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Worse for wear? - Due diligence in the clothing supply chain

The 2013 Rana Plaza tragedy in Bangladesh highlighted the true cost of fast fashion, with the building’s collapse killing over 1,000 people. Six years on, how are investors in clothing retail companies encouraging responsible sourcing and improving conditions for workers?

The clothing and footwear sector is one of the largest consumer goods sectors in the world. Western fashion brands may keep costs low by outsourcing manufacturing to emerging markets – but the hidden costs to local workers can be devastating.

Earlier this year I participated in a panel at the OECD Forum on Due Diligence in the Garment and Footwear Sector in Paris. The panel focused on investor expectations of supply chain due diligence. Having spent most of the last 13 years working in responsible sourcing and sustainability for international retailers I was interested to hear investors’ perspectives on this important topic.

During my time working with supply chains, I have seen many inhumane working conditions in factories in Europe, North Africa and Asia. I spent a couple of weeks in Bangladesh after the Rana Plaza tragedy and witnessed the enormous physical and emotional damage it caused.

I have arrived at factories to see groups of underage workers dash to the fire exits, found unconscious factory workers on the roof and met migrant workers whose identification had been removed, effectively forcing them to work. I have sat cross-legged on the floor of cotton spinning mill dormitories whilst young Indian girls sobbed about the conditions and harassment they faced, and I have liaised with weary families of workers who had committed suicide or died in suspicious circumstances. A member of my team was once locked in a factory for hours by an angry factory manager when she refused his bribe to remove the reference to child labour from her audit report.

These are the realities that help us to see the huge global challenge facing companies with supply chains, and it is not confined to apparel and footwear companies. What is clear is that businesses cannot truly tackle these forms of exploitation without an honest assessment of their business practices. This may include reviewing how they buy (purchasing practices), what they pay (facilitating a living wage), and how they allow workers a voice in this.

Progress

What struck me during the OECD's event was the progress that the OECD has made in assembling the key stakeholders involved in human rights due diligence, including investors. In previous roles, I worked with investor relations departments to respond to queries about our sustainability work. These queries were detailed and targeted and I personally welcomed the spotlight on our work.

However, what has been evident to me since moving into responsible investment is the extent to which investors contribute not only to thorough research but also to developing their own expertise, thought leadership and market best practice, which can help practitioners to make progress.

An example of this is the issue of living wages. There is a growing awareness of this, particularly within supply chains, where the topic cuts across issues such as forced labour, freedom of association - the right to bargain collectively with your employer and join a trade union - child labour, and health and safety. However, there is little agreement on the definition of a living wage and how it can be implemented. Involving investors in this debate and understanding how retailers’ behaviours can greatly influence the payment of a living wage will help focus attention on action.

For example, what is the retailer’s policy on a living wage? Investors should expect retailers to be able to explain if they consider wages when agreeing cost prices with suppliers and the expected timescales for production. Short lead times can lead to excessive hours, eroding even the minimum wage. Retailers may rightly point out that their actions alone are unlikely to impact a factory’s ability to pay a living wage, as most factories have multiple customers. So what is the retailer’s approach to collaborating on this topic, such as being part of the Act on Living Wages Initiative?

The OECD’s contribution in terms of its Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector and its convening of meaningful conversations on this topic alongside investor engagement on issues that delve beyond basic steps such as auditing, is crucial to driving progress. I believe this will help to deliver the decent working conditions that factory workers - so many of them women supporting extended families - need and deserve. 

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EOS Client Service and Business Development

Amy D’Eugenio,
Head of Client Service and Business Development, Hermes EOS