A group of 17 North American retailers and clothing makers has agreed to a five-year safety pact, aimed at improving conditions at Bangladesh factories that calls for inspecting all factories that supply their garments within a year.
They also agreed to set up basic safety standards within three months and are requiring that the inspection results of the factories be made public.
As part of the agreement, the U.S. companies including Wal-Mart Stores Inc., Gap Inc. and Target Corp. have 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 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.
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 from private businesses, without providing accountability for how the money is spent.
Only a handful of U.S. companies have committed to the global accord, including PVH Corp., the New York-based parent company of Tommy Hilfiger and Calvin Klein, teen-targeted retailer Abercrombie & Fitch, of New Albany, Ohio, and New York-based fashion company Sean John.
Instead, the alliance is pushing an alternative that will spread the responsibility, to include not only retailers, but also the Bangladesh government and the factory owners themselves.
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 clothing exports from Bangladesh to North American companies. The global pact covers anywhere from 800 to 1,000 factories. About 25 percent of 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. They are both good plans,” said Jay Jorgensen, senior vice president and 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/Wal-Mart 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 repairs and renovations will cost, 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.
Under the North American alliance plan, 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. Wal-Mart and others said Wednesday that they will make sure that will be enforced in the factories with which they do business .
The group 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, as well as the Office of the U.S. Trade Representative.