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Wal-Mart, Sears Must Put Out Factory Fires in Bangladesh

By the Editors
December 02, 2012 6:30 PM EST

The fire at Bangladesh’s Tazreen garment factory might not have killed more than 100 people if the facility had had half as many fire escapes as there have been evasions of responsibility for the disaster.

Wal-Mart Stores Inc. and Sears Holdings Corp. said they didn’t know their clothes were being made in the firetrap. Sean Combs’ clothing brand blamed a middleman for choosing the factory. Tazreen Fashion Ltd.’s owner, Tuba Group, pointed to a certificate of safety compliance from a nonprofit group, but the group said that document is bogus. Government officials laid blame for the deaths on arsonists supposedly out to undermine Bangladesh’s position as the second largest exporter of clothing after China.

Each of these parties bears a share of responsibility for the tragedy. Among them, however, retailers from wealthy countries have the greatest wherewithal to ensure that the factories they hire don’t sacrifice safety to the bottom line. They should force change -- for their own sake as well as for the workers on whom their profits depend.

It would be nice to think that the government of Bangladesh might start enforcing safety standards in factories. More than 500 workers have died in fires there in the past six years. Yet Bangladesh, one of the least developed countries on earth, can’t afford the inspectors. Its government also fears that if safety improvements increase costs, retailers will abandon Bangladesh for Pakistan.

It would also be convenient to think that Bangladeshi factory owners would take on the costs of such things as training staff for emergencies, building fire exits and monitoring shop floors to ensure that paths to those doors are kept clear. The reality is that given the competition for orders, these businesses generally operate on small profit margins that leave little room for such expenses.

Making fire-safety improvements in a shop like Tazreen might cost $1.7 million over two years, according to an estimate by Worker Rights Consortium, an independent labor rights monitoring group. That would probably have eaten up the Tuba Group’s profit on its $35 million annual revenue from the Tazreen factory.

A retailer, however, could pay a factory 2.5 percent more to cover those costs and pass on the increase to consumers, who would end up spending $20.50 for a sweatshirt instead of $20. Clothes would still be one of the great bargains of our time.

Cheap manufacturing costs in Bangladesh and other outsourcing centers have allowed consumers in importing countries to save money on what they wear. In the U.S., women’s clothing costs have fallen 7 percent since 1998; men’s have dropped 8 percent. Considering that this change has come at the expense of human lives, clothing has arguably become too cheap.

For years, retailers have said they were making conditions safer through programs that rely on inspections by internal auditors or auditors for hire. Yet factories keep burning. In September, 289 people died in a Pakistani factory inferno just a month after an auditor gave the shop a clean bill of health.

The Fire and Building Safety Agreement proposed for Bangladesh offers a way forward. An industry-labor collaboration, it would create an independent chief inspector to execute a mandatory safety program. Audits that revealed hazards would be made public, and the inspector’s recommended corrective actions would be mandatory. Retailers would be required to pay factories enough so that they could afford renovations and training programs; retailers would also be barred from doing business with noncompliant sites. These obligations would be enforceable through the courts.

To have sufficient leverage over the factories, the program is designed to go into effect only after four retailers have signed on. So far, two have: German retailer Tchibo GmbH and PVH Corp., the parent of brands including Calvin Klein and Tommy Hilfiger. Change would come fastest if the biggest players in Bangladesh joined in, including Wal-Mart, Hennes & Mauritz AB, the Gap Inc. and Inditex SA, owner of Zara.

Companies are reluctant to commit to higher costs, which is short-sighted. PVH initialed the deal in March after learning ABC News would report that Tommy Hilfiger had returned to doing business with a factory in Bangladesh where 29 people died in a 2010 fire. Perhaps as much as the cost of ensuring worker safety, that kind of publicity can hurt profits. More brands will be similarly harmed if they don’t help re-engineer the tinderbox that is the Bangladesh garment industry.

To contact the Bloomberg View editorial board: view@bloomberg.net.

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