About six months ago, the issue of working conditions in the third world came into sharp focus when a Bangladeshi garment factory collapsed, killing more than 1,000 people and injuring many more. For a long time, Western corporations have appeared fairly indifferent to the poor working conditions of those who supply them. Finally, a number of US and European retailers, including Wal-Mart Stores (NYSE:WMT), Gap (NYSE:GPS) and Hennes & Mauritz (NASDAQOTH:HNNMY), have agreed to tighten up safety standards in the area following the disaster.
Cracks in the system
On April 24, an eight-story commercial building and garment factory collapsed in Bangladesh, killing more than 1,000 people and injuring over 2,000. It was the deadliest structural failure in modern history.
In the aftermath of the incident, certain things changed in Bangladesh. Labor laws were amended, forcing employers to provide adequate safety provisions for workers, and the government has taken a more active approach to ensuring the well-being of laborers. However, last month, a large fire broke out at a knitwear factory in the outskirts of Dhaka, killing at least seven and injuring dozens. This once again brought the issue into the limelight .
Many of the problems in Bangladesh are due to compliance. It's not that there aren't any safety standards; many companies simply don't follow them. Additionally, inspections are rare. This inexpensive way of doing business has helped make Bangladesh the world's second largest exporter of clothes, the $22 billion industry propping up most of the country's economy .
Retailers agree, at last
Several safety groups have come to an agreement on improving the conditions of factory workers in the country. The US group has so far been led by Wal-Mart and The Gap, with H&M spearheading the European agreement. While it very much remains to be seen how these efforts pan out in practice, an agreement has been made for a "common, minimum criterion for fire and structural inspection safety standards, pending a few final modifications."
Under the terms of the deal, some 2,000 factories will face fire and safety inspections. However, with money always becoming an issue at some point, the groups have so far failed to cut a deal on how exactly to finance the upgrades. The agreement comes amid a great deal of social tension in the country, with hundreds of workers taking to the streets to demand higher wages and some 200 factories suspending production.
The standards agreed upon are, in any case, considerably higher than the ones currently maintained in Bangladesh. Sprinklers will now be required in all garment factories above 92 feet in height. Additionally, fire doors will be mandatory, and requirements for the quality of fire alarms will be tightened.
The bottom line
While it very much remains to be seen how the new safety standards are enforced, the agreement is definitely a step in the right direction. Apparently taking some responsibility for those who produce their goods, US and European garment retailers are taking steps to improve the lives of thousands of Bangladeshi workers. This is a much-needed development in one of the poorest parts of the world.
Daniel James has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.