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As Europeans Sign On, U.S. Retailers Divided Over Bangladesh Accord

It is becoming increasingly clear that many U.S. companies remain reluctant to join the accord and are trying to craft an alternative, according to sources.

WASHINGTON — The momentum for brands to address working conditions in Bangladesh is snowballing.

On Tuesday, 10 more European brands and retailers, including Carrefour, Marks & Spencer, Benetton and Mango, as well as Canada’s Loblaw Cos., owner of Joe Fresh, signed or committed to sign the binding Bangladesh fire and safety accord with unions. They signed on even as U.S. companies scrambled to come up with their own united response.

Gap Inc. indicated Tuesday it was close to signing the binding accord, but Wal-Mart Stores Inc. unveiled its own new plan to deal with the issue.

At the same time, a delegation from Bangladesh met with State Department officials to discuss working conditions in the nation’s textile and apparel sector, which has been hit by a string of disasters over the last six months. Pressure has been growing on retailers and brands to address working conditions in the Asian country following the April 24 collapse of an apparel factory building in Savar, Bangladesh, that claimed the lives of 1,127 people.

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IndustriaALL Global Union, UNI Global Union and several nongovernmental organizations have set a midnight Wednesday deadline for companies to sign their pact, but it is becoming increasingly clear that many U.S. companies remain reluctant to join the accord and are trying to craft an alternative, according to industry sources.

The other European companies that signed or committed to sign the binding accord on Tuesday include El Corte Inglés of Spain, Kik and Aldi of Germany as well as three apparel firms — Stockmann, N Brown Group and G-Star Raw. A total of 15 major brands and retailers, only one of them a U.S. company, have now either committed to or signed the “Accord on Fire and Building Safety in Bangladesh.” The other companies include original signers PVH Corp., the U.S. company that owns Calvin Klein and Tommy Hilfiger, and German retailer Tchibo, along with five firms that signed Monday — H&M, Inditex, C&A, Primark and Tesco.

The growing number of European retailers and brands signing the accord is increasing pressure on American firms to act.

A coalition of brands, retailers and industry groups, dubbed the “North American/Bangladesh Worker Safety Working Group,” which had been developing its own proposal on fire safety in Bangladesh, held a conference call among themselves Tuesday to discuss its next moves, according to industry sources.

“Everything is in turmoil now,” said an industry official, who requested anonymity. “What [U.S.] companies had been working on has now been overthrown by the deal with IndustriALL, and it is making it very difficult for companies to turn on a dime.”

The official said the working group was close to a deal before Monday’s announcements by H&M, Inditex and others, but it has now been shelved because companies do not want competing accords.

“Companies are now trying to figure out what works or doesn’t work out in that agreement,” said the official, adding that it appears most U.S. companies will not sign the IndustriALL-led accord. “My guess is PVH will be the only U.S. company on the IndustriALL agreement from the U.S. perspective. Obviously, legal counsel at companies are very concerned about this accord, which they interpret as having open-ended commitments that you can be sued for not living up to. That is a nonstarter.”

But Bill Chandler, vice president of corporate affairs at Gap Inc., said the retailer is “six sentences” away from signing the Bangladesh accord and has sent the coalition of unions led by IndustriALL compromise language to consider in modifying the agreement.

“We believe that an accord is within reach,” Chandler said. “Gap Inc. is willing to agree with all but one provision. The one area where we have requested a modification is in the area of dispute resolution. For American companies to support this agreement, our amendment provides in simple and clear terms how to resolve any disputes so that all parties are held accountable to their commitments. The litigation landscape in Europe is fundamentally different from the U.S. By signing the accord as is, American companies would essentially be opening the legal floodgates on issues that have not been negotiated in sufficient detail. The risk to American companies may have a negative impact on American companies’ ability to do business in Bangladesh.”

Wal-Mart said Tuesday it was striking out on its own path. The company said it will conduct in-depth safety inspections at 100 percent of factories in Bangladesh that produce goods for it. Noting that it uses 279 factories in Bangladesh, Wal-Mart said it will complete all reviews within six months and will publicly release the names and inspection information on all of its factories in Bangladesh.

The coalition working group said it plans to release a statement Wednesday outlining the steps it has taken to improve working conditions in Bangladesh, according to an executive close to the talks, who requested anonymity.

“We are trying to show what we as an industry are already doing [in Bangladesh] and what we plan to do in the short term to really address the key issue here of improving working safety,” the executive said.

Six industry associations and 26 companies have been involved in the working group, including the National Retail Federation, Retail Industry Leaders Association, American Apparel & Footwear Association, U.S. Association of Importers of Textiles & Apparel, Retail Council of Canada and the Canadian Apparel Federation, according to sources.

“There are large and small brands and retailers, some who have large exposure in Bangladesh and some who have small exposure,” the official said.

Meanwhile, the companies that came on board of the IndustriALL accord on Tuesday said it and collective effort would lead to safer and improved working conditions in Bangladesh’s garment industry.

Krishan Hundal, director of sourcing at Marks & Spencer, said, “We have a proven track record in Bangladesh, we believe our approach works and all our suppliers must adhere to our strict ethical standards as a condition of working with us. This includes regular fire, health and safety checks, and we only source from single-occupancy factories. But we also recognize the need for a safer garment industry in Bangladesh and have signed the Accord on Fire and Building Safety. We will play our role alongside the ILO, other clothing brands and NGOs in developing it into an effective program to deliver a better working environment across all 5,000 garment factories in Bangladesh.”

Hundal said M&S has sourced from Bangladesh for more than 10 years. The company maintains a sourcing office in Dhaka and uses 60 factories in the country for its products.

Biagio Chiarolanza, chief executive officer of Benetton Group, which had goods being manufactured at Rana Plaza, said, “We decided to support this agreement so that our group can be at the forefront of contributing to a significant and lasting improvement in working conditions and safety in Bangladesh. The agreement resulted from a multistakeholder approach that involved global retailers and manufacturers, trade unions, the International Labor Organization, as well as nongovernmental organizations. From the beginning, we believed that only this type of collaborative approach could bring effective and sustainable change to the issues faced by the garment industry in Bangladesh.”

Loblaw said the decision to sign the accord reflects the company’s pledge to stay in Bangladesh — Joe Fresh merchandise was being manufactured at Rana Plaza — and underscores its firm belief that active collaboration by retail and manufacturing industries, government and nongovernmental organizations “is critical to driving effective and lasting change in Bangladesh.”

“The accord aligns with and addresses the company’s commitments to a new standard that all of its control brand products must be made in facilities that respect local construction and building codes,” Loblaw said. “Loblaw will maintain its promise to have its own people on the ground in Bangladesh.”

The IndustriALL agreement with labor unions requires that companies mandate and pay for renovation and repairs to ensure factories in Bangladesh are made safe. The pact is a legally enforceable contract between companies and unions that will use binding arbitration to resolve disputes. It stipulates that companies will agree to independent safety inspections with public reports; mandatory repairs and renovations, ensuring factories have the money to pay for all repairs, renovations and retrofitting by raising prices or paying for renovations directly; require factory owners that are considered top-tier suppliers to a brand or retailer to allow union representatives to have regular access to their factories, and terminate business with any factory that refuses to make necessary safety upgrades. It also requires “a vital role” for workers and their unions, requiring the establishment of health and safety committees in all covered factories with worker representatives making up at least 50 percent of the membership.

The signatory companies are required to develop a full implementation plan within 30 to 45 days.

In Washington, Bangladesh Foreign Minister Dipu Moni met with Jose Fernandez, assistant secretary for economic and business affairs, at the State Department on Tuesday to discuss steps the Bangladesh government is taking to address the issues in the garment industry. Robert O. Blake Jr., assistant secretary of state for South and Central Asian Affairs, also met with Bangladesh foreign secretary Shahidul Haque.

The government of Bangladesh granted the right of workers to form trade unions without a company’s prior approval on Monday and it has also said it will begin talks about a wage increase in its core textile and apparel sector.

“We have consistently urged the government of Bangladesh to allow workers to exercise their right to freely associate, including to form unions of their choice, and allow organizations that seek to protect workers’ rights to operate freely,” a State Department spokeswoman said. “We are encouraged by the government of Bangladesh’s recent efforts to increase the registration of qualified, independent unions. In addition, we support labor law amendments approved by cabinet in Bangladesh that would allow the country to improve respect for freedom of association. We hope they will be enacted into law as soon as possible. An important part of the challenge is also enforcing the laws on this issue that are already on the books.”

She said the issues will be discussed further between Secretary of State John Kerry and Moni on Friday at the State Department.

In Bangladesh, a prayer meeting was held at the site on Tuesday as the rescue operation was formally declared over and the site where the eight-story building collapsed on April 24 was handed over to the district administration. Police officials told WWD that a total of 3,565 people were pulled out of the building. Although 2,438 were brought out alive, 12 died in hospitals, the official said. The only exception has been the discovery Friday of Reshma Begum, a worker who was able to survive on bits of food and is reportedly in stable condition.

Grieving family members who had not yet found their loved ones staged a protest at the site, and a government official said that missing persons reports for more than 100 people had been filed. He said results of some DNA tests were still pending and hoped that matches would be found.