The first wave of Covid-19 dealt garment manufacturers a devastating blow. Now, with the pandemic resurging across North America and Europe, triggering further lockdowns and sending whole economies crashing into existential despair, the odds of their survival—let alone recovery—remain dim.
Brands and retailers in the global north are generally taking a wait-and-see approach to the coronavirus crisis, even as a number of them continue to amass profits.
“I work for a sourcing office and being an intermediary, we are directly witnessing the factories being destroyed over brands’ one-sided exploitative actions,” Bappy Nurul Muktadir, director of operations at Evelyn Textiles in Bangladesh, told Sourcing Journal. “As the orders get suspended indefinitely, and worse, canceled, factories face skyrocketing liability on top of repeated worker unrest for layoffs or shutdowns.”
Indeed, it’s the workers furthest upstream who are bearing the brunt of buying decisions, which are designed to protect corporate coffers to the exclusion of all else, experts say.
A survey of 50 leading brands, published in November by the Business & Human Rights Resource Centre found a “mismatch” between the industry narrative of building back better and the lack of policy development to adequately protect the people who make its clothes. More than half (29) stayed in the black, yet nine of them had not committed to paying for any orders they canceled or suspended at the onset of the pandemic. Just one company—PVH Corp., which owns Calvin Klein and Tommy Hilfiger—had coaxed its suppliers to implement a “pandemic policy” to ensure vulnerable workers are not being disproportionately targeted for layoffs, though 25 said they had a pre-existing policy that covered this and seven said they had reiterated the same policy to their suppliers.
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At the same time, brands are becoming savvier about their buying strategies, said Thulsi Narayanasamy, senior labor rights lead at the Business & Human Rights Resource Centre. Though retailers may no longer be recklessly canceling orders outright because of the public outcry they’ll attract, they might be finding other ways to drive down prices—say, by paying 30 cents for a T-shirt they paid a dollar for the previous year, she told Sourcing Journal.
The fact that only three—Aldi Nord, Aldi Sud and Lidl—made it a new policy not to ask factories for price reductions or discounts relative to comparable items commissioned during the previous season offered a “clear indication that [brands] are getting around the issue of making a big news story out of it by driving the prices down quietly, directly with their suppliers, which means that suppliers are not in a position to be able to speak out about it,” Narayanasamy said.
The ability for corporations to unilaterally dictate the terms of engagement is indicative of the massive power imbalance between buyers and suppliers, particularly at a time when factories are hungry for orders that will keep their doors open. Already, business is stuttering: In Bangladesh, the world’s second-largest exporter of clothing after China, overall exports for ready-made garments tumbled 16.9 percent year over year in 2020, a state of affairs that Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, described as “unprecedented.”
“Brands are able to dictate the terms of production and the price point and they’re still able to do that,” Narayanasamy said. “So if they’re all driving the prices down, suppliers aren’t really in a position to push back on orders, because they’re already in such a precarious situation.”
When the Worker Rights Consortium and the Center for Global Workers’ Rights at Penn State University polled 75 factories across 15 countries last year, they found that 65 percent of suppliers reported that buyers have demanded price cuts on new orders steeper than the year-over-year reductions they typically request. More than half (56 percent) of respondents admitted they’ve accepted orders below cost, and the majority said they’ll probably succumb to the same sooner rather than later.
Suppliers said they now have to wait an average of 77 days after they complete and ship new orders before they receive payment, compared with a pre-pandemic average of 43 days. While only 34 percent of buyers took longer than 60 days before the outbreak, one in four buyers are currently imposing payment terms of 120 days or more.
“Brands are having more success extracting concessions because the [lower] order volume has placed suppliers in a position where they’re even more desperate than usual to get whatever orders they can grab,” said Scott Nova, executive director of the Worker Rights Consortium. “Supplier brands are taking advantage of that to squeeze them on price, and the new surge in the virus is likely to worsen that dynamic.”
Nate Herman, senior vice president of policy at the American Apparel & Footwear Association, says that companies have learned from the “lessons” of the first wave and “recognize the importance of keeping partnerships with their suppliers.” While the trade group has not issued formal guidance to its members, Herman said it encourages them to “try and avoid the situation we ran [into] back in late spring and early summer.”
“Labor conditions are still a critical part of the way we determine sourcing,” Herman said. “We are finding new ways to monitor labor conditions—obviously that has become much more difficult with the pandemic and the restrictions on travel and social distancing, but we are finding innovative new ways to do that. And that’s still a key priority for the industry.”
But price gouging is not only a current reality—it was probably happening all along, Nova said. While trade data showed that apparel imports shrank by $16.1 billion from April through June in the United States and from April through May in the European Union, a closer examination of the numbers reveals that the downswing in import value is as much due to a decline in prices as it is to a downturn in order volume.
“If you look at quarterly reports, you see companies talking about the savings they’re going to derive within the supply chain,” Nova said. “No doubt that [discounts have] been a source of profit for brands and retailers taking advantage of suppliers’ desperation.”
Meanwhile, the situation for garment workers grows more dire as a soaring number worldwide are reporting growing hunger, increased food insecurity and spiraling debt. Hundreds of thousands, if not more, have lost their jobs or are facing furloughs, and those who have managed to retain employment have seen their incomes fall an average of 21 percent from $187 to $147 per month between March and August, according to the Worker Rights Consortium. Financial relief, promised by governments or multi-stakeholder initiatives such as the International Labour Organization’s Call to Action, is neither enough nor easy to mobilize. And that’s if it’s described in more than the most nebulous of terms.
Without government aid or deferments of stimulus repayments, Huq recently warned, Bangladesh’s garment sector could collapse because of the “deep plunge into uncertainty” wrought by the pandemic’s second wave. In a recent survey of its members, 50 factories said they were receiving 30 percent fewer orders than usual. Brands, Huq said, need to live up to their promises of social responsibility, especially as the downturn in exports is likely to continue through April.
“Covid is a great test for relationships,” she told Sourcing Journal. “Brands and retailers are in a better position to absorb uncertainties than us. Therefore it’s time we think about collaborative approaches to inset the shock element in their sourcing decisions. In brief, the whole sourcing model has to hit a reset button cushioned by empathy and understanding.”
To mitigate the suffering, labor groups such as the Clean Clothes Campaign are asking brands to share their wealth—literally—by publicly committing to a “wage assurance” guaranteeing that all workers making and handling clothes in their supply chains receive the full wages they are owed in accordance with labor laws and international standards. Remake, a grassroots group, is asking 12 brands that have collectively raked in more than $1 billion in profits during the pandemic—Adidas, Amazon, Asos, Gap, H&M, Levi Strauss, Lululemon, Primark, Under Armour, Uniqlo owner Fast Retailing, Nike and Zara owner Inditex—to earmark 1 percent of their net revenue for garment worker relief. Remake also wants them to pay out 10 cents more per unit of apparel into a severance guarantee fund.
“Time is really of the essence,” said Ayesha Barenblat, founder and CEO of Remake. “And there’s really an urgency for brands to be committing to a wage assurance and to paying up. Covid has cracked wide open the hypocrisy of the love fest that the industry has around sustainability without actually being representative of the people that are most impacted.”