In light of the tragic building collapse that occurred in Bangladesh in April leaving over 1,000 factory workers dead, Target and Kmart, owned by conglomerate Wesfarmers (ASX: WES) have signed up to an accord on fire and safety which commits them “to the goal of a safe and sustainable Bangladeshi Ready-Made Garment industry.”
It is certainly positive seeing a major corporation like Wesfarmers leading the way on this serious issue. No doubt Wesfarmers’ decision will put pressure on rival Woolworths (ASX: WOW), owner of the Big W chain, to follow suit and give assurances to its customers about the safe origins of its merchandise as well.
Companies will increasingly have to justify to customers that the goods they sell are being produced in a humane, ethical and safe way. This will particularly affect companies such as Kmart, Target, Big W and Premier Investments (ASX: PMV) which directly source their goods from factories in countries such as Bangladesh. Direct sourcing companies are more at risk of being held accountable for practices within factories than stores which are primarily re-sellers such as David Jones (ASX: DJS) and Myer (ASX: MYR).
Compared to last century, globalisation and mass media have made the world a small place where companies cannot shirk their responsibilities without being caught out before too long. That’s certainly not a bad thing but it does increase the risk for investors if management does not act with the highest of integrity.
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Motley Fool contributor Tim McArthur has no financial interest in any company mentioned in this article.