Big-name retailers scramble to improve garment trade safety

The disastrous collapse of a Bangadesh garment factory has big-name Western retailers scrambling to pay compensation and set new standards for their manufacturers, to assuage consumer concerns and prevent tarnishing of their own reputations.

Proposals on the table include compensation and industry-wide safety standards

Many family members are still waiting to hear news about missing relatives after more than 1,000 died in the Rana Plaza building collapse. (Ismail Ferdous/Associated Press)

Thursday's fatal factory fire marked the fourth disaster in Bangladesh's highly profitable, low-cost garment industry in less than six months, and adds to the already intense pressure on Western retailers to take steps to improve workplace safety in the developing world.

Workplace safety and labour rights came under increased scrutiny in recent weeks following the collapse of a Dhaka factory building on April 24, which killed more than 1,000 people. It was Bangladesh's worst industrial accident and one of the world's worst tragedies in the low-cost needle trade.

The resulting attention on the numerous fast-fashion retailers from around the world that rely on Bangladesh's 4,500 garment factories now has many scrambling to find solutions to some of these problems, to assuage consumer concerns and prevent any further tarnishing of their reputations.

The approaches range from pulling out of the poor South Asian country to seeking a broad industry agreement to try to improve factory conditions. Here's a look at some of the actions companies have recently taken.

Bring big business elsewhere

In March, the Walt Disney Company ordered its licensees to stop production in Bangladesh and a number of other countries, according to the New York Times last week. Disney gave licensees a year to transition out of these countries.

The decison was reportedly triggered by a fire on Nov. 24, 2012, at Tazreen Fashions, which killed 112 people. Labour advocates said Disney apparel was made in the factory, though Disney denies it.

Disney officials told the New York Times that only one per cent of its branded products are made in Bangladesh. It also said it would allow licensees to return to Bangladesh if the Better Work program, which is designed to ensure safe working conditions, is involved.

But Better Work, a Geneva-based group partially run by the International Labour Organization, has said it won't get involved in Bangladesh unless the country legislates stronger labour protections.

One investment firm applauded Disney for focusing on countries where it has the most leverage, but it also said companies with a substantial presence in Bangladesh should stay there to help fix the problems.

Labour rights groups say companies that abruptly leave a factory can put the workers there at risk because the organizations leave without fixing the structural and safety problems.

Time will tell if Bangladesh decides to try to woo Disney back. The company produces $40 billion in sales and has nearly 30,000 facilities manufacturing its branded goods around the world.

Bangladeshi officials expressed worry that other retailers would follow Disney's lead.

Stay in Bangladesh and try to improve conditions

Instead of leaving Bangladesh, many Western retailers appear to be taking the wait-and-see approach. Canada's Loblaw Companies Ltd., owner of the Joe Fresh discount clothing line that was at least partly produced in Bangladesh's collapsed Rana Plaza, has been the most vocal about its plans to stay and help where it can.

Galen Weston, Loblaw's executive chairman, vowed that the company would be a force for change in the country.  

As part of its efforts, Canada's largest grocery retailer sent senior executives to Bangladesh to meet with local officials, non-governmental organizations and other groups to try to seek improvements in the industry. It vowed to audit its own factories and those audits will now include review of whether the building adheres to local building standards.

In Rana Plaza, there were at least five factories operating in the eight-storey building, which collapsed under the weight of illegally added storeys and the heavy generators brought in to run the machinery.

However, labour rights groups question whether self-regulation can be effective and if a single company can have much impact, noting the multiple factories that are often located within a single building. They question how Loblaw will address structural issues if other companies won't contribute to building improvements.

Some companies staying in Bangladesh use independent monitoring agencies to audit factories for them. But even that has risks.

The Brussels-based Business Social Compliance Initiative acknowledged that it approved two of the factories in Rana Plaza, while noting that its inspections did not include structural issues.

At the factory where the latest fire occurred, killing eight people, including a senior police official and the factory owner, it is said that the building was up to code and had the necessary emergency exits.

However, it appears staff weren't properly trained in emergency procedures and used other exits, a choice that led to their deaths.

Signing on to a cross-retailer agreement

Many labour activists believe the only solution to the string of garment factory disasters in Bangladesh — since the country itself lacks the necessary inspections of its own labour code — is to get companies to sign an agreement promising they will improve safety.

One option put forward by labour rights groups is the Bangladesh fire and building safety agreement. It was created after a 2010 garment factory fire killed 29 people. 

Only two companies — PVH Corp., which owns Tommy Hilfiger and Calvin Klein, and major German retailer, Tchibo Group — agreed to the memorandum. But it isn't enforceable until two others sign on.

The memorandum proposes a legally binding agreement that ensures independent building audits and higher fees paid to factories to make sure they can afford to bring their buildings up to code.

In the wake of the deadly Rana Plaza collapse, more than two dozen retailers met in Germany on April 29 to discuss Bangladesh factory safety.

The fire and building safety agreement was discussed, as were similar options, including talks to create a clearinghouse of information about factory inspection results that companies can access in order to learn of factories where other retailers stopped production because of safety concerns.

Labour rights groups argue that a legally binding agreement is the only way to ensure that companies improve conditions. Parties involved in the German talks have set May 15 as a deadline for reaching an agreement.

Informing the consumer directly with ethical labels

Some companies sourcing materials from countries or factories that follow ethical labour practices are now looking for ways to tout their status.

Sustainable Apparel Coalition — formed in 2011 to try to create a sustainability and labour practice standard — has created a tool, the Higg Index, for companies to measure environmental issues. It is now expanding that to include social and labour measurements.

Some of the companies involved, including Nike, Gap, Wal-Mart and Target, have been embroiled in sourcing scandals. The index is currently only used internally, but the coalition's ultimate aim is to deploy it publicly on labels or in consumer apps.

Another group, Fair Trade USA, a non-profit company that audits U.S. companies and certifies whether they give international coffee suppliers fair wages, is now moving into the apparel sector.

The pilot program claims to be the first clothing certification with a label that shows consumers whether farmers growing the cotton and workers sewing the garments were paid adequately and worked in an audited factory.

Companies that subscribe also pay up to 10 per cent more into a fund, which garment factory workers decide how to use. 

Fairtrade Canada doesn't offer a similar apparel certification, saying it found the pilot didnt warrant creation of a full standard and that garment work is a much more complicated supply chain than coffee.

Other retailers have simply begun posting information about their manufacturers on their websites, to show consumers where their clothing is sourced.

Payment and compensation

At least four companies that sourced materials from Rana Plaze have publicly announced they will pay compensation to the families of those killed or injured, each varying in the specifics and the amount or type of support offered.

Loblaw stated it would compensate victims through a relief fund. Spanish retailer, El Corte Ingles, promised to provide money to a fund for victims, while U.K. retailer Primark vowed long-term aid for children who lost parents, as well as financial aid for those injured and payments to families of the victims.

The latest company to offer financial support is Danish retailer, PWT Group, which owns the Texman brand. The company said it plans to provide "economical aid to the area" but didn't offer details.

After the Nazreen factory fire in November 2012, which killed 112, Wal-Mart said it was donating $1.6 million, not to compensate victims, but rather to a U.S. non-profit so it could create the Environmental, Health and Safety Academy in Bangladesh to offer training on fire and workplace safety.