Brands Face New Pressure on Labour Rights

When the pandemic hit, fashion’s already fragile efforts to establish better protections for garment workers collapsed.

As Western markets went into lockdown last March, brands cancelled billions of dollars of orders, with many refusing to even pay for goods that had already shipped. Manufacturers in turn cut wages, laid off staff or shut down altogether. Millions of garment workers in countries with limited social safety nets were left scrambling to survive.

In the first three months of the crisis, the value of garment workers’ lost wages in seven major Asian manufacturing hubs amounted to as much as $6 billion, according to estimates by labour advocacy group Clean Clothes Campaign. Many workers were laid off without legally mandated severance, with the total amount still owed likely exceeding half a billion dollars, according to an April report by the Worker Rights Consortium.

In the British city of Leicester, a Covid-19 outbreak was linked to garment factories that reportedly breached lockdown restrictions to continue manufacturing. Reports of union busting, wage theft and rising debt levels among garment workers have all increased since the pandemic began.

But such high-profile scandals have also drawn fresh focus from consumers, regulators and investors. Even manufacturers, who rarely voice public criticism, have called for reforms.

Amid the crisis, some see an opportunity to reset with a new, more robust social contract that secures safe working conditions, reasonable hours and fair wages across the industry. Doing so, they say, requires overhauling the whole system.

“I don’t think we should continue to do what we have done for the last twenty years. We need much more drastic and ambitious change,” said Alexander Kohnstamm, executive director at Fair Wear Foundation. “To do that, we need new business models.”

A Broken System

Even before the pandemic, calls for change were growing. Despite decades of effort, a growing body of evidence suggests fashion’s long-standing focus on voluntary codes of conduct and privatised auditing systems often fail to identify and resolve labour abuses.

Though there has been progress, it’s been messy and slow. Even as brands stepped up public commitments to operate more responsibly, the fashion industry’s modern business model created conflicting pressures, demanding faster-paced, more flexible and low cost manufacturing. For the most part, brands don’t own the factories that make their clothes, outsourcing to countries where labour is cheap and protections limited. Buying teams still often push for prices that are below the cost of production, according to manufacturers and labour rights groups.

The BoF Sustainability Index, which assessed 15 of fashion’s largest companies’ public disclosures on their sustainability policies and practices, found workers’ rights to be one of the worst-performing areas analysed. Brands performed particularly poorly in the assessment of their efforts to provide living wages and ensure the way they conduct their business supports safe and equitable working conditions. While the best performing companies indicated a commitment to address these issues, they provided little information about how they were doing that in practice, or the impact of those efforts.

Rebalancing The System

On the other hand, fashion companies’ abrupt cancellation of orders when the pandemic first hit — and the knock-on effect on vulnerable workers in the supply chain — have redoubled focus on efforts to reform persistent inequalities in contract terms and purchasing habits.

The biggest problem “is not the fact that factories renege on their obligations to pay their workers. It’s that the brands renege on their obligations to their suppliers,” said Miran Ali, vice president of Bangladesh’s garment manufacturers’ association and spokesperson for The Sustainable Textile of the Asian Region, or STAR, Network, a group of industry associations that launched an initiative to formulate better payment and delivery terms in the wake of the pandemic. It “is a fundamentally unfair system,” he said.

Manufacturers have rarely spoken up against brands in the past, but the pandemic has pushed them hard. Beyond order cancellations in the initial panicked weeks when lockdowns were first introduced in Western markets last year, manufacturers say they have faced pressure to provide retroactive discounts and accept delayed payments. More than half the suppliers consulted in a survey by the Center for Global Workers’ Rights last year said they had been forced to accept prices below their cost of production.

To be sure, some companies, including H&M Group and Zara-owner Inditex, made early and public commitments to ensure their suppliers were paid in full when the pandemic hit. Others did so later, as social-media-savvy advocates used catchy hashtags to galvanise consumer pressure. Advocacy group Remake’s #PayUp petition launched last March garnered 270,000 signatures within a month.

Major fashion brands publish codes of conduct for suppliers that lay out labour rights requirements. Many actively participate in international initiatives to promote better wages and working conditions.

But those commitments haven’t stopped the cascading impact of the industry’s financial contraction, and so far, there’s patchy evidence that efforts to support garment workers have trickled down to the people they were intended to protect, labour advocates say.

“That’s an issue with many of the top-down approaches,” said Nandita Shivakumar, India coordinator of the Asia Floor Wage Alliance.

Instead, many brands who have made high-profile commitments to responsible sourcing have also appeared in reports documenting labour rights violations in the supply chain during the pandemic; Nike, H&M and Inditex were among brands called out in the April report from the Worker Rights Consortium that found factories they used failed to pay workers legally mandated severance.

Inditex said it had either not worked with the factories named in the report for years, or never had. H&M Group said it continuously monitors wage payments at its suppliers to ensure workers are correctly compensated. Nike said the suppliers mentioned in the report had followed local legal requirements, according to its due diligence programmes.

Closing the Accountability Gap

Labour groups are pushing for more to ensure any efforts to change the system actually reach the workers they are supposed to benefit. That includes greater protection for unions and social dialog at the local and international level, binding agreements to establish living wages, more collaboration and alignment on standards and audits, and better incentives and tougher oversight of the industry.

Regulators are certainly paying more attention. In Europe, plans to introduce legislation that will make brands responsible for monitoring conditions in their supply chain are pushing ahead. The UK is looking to strengthen oversight of the sector following high-profile coverage of labour abuses at ultra-fast-fashion e-commerce company Boohoo Group’s Leicester manufacturers. In California, where most garment factories in the US are based, a bill to secure better wages and protections for garment workers and increase brands’ accountability is inching forward. And the US has banned cotton products from Xinjiang, China, over allegations of forced labour.

Companies are facing pressure from investors too, as cultural concerns about racial and social justice have filtered into rapidly proliferating funds that promise to put an environmental and ethical wrapper around investments. One of Boohoo’s biggest investors sold its holdings in the group after the issues in its supply chain were reported last summer. The company commissioned a review into its operations that found “unacceptable issues,” but cleared Boohoo of direct involvement. It has committed to overhaul its processes.

“When investors start asking questions about labour standards... that can lead to huge, huge, meaningful change,” said Sharon Waxman, president and chief executive of the Fair Labour Association.

Rachel Deeley contributed to this article.

The BoF Sustainability Index is based on a binary assessment that examines companies’ public disclosures up until December 31, 2020. There are limitations to this approach and while the assessment was conducted in good faith, the results should be viewed as a proxy for sustainability performance and not an absolute measure. Where BoF was unable to identify public evidence to support a company’s performance relating to the assessment criteria, it does not necessarily mean the company is taking no action at all or that bad practices are present. Read the full methodology on pages 38-41 in the report here or see the FAQs.

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