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Marks & Spencer Moving Out of Myanmar by March

Marks & Spencer revealed Tuesday that it will be making a “responsible exit” from Myanmar, citing a recent human-rights assessment that said it was no longer possible for brands and retailers to conduct normal due diligence in the embattled Southeast Asian nation, let alone the enhanced due diligence that current conditions demand.

The report, which was commissioned by the Ethical Trading Initiative, a multistakeholder organization of companies, trade unions and non-governmental organizations, uncovered “credible evidence” that forced labor in the garment sector has spiraled upward since the military seized power from Aung San Suu Kyi’s civilian government last year in February. Excessive overtime, violence and harassment, restriction of movement, low wages and the inability to exercise freedom of association are now “pervasive,” it said. Trade unions have been banned and union leaders have been arrested, put on the run and even killed.

“At Marks & Spencer, ethical trading is core to the way we do business. We have continued to monitor the market closely in Myanmar, through our partnership with the Ethical Trading Initiative, as well as on-the-ground audit process[es],” the British department store said. “The findings from the Myanmar enhanced due-diligence sectoral assessment demonstrate that it is impossible for our global sourcing principles to be upheld. We do not tolerate any human rights abuses within any part of our supply chain.”

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The process will wind up by March, the retailer said. According to its public supplier list, Marks & Spencer works with 20 clothing factories, comprising 25,761 workers, in Myanmar, which makes up less than 3 percent of its total sourcing base.

“Over the next six months, we will continue to work closely with relevant stakeholders including the Ethical Trading Initiative throughout the consultation process, to ensure that our suppliers adhere to national laws and human rights are upheld,” Marks & Spencer said. “We are also looking at what additional measures we can put in place to mitigate the effects of the decision on the individual workers in Myanmar.”

Other brands that have also divested or are in the process of divesting from Myanmar include Aldi South, C&A, Mango, Primark and Tesco. Companies that aren’t budging, on the other hand, include Adidas, Bestseller, H&M, Lidl, Next, Uniqlo parent Fast Retailing and Zara owner Inditex. Some expressed concerns that leaving the country would plunge workers into deeper financial insecurity. Others insisted on doubling down on their due-diligence mechanisms. While the Ethical Trading Initiative report didn’t explicitly direct brands and retailers to stay or go, it noted that Myanmar’s economy is already on a “significant downward trend” caused by multiple systemic issues unrelated to the garment sector. No matter what companies decide, it said, the economic outlook for Myanmar will remain “dire.”

For labor campaigners like Jay Kerr, who coordinates No Sweat’s Myanmar Military: Never in Fashion initiative, the dilemma is a false one. A study published by the Business & Human Rights Resouce Center in July logged more than 100 cases of human-rights violations against at least 60,800 of the country’s garment workers. Over half of them involved wage theft, while others included abusive work rates and mandatory overtime and attacks on freedom of association. An update in October listed another 52, adding Skims and Marks & Spencer to a list of brands linked to offending factories, including Adidas, Bestseller, Fast Retailing, H&M, Inditex and Next.

“While ending production will have a huge impact on the lives of garment workers, ignoring the mounting evidence of exploitation and forced labor since the coup is not an option for any organization that claims to care about the people that make their clothes,” Kerr told Sourcing Journal. “The only way to offset the impact of canceling future orders is with a decent financial package for garment workers. That means providing them with a basic income for as long as necessary. That is what a responsible exit looks like.”

Khaing Zar Aung, the exiled president of the Industrial Workers Federation of Myanmar, previously told Sourcing Journal that brands are legitimizing a “terrorist dictatorship” by staying. By sourcing from factories inside industrial zones tied to the military, they could also be filling its coffers, even though Myanmar makes up a minute fraction of most U.S. and European brands’ supplier maps. They might also be breaking the law: The Ngwe Pinlae Industrial Zone and Pyinmabin Industrial Zone, whose factories make clothes for brands such as Bestseller and H&M, is operated by Myanma Economic Holdings Public Company Limited, a military holding company that was sanctioned by the United States last year.

But brands must also do more than simply pick up sticks, said Kerr, who is based in London.

“We welcome Marks & Spencer’s decision to leave Myanmar but stress that they need to increase their efforts to support the democratic movement resisting the military coup,” he said. “If Marks & Spencer’s beliefs and values are truly aligned with a commitment to the UN Universal Declaration of Human Rights as they claim they are—if this is more than just words—then simply leaving a country fighting an authoritarian takeover is not enough. Global brands must make every effort to use their influence and economic power to support the movement to restore democracy and human rights in Myanmar.”

Dominique Muller, policy director at the Bristol-based nonprofit Labour Behind the Label, questioned why brands were so willing to support workers when they halted operations in Ukraine at the outset of Russia’s invasion. There is no reason, she said, why this type of financial support cannot be offered to workers in Myanmar.

There is also a need for brands and retailers to be open about what their responsible exit strategies entail. Muller is waiting to hear back from Marks & Spencer, but Primark, she said, has “refused” to share the details of its plan with the organization. (Primark refuted this, saying that it is still developing its exit strategy in collaboration with stakeholders and will provide an update when this is done. ) She hopes that the Ethical Trading Initiative will provide further guidance on what “truly responsible” exit strategies should look like.

“The evidence is clear that it is impossible to continue sourcing in Myanmar and ensure proper due diligence, but that also makes it very difficult for brands to leave in a responsible manner,” Muller told Sourcing Journal. “Brands that have profited from Myanmar’s cheap labor and labor laws must ensure they work with local partners where possible, ensure their safety and provide support to workers. Transparency is also key—we cannot just allow brands to name their exits as responsible without having more details.”

For Khaing Zar Aung, brands that have left Myanmar should also use their influence to question those that are staying, particularly if they belong to the same multistakeholder organizations. That includes the Ethical Trading Initiative, whose roster includes Bestseller, H&M, Inditex, Marks & Spencer and Primark. “They should take the initiative,” she said.

Marks & Spencer’s announcement comes amid its plan to accelerate the closure of 67 of its “low productivity” stores in as little as three years. The closures are part of a previous real-estate shakeup that put 110 stores on the chopping board. The idea, it said, was to have fewer but better sites that are “fit for the future.”

The move will contribute to efforts to knock 400 million pounds ($444 million) from its cost base as inflationary pressures continue to rise, CEO Stuart Machin told investors in a presentation on Wednesday. Energy costs, for instance, have already blown past Marks & Spencer’s budget by 40 million pounds ($44 million). Accelerating its transition to LED lighting and tackling refrigeration costs are now priorities, he said.

But the retailer will also be launching 104 “bigger and fresher” food outlets, Machin said. Many of them are expected to open in the same area or location as the axed stores as it tries to grow its food market share from 3.6 percent to 4.6 percent.

Meanwhile, the retailer raised wages for the second time in a year in September. More than 40,000 employees now receive a minimum of 10 pounds 20 pence an hour ($11.42), a 2 percent bump from the 10-pound ($11.09) floor that was introduced in April. It is important to support its workforce, Machin said, but ​​the result is that staffing costs have increased by 7 percent.

“There’s lots of volatility ahead and you’ve only just got to live the last 24 hours to know it’s not just a sort of consumer crisis; it’s an everything crisis,” Machin said. “And we know that there are many factors, whether that’s Brexit or the huge headwinds in energy, or cost of living part one, and cost of living part two, as we enter next year with the currency challenges that we’re facing. But something we talk about is despite all of these market challenges, how do we mitigate and manage those and keep focused internally?”