Yet another accident has cost the lives of factory workers in Bangladesh, shedding doubts on efforts to improve working conditions in the impoverished South Asian nation. This factory has been linked to Wal-Mart Stores, Inc. (NYSE:WMT) and other major retailers, whom had previously promised to address labor conditions in the country. Now, it’s fair to wonder if their efforts will be effective in reforming Bangladesh’s garment industry.
Death toll in WalMart factory incident
Beyond the 10 confirmed deaths, at least 50 more people were injured and officials fear that the death toll could rise. While details are not forthcoming, it is believed that the factory, manufacturing garments for two Canadian firms, Loblaw Corp. and Hudson’s Bay co. Loblaw corp. has already denied that any of its products were manufactured there and iterated the point that it has very high standards when working with outsourced companies.
The factory is also believed to have manufactured garments for Walmart corp. Wal-Mart Stores, Inc. (NYSE:WMT) has announced that it is seeking further information. Perhaps more so than any other firm, Wal-Mart Stores, Inc. (NYSE:WMT) has come under fire for conditions in Bangladesh. Critics charge that Walmart’s efforts to drive down prices are encouraging, or even forcing, local companies to cut corners in order to cut costs.
After 1,100 people died when a garment factory collapsed last spring, clothing manufacturing firms and local officials pledged to improve the horrendous working conditions found in many factories. In the previous November, over 100 people were killed in a fire. Workers accused managers of forcing them to stay on the job even as the fire raged through the factory.
Wal-Mart, Gap labor standards
Wal-Mart Stores, Inc. (NYSE:WMT), The Gap Inc. (NYSE:GPS), and other companies pledged to enforce higher labor and working standards for their suppliers, but progress has remained slow. For one, American firms have been hesitant to sign any binding pledges or agreements that could result in future lawsuits or legal issues. Second, resources are scarce in Bangladesh, which is one of the poorest countries in Asia.
Wal-Mart Stores, Inc. (NYSE:WMT) and The Gap Inc. (NYSE:GPS) did relent and sign an agreement to increase emphasis on safety in garment factories in July of 2013. The agreement was developed in coordination with former U.S. Senators George Mitchell and Olympia Snow. The agreement contained a five-year plan to inspect all supplier factories within the first year of implementation and to make data and results from such efforts public.
It is unclear if the factory in question has been inspected or is even a target of inspection. Supply chains within Bangladesh can be extremely complicated and many factories subcontract from other smaller factories. It is possible that some factories not on inspection lists will continue to supply larger factories. Further, the agreement has been heavily criticized for allowing companies to hire inspectors and for containing little independent oversight. Additionally, the agreement does not offer specific and binding punishments for factories that flaunt the agreement, though major companies have promised to cut such violators from their supply chain.
The continued outbreak of such incidents calls into question whether meaningful progress can be made in regards to working conditions, when cost cutting is still the primary goal of companies. So far, few major clothing firms have been willing to come on record and commit to pay higher prices for products manufactured from safer factories.
Wal-Mart Stores, Inc. (NYSE:WMT) has pledged $50 million worth of low-interest loans to companies in order to upgrade facilities. While this funding is a substantial commitment from a single firm, $50 million itself is not enough to make a major impact in Bangladesh as a whole. Still, if other companies and organizations, such as the IMF, step in to provide additional funding, there is hope that conditions could improve substantially.