EU retailers to raise prices, orders for RMG factories’ remediation.
The European retailers will place orders for longer period in higher volume and increase price per unit of products to help their supplier factories in Bangladesh where remediation works are needed to maintain workplace safety, said their platform, The Accord on Fire and Building Safety in Bangladesh. The Accord in a monthly update report on Friday said it had developed a Financing Remediation Guidance for brands (retailers) and factories outlining suggested steps for both parties to ensure remediation that is financially feasible. The guidance said the brands and retailers would ensure finance to the supplier companies and factories for remediation through improving cash inflow, increasing revenue and injecting capital. The brands and retailers will improve cash inflow through reducing payment terms and prepaying orders, ensure increased revenue through guarantee orders for longer period in higher volume and will inject capital through joint investment, providing loan and paying for renovations directly, it said.
The platform said, ‘Accord holds Corrective Action Plan finalisation and remediation meetings with factories and signatory companies to ensure both parties understand the remediation requirements, including the requirement to confirm that a remediation finance plan is agreed’. According to the guidance, the supplier factories will estimate costs of corrective action plan through identifying materials for all CAP items and obtaining quotations from service providers. The factory owners will also have to assess revenue projections and profitability of their companies and to asses financing options including own capital investments, loans, and change commercial terms, the Accord said. Following estimating by the factory, the cost estimate, factory’s financial capacity and finance option will be reviewed jointly by the brands and factories. Both the sourcing and factory managers will evaluate finance options including commercial terms and to confirm to the Accord which type of finance plan will be agreed and then the CAP will be approved by the retailers’ platform.
During the remediation period, the factories will have to give progress updates to the lead brand and the Accord and all signatory companies to review CAP progress on factory visits, the guidance said. Accord will facilitate discussions on financing plan between signatories and factories if expressly asked by the signatories or factories. Accord engineers will conduct follow-up inspections and verify remediation. If they found inadequate remediation progress, the Accord will issue non-compliance letter to the factories and companies. The Accord in its monthly update said that it had received 900 CAPs developed by the factories with support from the signatory companies. These CAPs will later be updated to indicate that the financial plan for remediation is in place when the Accord receives this confirmation from the lead brands and factories, it said. The update said the Accord was conducting initial inspections at newly-listed factories and had completed more than 250 inspections for fire, electrical and structural safety and more than 1,250 factories had so far been inspected by the initiative. Furthermore, the Accord is liaising with the North American Alliance for Bangladesh Worker Safety to avoid duplication of inspections to common factories and will soon begin discussions with factories and companies to finalise Corrective Action Plans and begin follow up inspections.
The Accord is continuing follow up factory visits to monitor and verify corrective actions and a total of 227 factories have had fire, electrical and structural follow up inspections. Another 263 structural inspections have been conducted in factories with major structural concerns, the update report said. After the Rana Plaza building collapse on April 24, 2013 that killed more than 1,100 people, mostly garment workers, Western retailers and apparel brands, reacting to public outrage, began a major push to improve safety in the Bangladeshi factories they do business with. The EU brands and retailers including H&M, Carrefour and Mango formed Accord and announced inspection programme in the garment factories.
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