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  • Retail Consortiums Approach Agreement on Safety Standards for Bangladesh Garment Factories

    The Wall Street Journal reports that the three global groups addressing social responsibility and work standards for Bangladesh garment factories have tentatively agreed on common standards for factory inspections. The three groups involved in this tentative agreement are:

    • Accord on Fire and Safety in Bangladesh, led by mostly European based retailers
    • Alliance for Bangladesh Worker Safety, led by Wal-Mart Stores, Gap, and a consortium of other U.S. based retailers
    • National Tripartite Action Plan, an agency of the government of Bangladesh

    According to the WSJ, this tentative agreement, brokered by the International Labor Organization requires the final approval of each organization’s steering committee. However, concerns are still being raised as to whether future inspections will be transparent, that they will be conducted by competent safety engineers and whether major retail brands will provide the financial backing for factories to make required safety improvements.  The WSJ indicates that upon its review, the agreement mandates that “factory inspections must be carried out by a least two qualified inspectors with five years minimum experience each, and a combined experience of a least twenty years.” It further details the maximum load of machines allowed in a floor area and standards for the existence of fire doors and fire exits.

    The Europe based consortium will inspect 1600 factories while the U.S. alliance is overseeing 600 factories.  The government has reportedly pledged to assess and upgrade 1200 factories not covered by the consortium pacts. There are an estimated 5000 total garment factories in the country.

    From the financial resources perspective, 100 mostly European brand retailers have signed a five-year, legally binding accord that requires members to maintain garment order levels in Bangladesh factories for at least the first two years, and to assist in the cost of factory upgrades.  Two-dozen U.S. based retailers led by Wal-Mart and Gap have signed a non-binding pact which pledges to invest in factory inspections and upgrades.

    A report published by business network CNBC however indicates that tensions among the European and U.S. based consortium broke into the open earlier this week.  An official from the European pact voiced concern that the American retailers would piggyback at no cost on the efforts of the Europeans in financing safety upgrades. There are also differences of opinion on how much actual monies are being set aside to finance factory upgrades.

    Meanwhile, worker unrest and protests continue to occur across Bangladesh’s garment factory sectors with a deadly clash with government troops reported on Tuesday.  Weeks of rolling worker strikes and unrest have occurred after the Bangladesh government recommended that the minimum wage be raised to roughly $67 per month. Workers have protested that that figure is not enough in spite of the call from labor unions to accept the minimum wage hike.

    As Supply Chain Matters has indicated in previous commentaries, the path toward social responsibility practices across Bangladesh is laden with challenges, but the overall efforts are moving toward a more positive direction.  All parties need to continue to work collectively toward a common goal of standards, financial support and consistency of purpose. Global retailers are making various commitments to continue sourcing garment orders from Bangladesh in return for minimum safety standards.  While these new agreements will certainly need further refinement, the broader goal must be kept in context.

    1 Comment

    1. Great article on a matter that is delicate given the unfortunate events that had happened in the past in Bangladesh, and more given the fact that Bangladesh is becoming the new China for many garment retailers. As you, I do believe that social responsibility actions from companies with suppliers in the region are moving in the right direction, however they should have the financial backup that implementing new safety standards require. I applaud the commitment from the “100 mostly European brand retailers” in signing the 5 year contracts. I do believe those are win-win agreements because by helping their suppliers they will be decreasing their risks of possible disruptions on their supply chains (something that seems not to be addressed by every retail and every Supply Chain Executive), and also they can create long-lasting relationships that could deliver costs reductions in the future, with the additional factor of using those actions as PR for their brands in their home countries as part of their social responsibility. Finally, it will be interesting to follow what is going to happened to the other 2,600 factories that are not being helped financially by those 3 entities. Will they disappear as retailers will not buy from them based on their lack of standards?. Will they be absorbed by those companies that get the financial support in the future? Or on the contrary, nothing will happened as non-responsible retailers will buy from them as they will (probably) produce at lower costs that the companies that implement new standards?

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