Abercrombie & Fitch (NYSE:ANF) said on Wednesday (May 15) it will sign an agreement to financially support safety inspections and improvements in Bangladesh garment factories. That brings the list of major retailers operating in the U.S. that have signed the pact to less than a dozen, including H&M, Aldi, Trader Joe's, Joe Fresh, Tommy Hilfiger and Calvin Klein. Abercrombie and PVH (NYSE:PVH), the parent company of Tommy and Calvin Klein, are the only two U.S. chains that have agreed to the pact.
A total of 31 retailers and apparel makers had reportedly signed the legally binding "Accord on Fire and Building Safety in Bangladesh" by the deadline Wednesday night, including the largest European chains. The accord requires chains to contribute up to $500,000 per year for five years to fund inspections and remediation of safety problems.
Meanwhile, the National Retail Federation (NRF) blasted the accord in a statement, saying it "veers away from commonsense solutions and seeks to advance a narrow agenda driven by special interests." The NRF has been circulating its own alternative proposal, but no retailers had signed it by Wednesday night, and the text of the proposed NRF-backed agreement has not been made public.
According to a Reuters report, NRF President Matt Shay complained that the European-backed accord "exposes American companies to a legally questionable binding arbitration provision" and that it seeks major funding without providing accountability for how funds are spent.
It's hard to take some of that seriously. Some chains have a hard time accounting internally for how $500,000 a year is spent, and retailers tend to like legally questionable binding arbitration provisions if they believe they'll keep customers from taking them to court.
And if, as Gap (NYSE:GPS) said when it refused to sign the accord, the concern is about being sued anyway, it's difficult to believe that the legal teams who draft endless, human-unreadable retailer website terms and conditions can't build a legal firewall that lets money go into the fund but won't let lawsuits come back out.
A more likely concern at many chains is probably how the improved safety standards will raise product costs. Agreeing not to buy apparel created in deathtrap factories could put a chain at a price disadvantage unless all its competitors sign on too.
But Walmart (NYSE:WMT)—king of the product-cost cutters—has already said it expects safety inspections and remediation to cause wholesale costs to rise, and it's willing to live with those increased costs. Walmart hasn't signed the accord, but says it will beef up its own inspections, publish the results and demand closure of specific unsafe factories. At the very least, that's an on-the-record plan.
So is the letter Gap sent to outlined to its headquarters employees on Wednesday, which said the chain will inspect the 78 factories it uses in Bangladesh and is committing up to $22 million in loans for factories to make safety improvements.
Except for PVH and Abercrombie, those are more of a plan than anyone else in U.S. retail has offered.
Big U.S. Chains Reject Bangladesh Accord, Say They'll Do It Themselves
H&M, Calvin Klein, Tommy Hilfiger Sign On To Bangladesh Safety Pact
Retailers Can Put Anything In A User Agreement, But There's A Huge Catch