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Does Luxury Leather Have Something to Hide?

Luxury leather brands aren’t reporting where they source their leather, a new report shows.

The “Shine A Light On Leather” report is an analysis of the supply chain disclosure practices of 100 companies in the leatherware industry, conducted by the Centre for Research on Multinational Corporations (SOMO) and Together for Decent Leather.

The report shows that 35 of the 44 luxury brands examined don’t publish supplier lists showing where they source their leather goods. This is concerning, SOMO said, because the global leather industry is notoriously associated with labor rights abuses and environmental pollution.

“Our analysis shows that companies in the luxury segment are particularly lagging behind. This is shocking. If a company knows its suppliers and supply chain, then there is no reason not to publish a supplier list,” Martje Theuws of SOMO said. “If a company does not know its supply chain, this raises serious questions about the company’s due diligence.”

“Shine A Light On Leather” focuses mainly on luxury leather goods and footwear, examining brands including Armani, Versace, Michael Kors and Coach. None of these companies responded to Sourcing Journal’s request for comment.

The report found that less than one-third (29 out of 100) of the buyers studied publish a supplier list; of those 29 companies, 12 of their supplier lists contain information only about first-tier suppliers or end-product manufacturers—ignoring the complexities existing within leather supply chain processes such as tanneries or home-based workplaces. Beyond the first-tier suppliers, public information is limited, leading SOMO to conclude that the level of supply chain transparency provided is very, very low. Regarding luxury brands, only 20 percent (nine out of 44) disclosed their suppliers.

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“These companies publish information and reports, some of which present very positive pictures of their corporate responsibility, but the failure to publish full supplier lists is problematic,” Theuws said. “Scattered information on supply chain issues does not allow for proper scrutiny. Such an approach can conceal as much as it reveals.”

Supply chain transparency was not the goal, but rather a means to enable different players to drive greater respect for workers’ rights and responsible business practices. The report said that lack of supply chain transparency could aggravate worker exploitation, such as poverty wages, dangerous working conditions, crackdowns on trade unions and lack of social protections. By contrast, when workers know which buying companies source from their workplaces, they can contact representatives of those buyer companies to ask them to use their leverage over the supplier to prevent or address labor malpractice.

Supply chain transparency also facilitates cooperation between companies sourcing from the same facilities. International brands and retailers have structured their supply chains so that they work with a multitude of suppliers and subcontractors. Labor rights issues are often complex and widespread and require a concerted approach, the report said. To effectively address such issues, brands and retailers need to collaborate, and collaboration is possible only if companies know the other buyers they share suppliers with.

“SOMO’s analysis shows that these kinds of voluntary initiatives do not guarantee supply chain disclosure because they don’t enforce transparency on their members,” Theuws said. “Therefore, it is extremely important that upcoming legislation on corporate accountability at the European level and in EU members states should include obligations for companies to publicly disclose supply chain information.”

The report distinguished six categories of information that buyer companies should disclose. First, they should reveal all the supplier facilities in their supply chain. Second, buyer companies should obtain and uncover details about the workforce at their supplier facilities and in the supply chain. The third category of information that companies should reveal is information on wages paid to workers. Fourth, workers’ right to join trade unions and collectively bargain are essential enabling rights. Disclosure of identified risks, mitigation, and remediation measures is a fifth supply chain information disclosure category. As a sixth category, companies should disclose information about the social compliance audits they have carried out at their supplier facilities and the results and any information on sustainability certifications supplier facilities may hold.

In SOMO’s analysis, only 17 of the 100 companies disclose any information on their suppliers beyond the first tier. In the luxury segment, Bally, Chloé, Fendi, and Zegna are the only companies that disclose some information on processing facilities and raw materials suppliers.

Of the 100 companies in the sample, only 22 provide some information on workforce indicators in their supply chain. Most of these 22 companies disclose the total number of workers per supplier facility and, in some cases, disaggregate these numbers by gender. Six luxury brands provide the number of workers per supplier: Bally, Chloé, Fendi, Gucci, Ted Baker and Zegna.

Not a single company in the sample discloses information on the wages that workers in their supply chain earn or their working hours.

Merely four companies in the sample of 100 disclose information on indicators related to freedom of association, collective bargaining and non-judicial grievance handling worker committees in their supply chain. In the luxury segment, Zegna provides information on the presence of trade unions or worker committees at the supplier level, though without distinguishing between the two types of bodies, rendering it essentially meaningless.

Although international norms and guidelines specify that identifying risks within a company’s supply chain is a crucial part of due diligence, according to SOMO, not one of the 100 companies in the sample discloses any information regarding risks identified at the facility level.

Despite a growing body of evidence about the shortcomings of social compliance auditing, many companies in the garment and footwear sector still rely on such audits when it comes to detecting human rights and labor rights risks in their supply chains. And despite the widespread use of audits, sometimes as part of certification schemes, companies fail to disclose which companies audit their facilities, when such audits have taken place, and what the results are. Bally, Gucci and Zegna were the only three of the 44 luxury brands studied that mention the certifications their supplier facilities hold.

“We call on brands, retailers, and fashion conglomerates to work towards comprehensive supply chain transparency and we urge responsible business initiatives to implement stronger disclosure requirements for their corporate affiliates,” SOMO said. “To push laggard companies towards greater transparency and to level the playing field, governments need to make supply chain transparency mandatory.”