In the wake of last week's progress on improving factory safety in Bangladesh—word that 75 retailers have signed onto a European plan, while 17 U.S. and Canadian chains and apparel makers have formed their own group—there's still shouting going on over which plan is best and (especially) whether the North American plan backed by Walmart (NYSE:WMT) and Gap (NYSE:GPS) is anything more than a sham.
That's likely to die down quickly as actual work gets started from both of the plans, and observers get a chance to see the results from each plan. Contrary to the arguments, the Americans' Alliance for Bangladesh Worker Safety isn't a sham, though it does shield its members from lawsuits and is based on voluntary participation, not binding contracts. And while the Europeans' Accord on Fire and Building Safety in Bangladesh has stricter legal rules, it's largely built on the assumption that Bangladeshi courts and lawmakers won't undermine the effort by refusing to hold factory owners accountable.
But there's a hidden benefit to having two different plans with different approaches: Some factory owners will look for (and find) loopholes to dodge the safety efforts of each plan. But with two competing—and carefully watched—plans, only loopholes that exist in both will let any scofflaws wriggle through.
That's the benefit to the safety improvement process. For retailers and apparel makers on both sides of the Atlantic, the benefit of two plans is mainly that they're tailored to two different retail and legal environments. Europe imports roughly 60 percent of Bangladesh's output, so its retailers have more skin in the game and will want to keep each other legally tied to an agreement. The Accord is arguably better designed for that situation.
The U.S. only imports about 25 percent of the apparel Bangladesh produces, but the legal climate is also different: Some states have deep-pockets laws that can subject a large retailer to heavy damages in a lawsuit even if the retail was only peripherally connected to a disaster at a clothing factory, such as the collapse on April 24 that killed 1,127 workers. The Alliance was specifically designed to shield big chains from that risk.
How well each effort will meet the real purpose of the agreements remains to be seen. But at least two groups are now working on the factory-safety problem—and for once, everyone is watching.
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