Bloomberg News

Wal-Mart to Inspect Bangladesh Factories, Won’t Sign Safety Pact

May 14, 2013

Wal-Mart to Conduct Safety Inspections at Bangladeshi Factories

A clearance sign sits on a clothing rack inside a Wal-Mart Stores Inc. store in Secaucus, New Jersey. Photographer: Daniel Acker/Bloomberg

Wal-Mart Stores Inc. (WMT:US) said it won’t accept an agreement “at this time” to improve fire and building safety in Bangladesh that’s supported by labor monitoring groups and was signed by several retailers this week.

Instead, in the wake of the deadly Rana Plaza building collapse, the world’s largest retailer announced it would make public safety inspections at all of its suppliers’ authorized factories in Bangladesh. Labor groups say that measure falls short of what’s necessary to ensure worker safety.

The reviews of the 279 supplier plants will be completed within six months, and the factory names and inspection information will be posted on Wal-Mart’s website, the Bentonville, Arkansas-based company said yesterday in a statement. The company said it expects the costs of “appropriate remediation and ongoing safety investments to be appropriately reflected in its costs of goods purchased.”

Kevin Gardner, a company spokesman, declined to comment on how the costs of increased monitoring efforts would affect prices paid by consumers.

Wal-Mart and other retailers have been discussing an agreement intended to improve labor conditions in Bangladesh since the collapse of the Rana Plaza factory two weeks ago -- the worst industrial incident in the country’s history. The accident killed at least 1,127 and followed a series of deadly fires there that already had prompted activists to push Western retailers to take more responsibility for work conditions in that country.

Visual Inspections

“Preventing the kinds of tragedies that have recently taken place in Bangladesh will only happen if all stakeholders across the board set clear parameters and take action to drive real safety and compliance improvements,” Rajan Kamalanathan, Wal-Mart’s vice president of ethical sourcing, said in the statement.

The company said it will evaluate factories’ electrical and fire-safety systems, review their compliance with local building standards and permits, and visually inspect buildings for signs of structural distress. Production will cease immediately at factories where urgent safety issues are identified, Wal-Mart said.

Gardner declined to describe what kinds of safety information would be publicly available, saying, “We’ll have more to share when we launch on June 1.”

Labor activists such as Scott Nova, executive director of the Worker Rights Consortium, a Washington-based labor-rights monitoring group, are skeptical about how much information the company will release.

Accountability Question

“Will they post inspection reports or just aggregated data?” Nova said. “This is vastly different than having a genuinely independent inspection. The bottom line is there’s no accountability. It’s still a Wal-Mart run and controlled program in which Wal-Mart calls every shot.”

Documents provided by the Worker Rights Consortium show that merchandise bound for Wal-Mart was produced at Ether Tex Ltd., a factory located inside Rana Plaza. One purchase order shows that “skinny fit” women’s and girls’ jeans would be produced for the fall 2012 season.

“Our investigation of the Rana Plaza building site after the collapse revealed no evidence of authorized or unauthorized production at the time of the tragedy,” Gardner said in an e-mailed statement. “If we learn of any unauthorized production, we will take appropriate action based upon our zero-tolerance policy on unauthorized subcontracting.”

Tazreen Fire

Clothing bound for Wal-Mart and Sears Holdings Corp. (SHLD:US) was found in the charred ruins of Tazreen, the Bangladesh factory that burned in November, killing 112 workers.

So far, Wal-Mart and Sears have declined to compensate the victims of that factory fire. Other retailers and suppliers involved there, such as Li & Fung Ltd. (494) and European retailer C&A Group, have committed to payments for those victims.

Wal-Mart rose 0.4 percent to $78.78 at the close in New York. The shares (WMT:US) have gained 15 percent this year, compared with a 16 percent increase for the Standard & Poor’s 500 Index.

Wal-Mart’s announcement came one day before the deadline for retailers to decide whether to accept the Bangladesh fire safety agreement supported by labor monitoring groups and already signed by companies including Hennes & Mauritz AB (HMB) and Inditex SA (ITX), Europe’s two largest clothing retailers. PVH Corp. (PVH:US), owner of the Tommy Hilfiger brand, said May 13 that it would join the effort and pledged $2.5 million. Loblaw Cos., whose Joe Fresh brand was produced in the collapsed factory, committed to the safety accord in a statement this week.

Safety Accord

The accord would require companies to pay suppliers more so factory owners could afford to make safety upgrades. It would run for five years and be funded by the participants. The plan calls for a review of existing building regulations and enforcement, the development of a worker complaint process and a mechanism for employees to report risks.

Fifty percent of 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 nongovernmental organization founded by two former child garment 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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Companies Mentioned

  • WMT
    (Wal-Mart Stores Inc)
    • $74.78 USD
    • -0.66
    • -0.88%
  • SHLD
    (Sears Holdings Corp)
    • $39.43 USD
    • 0.78
    • 1.98%
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