Big Retailers Reassess Practices After Bangladesh Building Collapse

May 3, 2013— -- Major clothing brands including Walmart, Gap Inc. and jcpenney are deep in discussions about how to respond to renewed cries for safety reforms in Bangladesh following a building collapse that has claimed the lives of more than 500 garment workers.

In addition, Disney this week made public its own plans to pull its licensees and suppliers out of Bangladesh entirely.

"For lots of reasons, this collapse and the enormous death toll has struck a nerve," said Charles Kernaghan, director of the Institute for Global Labour and Human Rights. "This has hit like a shock to the garment industry. And it's just not going away."

While there remains some uncertainty about exactly which retail brands were producing clothes in the Rana Plaza building in the Bangladesh capital, Dhaka, a number of major retailers including Gap, Target, and jcpenney met in Germany earlier this week to talk with worker rights groups about steps they can take make immediate improvements to safety conditions there. Two of America's largest companies, Disney and Walmart, have also gone public describing new steps they recently imposed to confront persistent safety issues in Bangladesh.

Disney sent a letter in March telling hundreds of licensees and vendors -- the companies that actually make apparel with Disney characters and logos -- that the company wanted out of Bangladesh and was imposing tough new rules overseas for those involved in production. Walmart said in an email to ABC News that it, too, launched new initiatives last month to address fire concerns.

After 112 workers were killed in a massive Bangladesh factory fire six months ago at the Tazreen factory, Walmart fired a supplier they said had routed orders to the factory involved in the blaze without the retail giant's knowledge.

"We know that continued engagement is critical to ensure that reliable, proactive measures are in place and we are continuing to work with the industry association, suppliers, brands and other interested parties to come to an appropriate resolution on this matter and develop broad-based solutions for the industry," said Megan Murphy, Walmart's senior manager for international corporate affairs.

Monitoring groups have said evidence including photos, "spec sheets" and eyewitness accounts suggest in addition to Walmart , clothes imprinted with Disney logos were also being made at the Tazreen factory.

A spokesperson for Disney, a parent company of ABC News, said they did not do any direct business with Tazreen and the items in question were being produced for Walmart under a Disney license. In a statement posted on the Disney corporate website after the fire, the company said Walmart told them the clothes had been made in a different factory by a 3rd party supplier and were only being stored in the Tazreen factory awaiting shipment when the fire broke out.

Until last week, fires had proven to be the most deadly threat to the low-wage workforce in a country that produces more American clothing than anywhere but China. As ABC News documented in investigative reports airing last year, more than 500 workers died over five years in garment factory fires in Bangladesh, in part because so many factories lack fire escapes, working extinguishers, enclosed stairwells and other basic safety provisions.

The death toll from the building collapse last week could yet surpass that number, though, with most recent estimates indicating that over 500 workers died, and dozens more remain missing. The building, which housed several different garment factories over eight stories, had only been permitted for half that many stories. Workers saw large cracks forming in the building in the days prior to the collapse, but were reportedly forced to continue to work there despite their worries about the structure's integrity.

Documents and garments collected at the scene by monitoring groups, as well as customs data, indicate a number of well known retailers, including Benetton, The Children's Place, and jcpenney, were producing clothing at factories inside the building that collapsed. Benetton has said it was not sourcing from any of the factories there, but a spokesman said the company is still investigating. The Children's Place did not return calls from ABC News. A jcpenney spokeswoman said a small order from one of the factories was traced through a Canadian supplier. Walmart said it did not believe its suppliers were in the factory.

Until now, only PVH, the parent of the Tommy Hilfiger line, has agreed to committing significant money to an independently monitored fire safety system in Bangladesh. But in Germany this week, a number of other companies appeared poised to join the effort. A spokeswoman for Gap Inc., which was not believed to have been producing clothes in the factory that collapsed, said she believes the program will only work if a critical mass gets involved.

"We believe in working toward positive change on the ground in Bangladesh," said Debbie Mesloh of Gap, in a statement emailed to ABC News. "The energy for a meaningful solution is also present. We believe that this can be done."

Georgetown University Business Professor Edward Soule said the tragedy that ensued has almost certainly sent a shockwave into the executive suites of clothing retailers – both out of concern for the lives of those who were sewing their garments, but also out of concern for the reputations of any company that allowed the conditions to persist.

"They know for many of them, their brand integrity is at stake," said Soule, an expert on managerial ethics and corporate social responsibility. "Right now they are saying, 'How do we not have things like building collapse kills 450 and our name in the same headline?'"

Jcpenney had been producing television ads touting the company's persistence in "searching the fashion world to bring you fresh style at stunning prices" -- ads for the Joe Fresh clothing label that was later found in piles at the scene of the collapse. After the collapse, Daphne Avila, a jcpenney spokeswoman, said the factory had never been an active supplier, "but we recently learned that one of the factories did produce Joe Fresh products, a small portion of which was destined for jcpenney."

Avila said jcpenney did not "have visibility into our national brand partners' supplier bases," and that problem prevented the retailer from knowing more about where the clothes were being made. "This is something that we're actively working on," she said.

Soule said the response pinpointed a major problem with the clothing industry that has made it difficult to address the safety issues in Bangladesh – namely, that most clothing companies send out production orders to dozens of unconnected garment factories, often under contract for production of a single design.

"This is a dysfunctional supply chain," Soule said. "Rather than scattering the work around and putting seven cut and sew factories against each other for one product for one season, they would be far better off with a few stronger, ongoing relationships."

That appears to be part of the response from Disney, which is a parent company of ABC News. The company's decision to leave Bangladesh, which was first reported Thursday by The New York Times, appears to be part of an effort to get a better handle on the work being done by its hundreds of licensees and suppliers.

"We have decided to consolidate production of Disney-branded products in a more limited number of Permitted Sourcing Countries and are asking our licensees and vendors to transition the production of Disney-branded goods out of the highest-risk countries," said a March 4 letter to the company's licensees and vendors.

The move means Disney-licensed apparel would not be made in Bangladesh, as well as Belarus, Ecuador, Pakistan and Venezuela.

"These are complicated global issues and there is no 'one size fits all' solution," said Bob Chapek, President, Disney Consumer Products. "Disney is a publicly held company accountable to its shareholders, and after much thought and discussion we felt this was the most responsible way to manage the challenges associated with our supply chain. We are hopeful that these decisions will also promote progress in the most challenged markets."

One Disney official told ABC News that pull-out is not absolute.

"For countries that are more challenged, the path back is Better Work," the official said, explaining that if countries become part of a United Nations-run Better Work program -- which collaborates with governments, unions, factory owners, to insure safer conditions – Disney would permit licensees to return.

Scott Nova, who runs the Worker Rights Consortium, a group that monitors working conditions in garment factories around the world, said he would have preferred to see Disney stay and invest in Bangladesh to make sure the factories are safe.

"But at the same time it's important that the government and factories there understand that there are economic consequences for their failure to act," he said.

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