinion piece on May 2, Foxvog and ILRF executive director Judy Gearhart argued that supply chain monitoring programs established by companies fuel corruption in Bangladesh’s garment industry by placing ‘additional requirements on factories without ensuring the financing needed to meet them, thereby encouraging factories to keep secret any safety risks they may have – precisely because they know brands are likely to walk away if they find out.’ To ensure safety in their supply chains, global brands need to make a contractual commitment to the safety of the workers making their products, the op-ed said.

Walking away is precisely what The Walt Disney Company decided to do a month and a half before the Rana Plaza disaster. In a March 4 letter to thousands of licensees and vendors, Disney ordered a halt to production of branded merchandise in Bangladesh and a handful of other countries and outlined new rules for overseas production. Driving the decision to exit countries with questonable worker safety standards was uneasiness about its heavy reliance on outside companies such as licensees to ensure that working conditions align with company standards, as reported by the New York Times on May 1.

At least one socially responsible investing firm, Domini Social Investing, lauded Disney for opting to focus on countries where it has more buying power and leverage to effect change. But given that Disney continues to allow its branded merchandise to be produced by licensees in 101 other countries, contingent on approval of the factories by independent monitors, it’s fair to wonder how Disney’s assessment of risk and leverage to effect change in those countries differs from its evaluation of Bangladesh. A Disney spokesperson who referred Corporate Secretary to the May 1 Times article for its position, did not respond to an email request for clarification on this point.

‘We’re calling on companies not to walk away from Bangladesh, but stay and fix the problems they’ve created,’ says Foxvog. ‘If they just walk away from Bangladesh, who’s left behind? It’s the workers, who are already [suffering]. They deserve to have jobs, and decent jobs at that.’

Unfortunately, the health and safety indicators provided by such organizations as the Global Reporting Initiative are too vague to offer much direction to companies that choose to disclose information about workplace conditions and nothing that relates to associated risks in their supply chains, says Tom Cecich, chairman of the Center for Safety and Health Sustainability, which advocates for stronger health and safety indicators for companies’ sustainability reporting. GRI hasn’t revised the four health and safety standards in the new version of its reporting guidelines being unveiled in Amsterdam on May 22, but it has promised to create a new health and safety work group to improve those indicators.

Among the 2013 list of the global 100 most sustainable companies compiled by Corporate Knights, a media, research and investment research firm in Toronto, less than 10 percent of them report on using GRI indicators for health and safety, says Cecich.

‘In the rush to be rated sustainable, health and safety of workers isn’t high on list of what’s [meaningful] for companies,’ he says. The Center’s own research found that one of the 100 companies had 49 fatalities in the year for which it was rated one of the world leaders in sustainable practices. ‘[That] seems to be a significant disconnect.’

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