The apparel buyers' platform Accord has developed a new remediation financing guidance for its signatory members and the local manufacturers outlining key steps for both sides to make sure remediation is financially feasible.
"In order to induce Tier 1 and Tier 2 factories to comply with upgrade and remediation requirements, brands and retailers will negotiate commercial terms with their suppliers which will make sure it is financially feasible for the factories to maintain safe workplaces and comply with upgrade and remediation requirements instituted by the Safety Inspectors," the Accord said in its monthly update published on Friday.
According to the guidance, the signatory Accord members will finance in three ways: 1. improving cash flow by reducing payment terms and prepay orders, 2. increasing revenue by guaranteeing orders for longer period and/or in higher volume and increasing price per unit, and 3. injecting capital through joint investment, providing loan, guaranteeing loan, accessing donor or government support or pay for renovation directly.
Similarly, factory owners will have to estimate costs of corrective action plan (CAP) by identifying materials for all CAP items, obtaining written quotations from service providers with comparative quotations, if possible, and evaluate financial capacity.
In this regard, Accord has provided the estimated cost for common equipment and the list of service providers on its official website.
As part of the remediation plan, both the Accord signatory companies and the factories will jointly review the cost estimation and evaluate the finance options including commercial terms and confirm it to the Accord.
The factories will give details of the update on progress in CAP to their lead brands and the Accord while all companies will review it, the guidance has said.
If there is any concern, both the parties can raise it with the Accord case handlers and they will request for updates from owners, brands and labour representatives.
The Accord will facilitate discussions between signatories and factories, if necessary.
The Accord holds CAP 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.
The Accord has received 900 CAPs developed by factories with support from signatory companies and has posted over 500 of them online.
When asked, Md Shahidullah Azim, vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) claimed a good number of factories already approached, but they were yet to get any fund.
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