A group of 17 North American retailers and clothing makers has agreed to a five-year pact aimed at improving safety conditions at Bangladesh factories that seeks to spread accountability across a wide spectrum from the local government to factory owners.
As part of the pact, the group — which includes Wal-Mart Stores Inc., Gap Inc. and Target Corp. — agreed to inspect all the factories they do business with within a year and set up basic safety standards within three months. They're also requiring that the inspection results of the factories be made public. They will then develop action plans for the factories that need improvement.
The alliance has provided a total of $42 million so far in funding and said that figure is growing. The mandatory costs of the program for each company will depend on how much business each of the retailers does in Bangladesh, but will be capped at $1 million per year. Some companies will offer an additional $100 million in loans to help factories improve safety.
The pressure has been building for companies to step up their monitoring of factories in Bangladesh following a building collapse in April that killed 1,129 workers there. The tragedy, the deadliest incident in the history of the garment industry, came just months after a fire in another garment factory in Bangladesh in November killed 112 workers.
The accord, announced Wednesday at a press conference in Washington, comes as U.S. retailers faced criticism for not joining a group of mostly European retailers in signing a separate safety pact that now has 72 companies involved. That global pact was announced in mid-May and had initially 30 companies on board. More details of the global accord were announced Monday after weeks of negotiations with worker rights groups and union groups.
U.S. retailers say they're averse to that agreement because they believe it exposes them to unlimited liability. They also say the pact sought major funding by private businesses without providing accountability for how the money is spent. They also believed that it gave union groups too much power.
Only a handful of U.S. companies have committed to the global accord and include PVH Corp., the New York-based parent company of Tommy Hilfiger and Calvin Klein, teen retailer Abercrombie & Fitch of New Albany, Ohio, and New York-based fashion company Sean John.
During the press conference, executives from Gap, Target, Wal-Mart and VF Corp. spent most of their time talking about the similarities of both plans. They said both emphasize collaboration, public reporting of factory inspections and an emphasis on worker rights.
But they also said they want to work together with participants in the global accord to create uniform safety standards instead of competing ones.
The North American alliance covers about 500 factories and a majority of the clothing exports from Bangladesh to North American companies. The global pact covers anywhere from 800 to 1,000 factories. About 25 percent of the garment exports from Bangladesh go to North America; the rest goes to Europe and other countries. There are about 5,000 garment factories in the country.
"There are two plans. There are both good plans," said Jay Jorgensen, senior vice president of global chief compliance officer at Wal-Mart in an interview with The Associated Press after the press conference. "We affirmatively want to work together with the accord."
But Scott Nova, executive director of The Worker Rights Consortium, one of the groups involved in negotiating the global pact, immediately slammed the plan and called it "a sham." In particular, he said the U.S. retailers are mainly trying to minimize any financial obligation.
"Under the Gap/Walmart scheme, the bottom line is limiting the brands' and retailers' costs," said Nova in a statement. "They offer a program that mimics the accord rhetorically, but that omits the features that make an agreement meaningful."
The legally binding global pact, which has been signed by such companies as Swedish retailer H&M and Italian clothing company Benetton, requires companies to pay up to $500,000 per year in the administrative costs of the program. On top of that, they're also responsible for ensuring that "sufficient funds are available to pay for renovations and other safety improvements."
How much it will cost for repairs and renovations won't be known until all of the factories are inspected, the Worker Rights Consortium has said. But based on consultation with fire and building safety experts, the group speculated the cost could run $600,000 per factory.
According to the global agreement, funds used to pay for renovations may be generated through negotiated commercial terms, joint investments, direct payment for improvements, government and other donor support or any combination.
The global pact also calls for inspecting clothing factories within the next nine months and will concentrate renovations on those that posted the biggest safety threat. Under that accord, workers will be paid while the factory remains closed.
With the North American alliance, 10 percent of the $42 million will be designated to assist workers temporarily displaced by factory improvements or who lose their jobs when factories close for safety reasons.
Nova also said that the North American alliance doesn't properly empower workers. According to the global accord, worker representatives have the power to initiate enforcement proceedings against companies that fail to comply with their obligations. And with the involvement of the local unions, factory workers will be informed of the potential danger of a factory and their right to refuse to enter a potentially unsafe building.
As part of the agreement with North American companies, a hotline will be set up in November that will allow workers to call in their concerns. Recently, the Bangladesh government passed a law that requires that factory workers be represented by an elected worker committee and Wal-Mart and others said Wednesday they will make sure that will be enforced in the factories they do business with.
With the global accord, a board made up of labor and retail representatives would oversee dispute resolutions that would be enforceable in the courts of the country where the company is based.
The group of North American companies worked with former U.S. Sens. George Mitchell and Olympia Snowe and solicited input from the ambassador of Bangladesh to the U.S., U.S. Bangladesh Advisory Council and the U.S. Department of State, and the Office of the U.S. Trade Representative. The other retailers that have signed on to the pact are Children's Place, Hudson's Bay Co., Macy's Inc., Nordstrom Inc., Sears Holdings Corp., Kohl's Corp. and Jones Group Inc.
Follow Anne D'Innocenzio on Twitter: http://twitter.com/ADInnocenzio