Some of Australia's biggest retailers, including Woolworths, Coles owner Wesfarmers and department stores Myer and David Jones, will review supply arrangements after the collapse of a garment factory in Bangladesh last month killed more than 1100 workers.
It comes as some of the world's leading fashion chains, such as Swedish group H&M and the owner of Spanish company Zara, have pledged to better monitor the working conditions of factory workers in Bangladesh and help pay for repairs.
Most of the Australian retailers, who represent the bulk of clothing sold here, said they either did not source directly or indirectly from Bangladesh or kept a close eye on any contracts they had with businesses linked to Bangladeshi garment factories, including building and safety audits.
After the April 24 disaster at Rana Plaza, outside Dhaka, Citi equities analysts Elaine Prior and Craig Woolford sent out a list of questions to Australian retailers to work out their exposure to the Bangladesh fashion supply network as well as their in-house ethical and safety policies.
"Western retailers are increasingly sourcing garments from Bangladesh. This brings specific risks, as evidenced by the Tazreen factory fire in November (112 dead) and the Rana Plaza building collapse last month," their report says.
"Retailers that source from Bangladesh are exposed to various risks if their brands are associated with a factory disaster. Customers' buying behaviour might be negatively affected. A retailer might feel an obligation to provide compensation or relief funding, or face liability, with some NGOs suggesting this may come under the 'remedy' commitments of the UN guiding principles on business and human rights."
In response, Wesfarmers, the Perth-based company that owns Coles, Kmart and Target, said the issue was on the radar of the chief executive, the board and the chairman. Its divisions that source from Bangladesh had all assured Wesfarmers head office that they had in place the necessary requirement on safeguards, safety measures and protocols for worker safety, and none of them bought from the factory at the centre of the latest disaster.
"Wesfarmers noted this is an extremely serious issue, one that will be further discussed by the company's leadership group. Kmart is the most significant buyer from Bangladesh in the Wesfarmers group. Target, and to a lesser extent Coles, also source from Bangladesh," the report says.
Kmart senior management are planning a supplier forum in Bangladesh within the next month. It organises these forums every six months in China, Bangladesh and India.
Woolworths has confirmed that it did not deal with the factory that collapsed, nor the one that burnt down last year. Myer uses one factory in Bangladesh, which also produces for Marks & Spencer. The factory has been safety audited.
"Prior to the recent building collapse," says Citi, "Myer had introduced an additional compliance step in Bangladesh of doing in-line inspection. This step was introduced to ensure the supplier cannot move production to another location when they start producing the goods."
David Jones said it had not had any direct or indirect exposure to date to any incidents in Bangladesh.
Meanwhile, four of the world's largest retailers - H&M, C&A, Primark and the owner of Zara - have agreed to improve safety at Bangladesh's garment factories and to monitor suppliers and pay for repairs at the factory site after the worst industrial disaster in the south Asian country.