Investors, Faith Groups Urge Brands on Bangladesh Safety

Investors including Trillium Asset Management, U.S. pension funds and religious groups are putting additional pressure on retailers with suppliers in Bangladesh to disclose and improve safety in factories.

One group has written to retailers asking them to commit to an international safety agreement that’s supported by labor monitoring groups and signed by 37 brands. In a separate letter, investors including public pension funds are urging companies to know and make public their suppliers and to ensure compliance with safety standards.

A letter drafted by the Interfaith Center on Corporate Responsibility, a coalition of faith-based investors and other organizations, is pressing retailers to sign on to the factory safety plan and has 123 signatories including, Trillium, the Presbyterian Church and the Unitarian Universalist Association. The group collectively controls $1.2 trillion in assets, according to the ICCR.

Retailers including Hennes & Mauritz AB (HMB), Inditex SA (ITX), Marks & Spencer Group Plc (MKS) and Loblaw Cos. (L) have pledged at least $60 million over five years to monitor safety in Bangladesh factories after a building collapse that killed more than 1,100 people. The pact calls for the appointment of a committee to oversee inspections, training programs and requires members ensure suppliers have enough money to maintain factories.

Workers’ Rights

“Responsible sourcing of the brands we are investing in is absolutely crucial to protecting the rights of workers as well as protecting the investment over the long term,” David Schilling, senior program director at ICCR, said in a phone interview. “The response we’ve gotten so quickly indicates that a wide group of investors have moral concerns and business risk concerns.”

Members of the group have not discussed whether they would sell shares in the companies if they do not sign the pact, Schilling said.

A separate letter, initiated by Amalgamated Bank LongView Funds, urges retailers to know their suppliers, disclose their names and ensure supplier compliance with standards. While it highlights the group pact as “an example of the crucial collaboration needed” it doesn’t press retailers to sign it.

The investor groups don’t single out individual companies that they want to see implement specific changes with suppliers.

Wal-Mart Stores Inc. (WMT) has said it won’t agree to the pact “at this time” and will instead make public safety inspections at all of its suppliers’ authorized factories in Bangladesh. Gap Inc. (GPS) has said it is “ready to sign on,” pending a change to the provision regarding binding arbitration.

‘Concerted Effort’

Fifteen funds including New York City Pension Funds, the Illinois State Board of Investment and California State Teachers’ Retirement System have signed the letter. The funds have $1.35 trillion in assets combined, according to the letter.

“There needs to be a real concerted effort,” said William Atwood, executive director of the Illinois State Board of Investment. “No one wants to profit, certainly not the state Board of Investment, for putting workers at some crazy risk. I would hope Wal-Mart will look real seriously at rethinking their approach to these procedures,” Atwood said in a phone interview earlier this week.

The retailer association proposal, called the Safer Factories Initiative, was announced yesterday by five apparel and retail trade associations in the U.S. and Canada.

One estimate by the Worker Rights Consortium, based in Washington, puts the cost of raising standards of safety in Bangladesh factories at $3 billlion.

Retailers were discussing agreements on improving labor conditions in Bangladesh both before and after the collapse of the Rana Plaza factory complex -- the worst industrial incident in the country’s history. The disaster killed at least 1,127 people and followed a series of deadly fires that already had prompted activists to push Western retailers to take more responsibility for work conditions there.

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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