May 3 (Bloomberg) -- Western retailers and international labor activists who met earlier this week in Germany are still wrangling over a two-year-old memorandum aimed at improving Bangladesh factory safety.
The contractually enforceable document, which would require companies to pay suppliers more so factory owners can afford safety upgrades, was at the center of discussions in Frankfurt on April 29. Since retailers including Wal-Mart Stores Inc. and J.C. Penney Co. began discussing the agreement in April 2011, more than 600 Bangladesh garment workers have died. At least 511 perished last week alone after a factory building collapsed.
Wal-Mart, based in Bentonville, Arkansas, and Plano, Texas-based J.C. Penney were among the retailers that attended the Frankfurt meeting, which was scheduled before Rana Plaza collapsed. The participants set a May 15 deadline to draft an agreement and decide whether to accept the terms. So far two companies have signed the original memorandum: PVH Corp., which makes Tommy Hilfiger brand apparel, and German retailer Tchibo.
“My hope is that companies have been shocked to their cores by seeing the photos and hearing the workers’ quotes coming out of Rana Plaza,” said Liana Foxvog, a spokeswoman for the International Labor Rights Forum, a Washington-based advocacy group. “I trust that they realize that enough is enough and have the sense to sign on to the same core elements that PVH and Tchibo have adopted.”
Retailers have faced increasing pressure to ensure Bangladesh factories are safe in the wake of the building collapse. It was at least the third reported industrial accident in the South Asian nation since November, when 112 people died in a fire at a workshop that was producing clothes for companies including Wal-Mart and Sears Holdings Corp., which is based in Hoffman Estates, Illinois. Both have said the factory was not authorized to make their clothes.
The global garment industry would have to spend about $3 billion over five years to bring safety standards at Bangladesh apparel factories to Western standards, according to an analysis by the Worker Rights Consortium. Upgrading the country’s approximately 4,500 factories would cost the garment industry about 10 cents per garment, the Washington-based labor monitoring group said.
The annual cost would be $600 million, or about 3 percent of the $19 billion the Bangladesh Manufacturers & Exporters Association says Western companies spend annually on manufacturing in Bangladesh.
Fifty percent of Bangladesh’s garment factories don’t meet legally required work safety standards and those that have improved working conditions have done so under pressure from Western apparel makers, according to Kalpona Akter, executive director of the Bangladesh Center for Worker Solidarity, a non-governmental organization founded by two former garment child workers to promote safer factories. Bangladesh’s labor law requires safety measures such as fire extinguishers and easily accessible exits at factories.
As the death toll mounted in Bangladesh, the authorities said Rana Plaza lacked the required building permits and that its owner Sohel Rana, 38, was arrested along with the owners of factories located inside the building. Workers were ordered back to work after an engineer had warned the building was no longer safe, local officials said.
Companies rushed to respond to the disaster. Loblaw Cos., whose Joe Fresh brand garments were made at Rana Plaza, said yesterday it was dispatching four executives to Bangladesh to meet with government officials. Loblaw, which is based in Brampton, Ontario, also plans to put Joe Fresh employees permanently on the ground to ensure the buildings it sources from hew to local building codes.
“I am troubled by a sequence of events or management practices that saw fit to send apparel workers back into this building after it was declared dangerous,” Loblaw Chairman Galen G. Weston told reporters in a briefing in Toronto. Weston said he was also troubled by the “deafening silence” from the many retailers who bought clothing from the collapsed building that have not come forward to address this issue.
Joe Fresh founder and chief Joe Mimran reiterated that Loblaw has no plans to leave the country, where it has 47 locations that supply the brand. However, Mimran said that the company will have to rethink which countries it will enter if the reliability of audits there can’t be trusted.
Walt Disney Co. told suppliers in March that it will no longer let its branded merchandise be made in Bangladesh and will restrict production to a list of permitted countries, according to a letter the Burbank, California-based company released today.
“These are complicated global issues and there is no ‘one size fits’ solution,” Bob Chapek, president of Disney’s Consumer Products division, said an an e-mailed statement. “Disney is a publicly held company accountable to its shareholders and after much thought and discussion we felt this was the most responsible way to manage the challenges associated with our supply chain.”
Wal-Mart, Gap Inc. and Children’s Place, a Secaucus, New Jersey-based kids’ apparel chain, all said they wouldn’t pull out of Bangladesh.
“Global buyers are a critical part of the Bangladesh economy and simply walking away is not the answer,” Jane Singer, a Children’s Place spokeswoman, said in an e-mail. “The terrible tragedy provides further impetus for coordinated efforts between retailers, NGOs and the Bangladesh government to provide long-term solutions to prevent future safety issues.”
In the meantime, retailer and labor activists will keep talking and trying to come to an agreement.
“The question is whether the magnitude of the horror at Rana Plaza will be enough to overcome the long-standing resistance of most companies to making any enforceable commitments on building safety,” Scott Nova, executive director for the Worker Rights Consortium, said in an e-mail. “If the apparel industry has any moral conscience, a serious, enforceable agreement can be reached. We will see.”
To contact the reporter on this story: Renee Dudley in New York at email@example.com