Cheap for retailers, costly for workers

People demonstrate outside a Primark retailer shop in central London yesterday to demand the company take responsibility for the collapse of Rana Plaza. Photo: AFP

The factory collapse in Bangladesh that killed over 300 people this week is a stark reminder of the risks in the global retail industry's search for cheap production.
But there have been few signs that safety issues and other questionable labour conditions are sending shockwaves through the major Western retailers, their shareholders or the people who buy the clothes in the United States, Europe and elsewhere.
Despite a series of accidents that have killed hundreds of people in recent months, dozens of major retailers and apparel makers continue to operate in Bangladesh.
About 18 months before the previous big tragedy in Bangladesh - a fire in November in a textile factory that killed 112 people - shareholders at Wal-Mart Stores Inc had the opportunity to weigh in on the safety question. By a nearly 50-to-1 margin, they rejected a proposal to require suppliers to report annually on safety issues at their factories.
In arguing against the proposal, Wal-Mart's management made its reasoning clear: Having suppliers compile such reports "could ultimately lead to higher costs for Walmart and higher prices for our customers. This would not be in the best interests of Walmart's shareholders and customers and would place Walmart at a competitive disadvantage," the company said in proxy materials.
Cheaper products appeal to shoppers. And the taint, if any, appears to be manageable.
Shoppers such as Mohini Raichura are making decisions that justify the retailers' strategies. Raichura, a 30-year-old London charity worker, was shopping Friday at Primark, a discount retailer owned by Associated British Foods, even though she knew that some of its products were made at the factory that collapsed earlier in the week.
"I go there because it's cheap. That's awful. It really makes me a bad person," Raichura said. "But you know, I work for a charity, I'm on a limited income, and I pay rent in London —that's how I justify it."
Consumers continue to purchase products from brands like Wal-Mart's Faded Glory, found in the Tazreen rubble, and Loblaw's Joe Fresh, found in the ruins of the factory building this week.
The world's court systems have not provided a disincentive, either. For example, in 2005, a lawsuit was filed in California state court on behalf of factory workers in Bangladesh, China, Indonesia and other countries accusing Wal-Mart of failing to address substandard working conditions in suppliers' factories.
But the case was ultimately dismissed, and according to a search of available filings on the Thomson Reuters legal database Westlaw, there have been no US lawsuits filed against Wal-Mart or Sears on similar matters since the Tazreen fire.
Michael Silverstein, senior partner and managing director at Boston Consulting Group, said the attractions of places like Bangladesh outweigh the risks, and most retailers believe the risks can be managed.
Before Wal-Mart invited shareholders to this year's annual meeting, to take place June 7, the board of directors rebuffed another effort to force a shareholder vote on workplace safety issues.
According to documents filed with the US Securities and Exchange Commission, a shareholder presented a proposal to require the company to report on its progress for assessing risks to human rights in its operations and supply chain.
But Wal-Mart said the proposal was so similar to the one that failed in 2011, and that it already addresses the request through its standards for suppliers, that it did not merit reconsideration. The SEC approved its decision to reject the request for a shareholder vote.
Activists criticise retailers and apparel companies for not doing more to force improvements in a country where working conditions are poor and government oversight is lax.
"The bottom line is that worker safety laws are hardly enforced," said Iftekharuzzaman, the executive director of Transparency International in Bangladesh. The retailers and apparel makers cannot be "perceived helpless" when such incidences occur.
The Western companies should not pull out of Bangladesh and other low-cost countries because impoverished workers would pay the price, he noted. Instead, they need to push for changes from within.