Bangladesh safety accord still raises many questions
Retailers and brands are taking steps to improve safety standards at factories in Bangladesh
There is no doubt that something needed to be done to improve safety standards at factories in Bangladesh making clothes for western brands and retailers. But the new Accord on Fire and Building Safety - details of which were reported on just-style yesterday - seems to raise nearly as many questions as it answers.
The collapse of the Rana Plaza factory building outside Dhaka, the Bangladeshi capital, on 24 April with the loss of more than 1,100 lives was undoubtedly the game-changer that galvanised a number of major firms to commit to a five-year safety agreement this week, ahead of today's (15 May) deadline for doing so.
The new Accord on Fire and Building Safety in Bangladesh kicked off on Monday (13 May) with support from European retail giants H&M, the single largest apparel-producing company in Bangladesh, and Zara-owner Inditex, the single largest fashion retailer in the world. Primark, Tesco, Marks & Spencer and Benetton are just a few of the 25 names who have now joined.
What they have signed up to is a legally-binding, five-year pact that agrees to independent safety inspections with public reports on all Bangladeshi suppliers used by the signatory companies, mandatory repairs and renovations, the obligation by brands and retailers to underwrite the costs of safety upgrades - including ensuring they pay suppliers enough to maintain safe workplaces - and repercussions for suppliers that refuse to improve conditions including the termination of business.
There will also be health and safety training for workers and management personnel, health and safety committees, and the right of workers to file complaints and to refuse unsafe work. And an active role is seen for both workers and trade unions.
Signatory brands will contribute a maximum $500,000 per year to pay for the steering committee, safety inspector and training coordinator. Payments will depend on each company's annual garment production in Bangladesh.
And crucially, to incentivise suppliers to carry out any reforms, there is also a commitment to remain in Bangladesh, and continue placing order volumes at their current level for at least two years with tier 1 and tier 2 factories.
But while the accord has obviously gained enormous momentum in the last three days, it's certainly not the "international movement" its creators were hoping for. Instead, there seems to be a transatlantic divide, with US support so far notable by its absence.
Both Gap and Walmart say they are unhappy about the way disputes will resolved and the potential risk of lawsuits in the US if anything goes wrong.
Walmart also believes requirements on supply chain matters should be left to retailers, suppliers and the government, "and are unnecessary to achieve fire and safety goals."
Gap has instead emphasised its own plans to spend $22m on fire safety improvement at the factories it uses in Bangladesh.
Likewise, Walmart has ramped up its inspections and safety programme in the country. This is on top of already-strengthened sourcing rules, which were overhauled earlier this year to bar any sub-contract work to manufacturers and facilities it has not approved, and terminating suppliers for a single violation.
There are also, perhaps, unspoken concerns about the requirement to commit orders to Bangladeshi factories for the next two years.
Production in the country is already being disrupted by strikes and political unrest - the most recent of which forced 300 factories to close earlier this week - and it's impossible to know if this will be resolved any time soon.
One step to try to address the situation has seen the government set up a new minimum wage board to review garment worker wages and pave the way for a rise - which would be back-dated to 1 May - and there have also been moves to make it easier for workers to unionise.
But this could also erode the low wage benefits that attracted most garment buyers to Bangladesh in the first place. The existing entry-level minimum wage for a ready-made garment worker was set in 2010 at BDT3000 (US$38.53) and is among the lowest in the world.
The issue of rising costs is also likely to be more acute in the US, where apparel imports from Bangladesh are subject to import duties - unlike the European Union, where Bangladesh currently receives duty-free and quota-free access for its products.
Indeed, signs that US buyers are perhaps tiring of the delays and disruption of doing business in Bangladesh can be seen in apparel import data, which shows the volume of imports fell 1.3% year-on-year in 2012 to 1.52bn SME (square metre equivalents). In contrast, imports from China were up 1.4% in the same period to 9.88bn SME.
There is also a very real likelihood that the industry's focus on the cost of labour and efforts to keep it as low as possible will see some sourcing shift to other low cost countries like Vietnam and Cambodia.
While the major multi-national brands - whether or not they have signed up the accord - are obviously taking steps to prevent further industrial disasters in Bangladesh, there is also the issue of what happens in factories that are non-compliant and fall outside the accord.
Walmart has already barred more than 230 factories in Bangladesh from producing its products - almost as many as the 279 factories that it still uses there. And it's not inconceivable to assume that at least some of those will continue to supply less scrupulous buyers.
So if the goal of the agreement is to prevent more deaths in Bangladesh, a grey area still remains where more lives may inevitably be lost.
As H&M notes, in order to make a real, sustainable impact, the accord will need the support of a broad coalition of brands if it is to reach the sector's 5,000 factories.
It is also unclear just how much responsibility retailers and brands will have when factories go out of business - not only for redundancy pay but also when it comes to finding alternative employment for workers. How will this be divided among the various companies sourcing from the facility?
And what happens when retailers just have a short-term relationship with a factory? Safety inspections, remediation and fire safety training is being focused on tier 1 and tier 2 factories - with those in tier 3 just facing limited initial inspections. But surely it is facilities contracted for just occasional or one- time orders, or small production volumes that present the greatest risk.
Another issue is how far does the accord extend its reach? Earlier this week Walmart is said to have requested the closure of the Dresswell factory, which it didn't use but was situated next to its supplier Stitch Tone. How many cases are there likely to be where production has to be stopped because of safety concerns at an adjacent facility - and where do retailers draw the line when it comes to the chain of compliance?
Essential first step
The accord is obviously an essential first step in the right direction, and firms should be commended for pulling together with a solid effort to bring about change.
But it is also unlikely to be the last step to achieving safe factories, since there will always be those who, for whatever reasons, slip the net. The challenge is to make sure the momentum continues and that the agreement continues to evolve.
It is also worth remembering that while a lot of time has been spent recently talking about the disasters, there are also a lot of very reputable organisations operating in Bangladesh in an ethical way. It's now time for the others to catch up.
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