Between 2012 and 2013, more than 1,200 workers died in two major disasters in Bangladesh. In late 2012, a garment factory on the outskirts of Dhaka burned down, killing 117 people. Then, in April 2013, a factory collapsed and killed 1,129 workers, just a day after the building was deemed unsafe because of cracks in its infrastructure. The scale of the casualties was enough to catch the eye of major Western news outlets, and some consumers and workers' advocacy groups rallied in support of the Bangladeshi workers.
That outpouring of concern helped bring together businesses and consumers to try and prevent future catastrophes. Just yesterday, VF Corp (NYSE:VFC) announced that it was working with the International Finance Corporation to provide $10 million in financing for safety improvements in Bangladesh. VF is part of the Alliance for Bangladesh, a group of retailers working to support safety in Bangladesh. However, it's not the only game in town.
The Alliance is made up of American and Canadian businesses, including Costco and Wal-Mart (NYSE:WMT), but there is a counterpart in Europe called the Bangladesh Accord for Fire and Building Safety. Signatories of the Accord include Adidas, Fast Retailing, and H&M, with 16 American companies making the list.
The same end with different means
The two groups have been sniping at each other since their inceptions, with each accusing the other of not doing enough, or of doing things poorly. The newest Alliance announcement, for example, is a shot at the Accord, which has rejected some of the Alliance-backed inspections of shared buildings.
The American-heavy Alliance was formed as a way for American businesses to do some good without opening themselves up to the litigation that they feared would come with signing the Accord. As a result, the Alliance has been a little less transparent about its activities, focusing on positive improvements instead of problems in order to avoid libel charges and litigation.
Most of the Alliance's concern stems from the Bangladesh Accord for Fire and Building Safety being legally binding. The Alliance's structure is designed to be closer to an aid group, where help is offered and given, but without holding companies legally accountable if things go wrong.
The future of Bangladesh factories
Both groups are concerned that there will be more problems. While inspections have shut down some plants that were unsafe for occupancy, others have refused to shut their doors. The groups have run into conflicts with the Bangladesh government, which has sometimes sided with the producers and allowed dangerous conditions to continue in order to keep cash rolling in. In those cases, the producers will stop producing clothing for Alliance or Accord members, but will continue to put its workers at risk.
It's a delicate balance, and both groups are trying to walk a very fine line. On one hand, they want clothing to be produced in a safe setting and to get workers out of dangerous situations. On the other hand, that has to be balanced with the manufacturers' need to make money. Shutting down a factory for it to be renovated can have a huge financial cost, even if the repairs are funded by retailers.
VF's most recent financing move is to act as guarantor for loans to suppliers form the IFC. Those loans are to be used to make improvements in safety, worker conditions, or environmental impact. The move by VF and others is a big step toward making things better for workers in Bangladesh. Both the Alliance and the Accord are moving into the difficult portion of the work, though. With most of the factories inspected, it's time to start making improvements. Financing will continue to be a big part of the overall challenge.
VF isn't alone in its financial commitment, with Wal-Mart and others also contributing funds, through the Alliance, to support facility upgrades. A solution is still years away, and there are plenty of challenges between now and then. The biggest one right now is to make sure the Accord and the Alliance, which both have the same goal, can work together instead of getting in each other's way. Even that might be a stretch, though.
Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale. The Motley Fool owns shares of Costco Wholesale. 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.