Bloomberg News

Bangladesh Fire Safety to Cost Retailers $3 Billion, Group Says

December 10, 2012

The global garment industry would have to spend about $3 billion over five years to bring safety standards at Bangladesh apparel factories to Western standards, an analysis by a labor-rights group shows.

The analysis, provided to Bloomberg News by the Worker Rights Consortium, comes after a fire at a factory that made garments for Wal-Mart Stores Inc. (WMT:US) and Sears Holdings Corp. (SHLD:US) killed more than 100 people last month. Upgrading the country’s approximately 4,500 factories would cost the garment industry about 10 cents per garment, the group said.

Since the blaze at the Tazreen Design Ltd. factory on Nov. 24, Western companies have faced increased calls from labor- rights organizations to pay suppliers higher prices so factory owners can afford safety upgrades. The $3 billion figure, or $600 million per year, represents about 3 percent of the $19 billion the Bangladesh Manufacturers & Exporters Association says Western companies spend annually on manufacturing in Bangladesh.

The Worker Rights Consortium estimates are based on discussions with U.S. fire safety experts and on estimates of local construction costs in Bangladesh, said Scott Nova, the Washington-based group’s executive director. Nova said the figures are “high-end estimates” because the group assumed that all factories need improvements that include fire exits and alarms, emergency lighting and training programs.

“We firmly believe factory owners must meet our standards for suppliers and we recognize the cost of meeting those standards will be part of the cost of the goods we buy,” Kevin Gardner, a Wal-Mart spokesman, said in an e-mail. “We know our customers expect this of us and our suppliers.”

Too Costly

At a 2011 meeting convened to find ways to boost safety at Bangladesh garment factories, Wal-Mart declined to pay suppliers more to help them upgrade their manufacturing facilities because doing so would be too costly.

At the meeting in Dhaka, the Bangladesh capital, retailers including Gap, Target Corp. (TGT:US) and JC Penney Co. discussed a contractually enforceable memorandum that would require them to pay Bangladesh factories prices high enough to cover costs of safety improvements.

Wal-Mart, which has acknowledged one of its suppliers used the Tazreen factory in Bangladesh, worked with at least five suppliers there, documents found in the ruins by a labor-rights group show. The retailer said the factory near Dhaka, Bangladesh’s capital, was no longer authorized to produce merchandise for the company and that it had cut ties with one supplier that kept using the facility.

Wal-Mart fired Success Apparel, a person with knowledge of the matter said last week. Success, a New York-based firm with a more than 20-year relationship with the world’s largest retailer, said in a statement Dec. 8 that it didn’t know its clothes were being made at the Tazreen factory.

Foxconn Suicides

The fire at the Tazreen factory is being compared to events such as the suicides at Foxconn Technology Group, the Taiwan- based contract manufacturer that makes many of Apple Inc.’s products. After an outcry, the non-profit Fair Labor Association audited Foxconn factories in China, and the supplier vowed to make improvements.

Fifty percent of the Bangladesh’s garment factories don’t meet legally required work safety standards and those that have improved working conditions have done so under pressure from Western apparel makers, according to Kalpona Akter, executive director of the Bangladesh Center for Worker Solidarity, a non- governmental organization founded by two former garment child workers to promote safer factories. Bangladesh’s labor law requires safety measures such as fire extinguishers and easily accessible exits at factories.

To contact the reporter on this story: Renee Dudley in New York at rdudley6@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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  • WMT
    (Wal-Mart Stores Inc)
    • $76.84 USD
    • 0.62
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  • SHLD
    (Sears Holdings Corp)
    • $27.68 USD
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