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Breaking Down the New Accord on Fire and Building Safety in Bangladesh

A lot of ink has been spilled about the new Accord on Fire and Building Safety in Bangladesh, and two-dozen firms have signed on, but what does the agreement actually say?

Gap has refused to sign because of a dispute resolution provision that it fears will create legal liability, and only one American firm has signed the deal at all – PVH, owner of Calvin Klein and other brands. Still, signatories to the agreement represent almost 60% of Bangladesh production, so it seems to be here to stay. Here are some of its important provisions:

Inspection, Remediation, and Training: 

Signatories will be required to divide their factories into Tier 1, Tier 2, and Tier 3 groups, based on how much production they receive from them. Tier 1 factories will receive safety inspections, remediation, and fire safety training. Tier 2 will receive safety inspection and remediation, Tier 3 factories will receive initial inspections, and, if determined to be high risk, will receive remediation and more regular inspection.

There are also production requirements: Tier 1 factories should be no less than 30% of production in the country, Tier 1 and Tier 2 combined should be no less than 65% of production, and Tier 3 should never be more than 35% of production, consisting of occasional or one-time orders.

Dispute Resolution:

Disputes are subject to decision by a steering committee (SC), made up of trade union signatories, company signatories, and a neutral seat chosen by the International Labor Organization (ILO). Either party can appeal the decision of the SC and instead move to legally binding arbitration. The award from the arbitration is enforceable in the country where the signatory is registered.

Public Inspections:

Inspections have to be carried out by people who are not employed by companies, trade unions, or factories. Written inspection reports will be shared with factory management, newly created factory health and safety committees, workers representatives from unions, signatory companies, and the SC. The report and any remediation plans will also be disclosed to the public within six weeks of an inspection. If remediation is necessary, the signatory companies shall set up a mandatory and time bound schedule for the factory to implement the corrective actions.

Employment:

The factories will be required to keep paying wages and keep employees on during the renovations period, but for no longer than six months. The signatories agree to help workers who lose their jobs due to loss of orders find employment with safe suppliers, including giving them hiring preference. Workers will also be allowed to refuse work they believe to be unsafe without suffering discrimination or loss of pay, including refusing to enter or remain in an unsafe building.

Health and Safety:

The health and safety committees will work with the trade unions, and workers will be at least 50% of the committee.

Disclosure:

The SC will release a list of all the suppliers that are used by signatory companies, including sub contractors. It will also show which are Tier 1 and which are Their 2, but volume data and specific links between companies and suppliers will be kept confidential.

A quarterly report will be released that aggregates compliance data and offers detailed recommendations for improvement. It’ll also spell out progress that has been made on remediation.

Supplier Incentives:

To encourage compliance, suppliers will be subject to termination of their relationships. Signatory companies are responsible for negotiating commercial terms that ensure factories have the financial means to undertake upgrades and remediation. Signatory companies are also encouraged to engage in joint investments, loans, donor or government support, business incentives, or paying for renovations directly.

Long-Term Commitment:

Signatory companies also commit to do business in Bangladesh in the long term, and not to reduce order volumes below those in 2012 for at least the first two years of the agreement, as long as it is commercially viable for the company and the factory complies with expectations.

Signatory companies also agree to contribute up to $500,000 per year to support the SC, Safety inspections, and a training coordinator. Their contributions will be proportionate to their share of annual volume relative to other signatory companies.

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