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Retailers Becoming More Stringent about Monitoring Safety at Bangladesh Factories

Source: Dow Jones

Posted on 08 Jul 2013 by Neilson

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Factory safetyRetailers are becoming more stringent about monitoring safety at the factories they use in Bangladesh, pre-empting a safety pact that won't come into full effect until the fall.

A sense of urgency has permeated retailers in the wake of a factory building collapse that killed more than 1,100 workers in April, illuminating the lack of oversight in one of the world's largest garment manufacturers. Retailers such as Hennes & Mauritz AB, Zara parent Inditex SA and British retailer Primark, part of Associated British Foods PLC, scrambled to come up with an industrywide safety pact, which begins to take effect on Monday.

Yet many are also taking matters into their own hands and working with their competitors, duplicating some of the functions of the safety pact. The newfound cooperation underscores the pressure on retailers to adapt how they do business in Bangladesh.

Retailers are rushing to conduct their own building-safety checks, even before the same buildings are checked by the pact's chief inspector.

Last month, British retailers Tesco PLC and Primark said they discovered structural problems at the Liberty Fashion Wears Ltd. factory in Savar, near the crumbled Rana Plaza. The four-story building doesn't have enough steel support for its weight, the retailers said, and it is at risk of collapsing like its neighbor.

Tesco and Primark then teamed up with other retailers producing at the factory, including Carrefour SA and Debenhams PLC. And two weeks ago, retailers including Tesco and Carrefour wrote a letter to the factory owner, cosigned by the trade unions, demanding that he close the site until more inspections and repairs are done, according to the retailers. They insisted that the factory keep paying wages during the shutdown, and they committed to completing their orders there once the factory is safe again.

Attempts to contact the factory owner were unsuccessful.

Retailers are also sharing supplier lists--information that they used to guard for competitive reasons. Many retailers use the same factories, so they believe they can exact change by coordinating efforts.

Over the summer, a group of 70 retailers participating in the safety pact will establish a master list of the factories covered by it. Members estimate it could cover 1,500 to 2,000 of Bangladesh's 5,000 factories. According to the pact, each factory must be inspected by next April, one year after the Rana Plaza collapse.

The five-year accord is designed to raise fire- and building-safety standards in Bangladesh.

Seventy retailers--nearly all European--have signed the legally binding pact since mid-May, pledging to help finance repairs at sites that don't meet their standards and to not contract work at factories that the group deems unsafe. Inditex, PVH Corp., the owner of Calvin Klein and Tommy Hilfiger, and British mail-order retailer N Brown Group PLC are heading the initiative on behalf of the retailers. Trade union groups and the International Labour Organization are also participating.

Major U.S. retailers including Wal-Mart Stores Inc. and Gap Inc. are pursuing a competing program that would establish a $50 million safety fund, according to a person familiar with the proposal. It could be announced as soon as mid-July, according to the person.

The European group, which will operate as a foundation based in Amsterdam, has just begun to recruit its two key positions--chief safety inspector and executive director. The safety inspector will coordinate building-safety assessments of all of the factories in which the retailer signatories manufacture.