Should You Boycott Walmart and Gap Over Factory Worker Safety?

Walmart Gap stores
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On the heels of a garment factory collapse in Bangladesh that killed more than 1,100 workers, many well-known companies signed the Bangladesh Factory Safety Accord to improve safety conditions for the employees of their suppliers there -- companies such as PVH (PVH), which owns Calvin Klein, Tommy Hilfiger and Izod; Swedish retailer H&M; Inditex, which owns Zara; and Abercrombie & Fitch (ANF).

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."

Alternative Plans

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.

While Walmart's pledge does not include an agreement to underwrite safety upgrades, the company says it "expects that the costs of appropriate remediation and ongoing safety investments to be appropriately reflected in its costs of goods purchased."

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.

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56 Comments

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Ben

Wrong , it is the American buyers who are causing this by demanding Cheaper and Cheaper prices . There is only one way to keep getting Cheaper goods and that is to shop at the Big Box stores who forgot what Quality Goods are because You America Demand CHEAP .

SO LIVE WITH IT .

May 23 2013 at 10:59 AM Report abuse +1 rate up rate down Reply
aeschonfeld

Speaking for myself, I will boycott Gap and Walmart because I believe they represent much of what needs to be corrected in our country. We are the fortunate few in a world where poverty and depravation exist for an enourmous number of people. While I am at it, I want to find a way to hurt the American Beverage Association. There most recent advertisements about limiting the size of food labeling and restricting the function of government to promoting ways in which big business can prosper (the the detriment and possible poisoning of the rest of us) deserves an ecconomic payback!

May 23 2013 at 9:35 AM Report abuse rate up rate down Reply
ddnlj1

It's not American buyers who have created this problem. American companies have.

Companies like Walmart buy products from foreign factories for pennies on the dollar, while turning a two or three hundred percent profit selling them to us. There is absolutely no reason why these companies can make a decent profit AND buy products from American factories...no other reason than greed.

They have turned their backs on us and caused our factory jobs to disappear all because they demanded more and more profit for themselves. I think it's time we turn our backs on THEM.

May 22 2013 at 6:58 PM Report abuse +2 rate up rate down Reply
nthereoff

At lease Walmark is an American Company thats pay it taxes and is located in the U S. How about Companies that pay no Fed or State tax and are located outside the U S?

May 22 2013 at 5:00 PM Report abuse -1 rate up rate down Reply
theycallmeroy3

Believe it or not, this is the hope of globalization. We want people to realize opportunity. And opportunity doesn't come without a struggle. Its up to the Bangladesh people to take it from there.
What we hope they think as they toil away is, " Hey, how can I do this better.?"

May 22 2013 at 2:08 PM Report abuse +1 rate up rate down Reply
theycallmeroy3

Is it better to get 0.23 cents an hour, or nothing at all? Because in Bangladesh, that's the wage.

May 22 2013 at 1:56 PM Report abuse +2 rate up rate down Reply
rankincap

Walmart, Gap and every retailer in the world provides the products that their customers want at the parices they want to pay. You have more people wanting a $10 shirt than a $60 shirt. The American consumer wanting their products as cheap as possible is being realized by following the cheapest labor country. Don't complain bout foreign made good unless you are willing to pay the going price for an American made product. It cost a lot of money to buy land, build a building, put fixtures in the new store, pay for utilities, pay insurance and pay for the wages to your employees. Belly up and demand American products. I buy what I can, but with all the rules and government regulations in the US some products are hard to make here. If I was Walmart and Gap I would never have signed that agreement either.

May 22 2013 at 1:55 PM Report abuse -1 rate up rate down Reply
1 reply to rankincap's comment
Serena*

woops I accidentally clicked thumbs down but I agree :P

May 23 2013 at 7:22 PM Report abuse rate up rate down Reply
theycallmeroy3

Could we all agree Bangladesh is a third world country? Before, they had one choice, die of hunger and disease. As horrible as it all sounds, was their purchasing power increased by having a job?

May 22 2013 at 1:52 PM Report abuse +2 rate up rate down Reply
sstuczynsk

If you boycott Wallmart and the Gap for worker safety, you should look at every product you buy before you get to the check out stand. Almost everything you buy is made in some other country. I went to buy a paint brush last week and had to look for an American made paint brush. If we all just took the time to buy American made products, we could stop the problem of worker saftey real fast.

May 22 2013 at 1:31 PM Report abuse +1 rate up rate down Reply
1 reply to sstuczynsk's comment
theycallmeroy3

Yeah, they say dying of hunger is a far better death.

May 22 2013 at 1:38 PM Report abuse +2 rate up rate down Reply
PsychedelicSpell

Cannot boycott a places I do not shop at nor have ever. Can find the same items much cheaper online they do not have the overhead and pass on the savings.

May 22 2013 at 12:06 PM Report abuse +1 rate up rate down Reply
1 reply to PsychedelicSpell's comment
pfjw

Same items, same source, same results. So, you are neither addressing the issue nor solving the problem.

May 22 2013 at 12:31 PM Report abuse rate up rate down Reply