U.S. Retailers Unveil $42M Safety Plan

A group of 17 major North American retailers – including Walmart Stores Inc. (Bentonville, Ark.), Gap Inc. (San Francisco), Target Corp. (Minneapolis) and Macy’s Inc. (Cincinnati) – have announced a $42 million plan to improve factory safety in Bangladesh.

The American plan, called the Alliance for Bangladesh Worker Safety, would commit the funds for worker safety, including inspections and an anonymous hot line for workers to report concerns about their factories, plus more than $100 million in loans and other financing to help Bangladeshi factory owners correct safety problems.

The plan has drawn immediate criticism for being too small, not stringent enough and inferior to the accord revealed earlier this week by European retailers.

Some labor rights groups have estimated that it would cost as much as $3 billion to bring Bangladesh’s garment factories up to an acceptable safety standard. And, unlike the European plan, the American plan lacks legally binding commitments to pay for those improvements.

Under the U.S. retailer proposal, the participating companies would contribute money — from a modest amount up to $1 million a year, depending on the level of business each does in Bangladesh – creating a fund of $42 million during the five years of the plan.

The proposal also calls for the retailers to inspect the estimated 500 Bangladeshi factories that the North American retailers use within 12 months, and then develop plans to fix any substantial safety problems that are found.

“In terms of legal liability, if a worker reports a factory is not measuring up, we have the measures to respond, to investigate,” said Jay Jorgensen, global chief compliance officer for Walmart. “If a factory is not meeting the standards, under our agreement they’re going to be terminated. That’s the ultimate pressure point on a factory to treat its workers well – the continuation of business.”

Jorgensen said the $100 million in loans and other financing was an important component. “The Bangladesh Garment Manufacturers Association has asked that financing be made available,” he said. “It’s hard to get loans there, and if you get a loan, it’s expensive. We’re trying to make capital available on a low-cost basis so that repairing a situation where safety issues don’t go unremediated because of financing problems.”