By Christina Passariello
PARIS--Retailers 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 (ABF.LN, ASBFY), 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 (TSCDY, TSCO.LN) 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 (CA.FR, CRRFY) and Debenhams
PLC (DBHSY, DEB.LN). 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. (PVH),
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. (WMT) and
Gap Inc. (GPS) 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.
--Suzanne Kapner contributed to this article.
Write to Christina Passariello at
Christina.Passariello@wsj.com
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