Target Corp. said Wednesday one of its top executives will serve on the board of directors of the Alliance for Bangladesh Worker Safety, an industry-led organization dedicated to improving working conditions in the impoverished South Asian country. The group will set up a system of inspections to ensure that retailers and their suppliers adhere to safety standards developed by the alliance.
At a news conference Wednesday in Washington, D.C., the alliance said retailers, including Target, Wal-Mart, Sears, and J.C. Penney will provide $100 million toward factory repairs and another $42 million in cash over five years for training, education and compliance.
"Target has been involved for a number of years in promoting safer factory conditions in Bangladesh," Daniel Duty, the company's vice president of global affairs, told the Star Tribune in a brief phone interview. "But we also saw a need for an industrywide approach. We wanted to bring collective action" to the issue.
Target, represented by Duty, is one of four retailers to serve on the board, which also includes Wal-Mart, Gap and BF Brands.
The retail industry decided to take action after a garment factory building in Bangladesh collapsed in April, killing more than 1,000 people. The accident highlighted the plight of workers in the country, who often work for low wages in poorly designed buildings.
Labor and activist groups have criticized retailers like Target, Wal-Mart and the Gap for not joining the Accord on Fire and Building Safety in Bangladesh, which would impose legally binding requirements on retailers. More than 70 global retailers, including H&M in Sweden and Loblaws in Canada, have signed the accord.
But American retailers have resisted legal requirements, preferring instead to pursue voluntary agreements. The companies fear spending endless amounts of money and time in court.
Joining the accord "could hold U.S. companies to unlimited lawsuits," Duty said. "We do not want to be involved in litigation."
Duty said the alliance will still hold retailers accountable. The alliance, for instance, could take a retailer to court if that company does not pay its dues to the organization. Otherwise, the alliance will use peer pressure and public shaming to make sure members follow through with their commitments.
"The court of public opinion will hold retailers liable," Duty said. If a retailer continues to violate the agreements, the alliance will toss the company out of the group, he said.
But critics say that's not enough. Without legally binding agreements, the alliance will have no teeth to ensure compliance, said Mike Garland, an assistant comptroller for New York City who oversees corporate governance issues for the city's $140 billion pension fund. New York is one of the biggest investors in Target; the fund owns about 1.7 million shares of Target stock, worth about $124 million.
The alliance also risks undermining the legally binding accord backed by the European retailers, Garland said.
"It's unfortunate that U.S. retailers have chosen their own way," Garland said. "Given the seriousness of the issue, it demands a coherent global response. I don't think it helps to have competing programs."
Labor groups also criticized the alliance for not working with independent unions that represent the garment workers. Instead, the alliance said, it will set up a confidential employee hot line and help facilitate "Worker Participation Committees" in factories, where workers can raise safety concerns without fear of retaliation.
"The voices of workers need to be at the center of any program for worker safety," said Liana Foxvog, a spokeswoman for the International Labor Rights Forum. "It will be hard for workers to trust company-controlled programs."
Garland said the pension fund is particularly disappointed in Target. The fund generally has a good relationship with the company over such issues; before Target's most recent annual meeting, the fund had proposed a shareholder resolution that called on Target to require its suppliers to publish reports on working conditions in their factories. But after "productive" discussions with Target, the fund agreed to drop its proposal, Garland said.
Sensing that Target would not join the accord, the fund recently wrote a letter to the company urging them to do so. Garland declined to say what, if anything, the fund will do next to pressure Target.
The alliance is a good first step for the industry to collectively address the problems associated with outsourcing labor to low wage Third World countries, said Amy Koo, an analyst with the Kantar Retail consulting firm in Boston.
Before the alliance, each retailer had its own system to monitor its supply chain. For the first time, retailers are setting standards and an inspection regimen they could eventually apply to countries beyond Bangladesh, she said.
The industry could also eventually address other significant labor issues like wages. Instead of worrying how competitors could undercut them on manufacturing costs, retailers could set common standards on how much to pay workers, Koo said.
But first, the alliance needs to prove it can effectively improve worker safety, analysts say.
Success will depend on "how much enforcement, how much follow-through there will be," Koo said. "Are they really looking to solve the problem or are they looking to make themselves look good?"