Should You Boycott Walmart and Gap Over Factory Worker Safety?
Conspicuously absent from the list: Walmart (WMT) and Gap (GPS).
Turned off by the accord's legally binding provisions, according to The Wall Street Journal, Walmart and Gap have essentially exempted themselves from the risk of having to pay penalties for failing to meet the accord's commitments to protect worker safety.
What's a conscientious consumer supposed to think when a company they patronize refuses to sign a contractually binding agreement to help fund safety upgrades at supplier factories and expand workers' rights? Are you putting lives in danger when you shop at companies like Walmart and Gap?
To help you make more informed decisions with your shopping dollars, let's take a deeper look at this issue.
Tragic Trend in Bangladesh
Last month's factory collapse wasn't the first sign of worker safety crisis in Bangladesh. Late last year, a garment factory fire took the lives of 112 workers. And according to the International Labor Rights Forum, more than 700 garment workers died in Bangladesh between 2005 and the end of 2012. Another garment factory fire in Dhaka killed eight people even as the dead were still being recovered from the Rana Plaza collapse.
The worker safety crisis in Bangladesh has been so severe and so consistent that several major retailers, including Walmart, Gap, Target (TGT), and J.C. Penney (JCP), met in 2011 to discuss strategies to improve safety conditions there.
Among other things, the retailers considered the possibility of creating a contractually enforceable memorandum that would require participating retailers to pay Bangladesh factories enough for their goods to cover safety improvements.
According to meeting minutes acquired by Bloomberg, Walmart and Gap rejected that approach, claiming, "to the issue of any corrections on electrical and fire safety, we are talking about 4,500 factories, and in most cases very extensive and costly modifications would need to be undertaken to some factories ... it is not financially feasible for the brands to make such investments."
Both Walmart and Gap have announced that they have created their own programs to address worker safety.
Walmart's plan includes providing fire safety training to all Bangladesh workers and conducting safety audits of all its factories. The company pledges that when auditors find "urgent" safety concerns, it will publish the names of the offending factories and cease production until the safety issues are addressed. If not addressed, the factory will be removed from Walmart's list of authorized manufacturing facilities.
Gap's plan includes an agreement to provide "accelerated access of up to $20 million of capital to support recommended fire safety improvements," but does not clarify how participating factories are expected to make up the difference in their future profit margins, which are likely paper-thin as it is.
The Price of Good PR
Conscientious consumers might worry about these approaches for two reasons.
First, some worker rights advocates worry that voluntary programs don't tend to have a real impact, and that non-enforceable agreements allow these companies to generate positive PR without making legitimate improvements to worker safety in Bangladesh.
Second, it's useful to remember that large retailers use their size as leverage to force their suppliers to sell products at those paper-thin margins, which forces suppliers to cut costs if they wish to maintain a profit.
At times, this cost-cutting can lead to cutting corners on worker safety. So if retailers want workers to be safe, they have to be willing to cough up the cash required to maintain a safe working environment -- either by paying for safety upgrades at their supplier factories or by paying more for the goods they purchase.
Walmart suggests it is willing to pay more for safe working environments by claiming it expects the cost of safety to be reflected in the prices offered by supplier factories.
The Consumer Role in All of This
Just as supplier factories face tremendous pressure to cut costs in order to stay competitive, the retailers we love also face tremendous pressure to keep costs down as they compete for our spending dollars.
In other words, consumers are part of the dynamic that can lead to tragedies like those in Bangladesh -- or, on the flip side, lead to changes in working conditions in the factories that make the products we purchase.
Shoppers can choose to stop patronizing companies that fail to invest in worker safety (or whose worker safety programs are unsuccessful) and, instead, reward businesses that treat their workers right by purchasing products from them instead -- even if it means spending a little bit more.
It's the classic "vote with your dollars" dynamic at play. What will you do?
Motley Fool Contributor M. Joy Hayes, Ph.D., is the Principal at ethics consulting firm Courageous Ethics. Joy has no position in any stocks mentioned. Follow @JoyofEthics on Twitter. The Motley Fool has no position in any of the stocks mentioned.