European, US retailers split on Bangladesh reform plan

Wednesday, 15 May 2013 00:00 -     - {{hitsCtrl.values.hits}}

  •  H&M, Inditex sign Bangladesh reform accord
  • Gap wants changes in how disputes are resolved in court
  • Wal-Mart asks Bangladesh Government to shut unsafe factory

STOCKHOLM/CHICAGO (Reuters): Major US retailers, including Gap Inc., declined to endorse an accord on Bangladesh building and fire safety backed by Europe’s two biggest fashion chains, a trans-Atlantic divide that may dilute garment industry reform efforts.

Three weeks after the collapse of a building housing garment factories, which killed more than 1,100 people, Western brands that rely on Bangladesh to produce clothing cheaply disagreed over how best to ensure worker safety.

A series of deadly incidents at factories, including a fire in November that killed 112 people, has focused global attention on safety standards in Bangladesh’s booming garment industry, the world’s biggest exporter of clothing after China.

Wal-Mart Stores Inc., the world’s biggest retailer, called on Bangladesh to shut one factory and examine another after its own inspections found safety problems.

Sweden’s H & M Hennes & Mauritz AB and Spain’s Inditex SA, the world’s two largest apparel brands, topped a list of predominantly European companies signing an agreement led by the International Labour Organisation, trade unions and other lobby groups.

Major brands and retailers set a 15 May deadline to join the agreement after talks in Germany last month. As of late Monday US time, the only well-known US Company to announce it had signed on was PVH, which owns brands including Calvin Klein.

Gap said it was ready to join ‘today’ but first wanted a change in the way disputes are resolved in the courts.

“With this single change, this global, historic agreement can move forward with a group of all retailers, not just those based in Europe,” Gap Global Human Resources and Corporate Affairs Department Executive, Eva Sage-Gavin said in a statement.

Europe accounts for about 60% of Bangladesh’s clothing exports, so even without participation from the big US retailers, the agreement may bring some change in a country that has seen at least three deadly garment factory disasters in the span of six months.

Bangladesh Garment Manufacturers and Exporters Association President Mohammad Atiqul Islam, said the deal was a bit of good news in the ‘worst time for us’.

“We believe this decision will motivate other big buyers across the West and the USA to join their hands with us,” he told Reuters in an interview.

Li & Fung Ltd., which supplies dozens of major retailers, including Walmart, said it was ‘continuing to look at’ the European pact, but declined to give details. Bangladesh is second only to China in Li & Fung’s global supply chain.

“We don’t think the answer is to move away from Bangladesh,” Li & Fung Group President and Chief Executive Bruce Rockowitz, told reporters after a shareholder meeting in Hong Kong on Tuesday.

“The answer is actually to invest more and try to make safety better and work with the Government on doing a better job on monitoring buildings.”

Walmart flags safety concerns

Walmart did not say whether it planned to sign the accord. But on Monday it released an unusually blunt and detailed public statement, asking the Government to halt production at Stitch Tone Apparels in Chittagong, Bangladesh, and to inspect Nassa Group’s Liz Apparels Ltd. factory complex in Dhaka.

The garment companies could not immediately be reached for comment.

Walmart said it found ‘structural concerns’ at a factory adjacent to Stitch Tone, Dresswell Ltd., which was not part of the retailer’s own supply chain. It said the Dresswell factory “appeared unstable and could cause a hazard” for workers at Stitch Tone, which was making clothes for Walmart.

Walmart said it removed its business from Stitch Tone and advised the owner not to continue production.

The inspections also found visible cracks in the wall at Liz Apparels. Walmart said it notified factory owners, the garment association and the Government about the safety concern at Liz Apparels and Stitch Tone.

“The Government of Bangladesh did the responsible thing last week by closing factories believed to be dangerous,” Walmart Vice President of Ethical Sourcing Rajan Kamalanathan, said in a statement. “We call on them to show the same leadership in the Stitch Tone Apparels and Liz Apparels cases, and take any actions necessary to ensure safe conditions.”

Retailers routinely inspect suppliers, but several companies said after the Rana Plaza collapsed in April that they were not able to check for structural soundness.

Walmart said it hired Bureau Veritas to inspect for structural, fire and electrical safety, including checking building designs and permits as part of an expanded inspection process it launched last month.

Rana Plaza was extended to add three more floors, in violation of city building codes, according to the Chief Engineer of Dhaka’s Development Authority.

The day before the building collapsed, cracks were seen in the walls.