Retailers forced to look at suppliers

Australia's biggest retailers, including Woolworths, Myer and David Jones, will review their supply arrangements after the collapse of a garment factory in Bangladesh last month killed 1100 workers.

Some of the world's leading fashion chains, such as Swedish group H&M and the owner of Spanish giant Zara, have already pledged to better monitor the working conditions of factory workers in Bangladesh and help pay for repairs.

Most of the Australian retailers, which represent the bulk of clothing sold domestically, 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 the country's garment factories, including building and safety audits.

In the wake of the April 24 disaster at Rana Plaza outside Dhaka, Citi equities analysts Elaine Prior and Craig Woolford sent a list of questions to Australian retailers to tease 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 [1100 dead]," the Citi report said.

"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 conglomerate 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 sourced from the factory that is the centre of the latest disaster.

"Wesfarmers noted that this is an extremely serious issue and one which 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 Citi report said.

Kmart senior management are planning a supplier forum in Bangladesh within the next month. It organises forums every six months in China, Bangladesh and India.

Woolworths has confirmed that it does not source from the factory that collapsed, or the one that burned down last year.

Myer sources from one factory in Bangladesh, which also produces for Marks & Spencer. The factory has been safety audited.

"Prior to the recent building collapse," said 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.

Four of the world's largest retailers - H&M, C&A, Primark and the owners of Zara - have agreed to improve safety at Bangladesh's garment factories and to monitor suppliers and pay for repairs at the factory site.