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Dillard’s, Dollar Tree to Monitor Foreign Suppliers to Increase Worker Safety

Major retailers Dillard’s and Dollar Tree have agreed to watch the factories of their foreign suppliers more closely and on a continuing basis to ensure safety is the highest priority and that new reporting standards are implemented for increased transparency.

Both companies will audit safety and labor practices and will require new safety rules for suppliers.  Dollar Tree assigned a vice president to monitor supply chain operations. After the two firms announced their plans for stricter supplier oversight, New York State Comptroller Thomas DiNapoli rescinded his call to shareholders in the companies to press management to increase oversight.

DiNapoli manages New York State’s $173 billion pension fund and one of his responsibilities is to guarantee the strong investment performance of the equities held by the fund. As of April 30, according to reports, the New York State pension fund had stakes in Dollar Tree and Dillard’s worth $30.7 million and $5.6 million, respectively.

The new factory scrutiny promised by Dollar Tree and Dillard’s reflect a growing trend among U.S. retailers and manufacturers to beef up safety standards at suppliers’ factories in Bangladesh, and elsewhere, after a series of fatal fires and accidents killed thousands of workers, most notably, the Rana Plaza factory collapse. Rana Plaza factory was a major source of garments for a number of U.S. firms.

Hazardous working conditions and fatal accidents at foreign factories with sub-standard safety measures can cause a worldwide consumer backlash against the brands manufactured at these workplaces and to the retailers that sell them. Such circumstances and the resulting negative publicity, said DiNapoli, can cause “financial and reputational damage” to the retailers, and thus depress their share prices.

As manager of the New York State Pension system, which holds Dollar Tree and Dillard’s stock, DiNapoli is naturally worried about declining returns in addition to his concern for worker safety.