Wal-Mart Shouldn't Discount Worker Safety

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By Lisa Beyer

Wal-Mart Stores Inc. is learning just how hard it is to escape the stain of exploiting human beings for profit.

The company was already roiling from news that the Tazreen factory in Bangladesh, a firetrap that burned down killing more than 100 workers last month, was a Wal-Mart supplier. Now, Bloomberg News has reported that the retailer last year said it would not pay Bangladeshi factories prices sufficient to cover safety improvements that might have prevented the Tazreen blaze.

Wal-Mart's position was contained in a record of a meeting in Dhaka about the Fire and Building Safety Agreement, a proposed industry-labor collaboration for Bangladesh that would create an independent chief inspector to execute a mandatory factory safety program. Under the plan, retailers would be required to pay factories enough so that they could afford renovations and training programs to make workplaces minimally safe. At the meeting, Sridevi Kalavakolanu, a Wal-Mart director of ethical sourcing, said that was not "financially feasible," according to the record.

Making workplaces safe wouldn't cost that much, according to estimates by the Worker Rights Consortium, an independent labor rights monitoring group. Factory costs represent a relatively small part of the sale price of an outsourced clothing item, perhaps $4 on a $20 shirt. Renovations and training programs to make a factory like Tazreen compliant with fire-safety standards might add 2.5 percent to those costs, which the retailer can pass on to consumers by charging $20.50 for the shirt.

At the Dhaka meeting, the Gap Inc. also opposed the mandatory fire-safety agreement. Instead, the company has adopted its own program, which asks vendors to abide by master plans drawn up by a fire chief. In answering to itself, however, Gap does little if anything to improve on the current system, in which retailers and factories rely on inspections by internal auditors or auditors for hire.

Even if Gap's fire chief maintains high standards, there's no guarantee Gap's vendors can afford to meet them, even with $20 million in loans the company is offering for capital improvements. Because of excess factory capacity in Bangladesh, competition for bids is intense, so profit margins are thin.

That's why the Fire and Building Safety Agreement relies on retailers to effectively cover the costs of workplace safety. To go into effect, the agreement requires four signatories. Onboard already are German retailer Tchibo GmbH and PVH Corp., the parent of brands including Calvin Klein and Tommy Hilfiger. By joining them, Wal-Mart and Gap could do themselves good, not to mention the vulnerable factory workers of Bangladesh.

(Lisa Beyer is a member of the Bloomberg View editorial board.)

Read more breaking commentary from Bloomberg View at the Ticker.

-0- Dec/05/2012 21:30 GMT