Ayesha Barenblat, founder and CEO of Remake, knows the last thing the fashion industry needs is another brand rating guide.
“The space is rather saturated,” she admitted at the launch of the advocacy group’s Fashion Accountability report, the first of its kind to give companies a negative score based on their progress—or lack thereof—with tackling the social, environmental, economic and political issues entrenched in their supply chains.
Barenblat said she believes the report is “additive” to the discourse, however, because it takes an intersectional approach to human rights, environmental justice and commercial practices that few before it have addressed. It is also time to stop rewarding transparency “for transparency’s sake” and focus on action, rather than intent.
“If a brand has set a living wage or climate goal but not demonstrated any progress towards that goal, they got no points,” she said. “And we really think that it makes sense for us to be looking at the industry and scoring them on what is and where they’re making a difference, rather than what they say or aspire to do.”
Remake looked at 60 leading brands and retailers across fast fashion, luxury, sportswear and big-box retail, assessing them on a 150-point scale. On average, companies scrounged up 17 points. The best-performing company, Nisolo, earned 83 points, while the worst, a tie between Forever 21 and Ross, scored -13.
Elizbeth L. Cline, director of advocacy and policy at Remake, said the report’s range of scores was “telling.” “What that means is we really are seeing a wide spectrum of behavior in social and environmental responsibility,” she said. “Our lowest-scoring companies really reflect brand behavior during the pandemic.”
Indeed, the report arrives as garment-worker rights are attracting new scrutiny, whether from the signing of the California Garment Worker Protection Act, the renewal and expansion of the Accord on Fire and Building Safety in Bangladesh or the wave of Covid-induced order cancelations that left factory owners facing insolvency and millions of garment workers on the brink of starvation and destitution as they received partial wages or no pay at all.
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Companies that lobbied against the California Garment Worker Protection Act or invoked force majeure to avoid paying for completed or in-progress orders were dinged in their scores. Gap Inc., for instance, earned a demerit because it’s on the executive committee of the California Retailers Association, which was “vocally opposed to the bill,” Cline said, while Forever 21 and Ross have a “history” of complicity in wage theft in California. Other companies that campaigners say haven’t paid for canceled orders or retroactively imposed steep discounts also performed poorly, including Global Brands Group (-12 points), TJX (-11 points), Edinburgh Woollen Mill (-10 points), The Children’s Place (-10), JCPenney (-8 points), Sears (-8 points), Kohl’s (-6 points), American Eagle Outfitters (-4 points) and Walmart (-1 points). Of the companies Remake examined, 14 of them, or 23 percent, never agreed to pay for orders they nixed during the global outbreak.
“Interestingly, discounters and big-box stores were our lowest-ranking brands, which really turns this notion that fast fashion is the worst performer overall,” Cline said. “We really think that draws attention to the issue of pricing in fashion, which is why we are going to focus on overhauling commercial practices in 2022.”
Remake, which led the #PayUp social media campaign, is advocating for something akin to a buyer’s code of conduct: “essentially a list of responsible behaviors to protect human rights in the supply chain and we think that it’s so important to address this imbalance of power we saw during the pandemic that the #PayUp campaign exposed,” Cline said.
“One of the things we saw during the pandemic was brands ending contracts without negotiations with their suppliers with these huge devastating humanitarian impacts,” she added. “And we haven’t seen a lot of changes in brand behavior since then.”
While campaigners helped claw back $22 billion of the $40 billion that Pennsylvania State University’s Center for Global Workers’ Rights estimates companies owe, the shortfall is indicative of a flaw in fundamental purchasing behavior that has a knock-on effect on everything from wages to meeting sustainability targets.
“Because when you are engaged in a race to the bottom, from a price standpoint, one of the things that we have looked at is there’s no incentive for suppliers to invest in the decarbonization that has to happen with Scope 3 emissions, and that’s where the largest greenhouse-gas impacts of the industry lie,” Barenblat said. “And so whether you think of human rights or climate—and we’re really looking at it from an intersectional lens—it all comes down to the financial incentives and the commercial practices of brands.”
‘Finding loopholes not to pay’
The fact that fashion owes $18 billion in outstanding payments is remarkable in light of the “pretty strong economic comebacks” that many brands have experienced since the release of Covid-19 vaccines, said Vincent DeLaurentis, director of outreach at the Worker Rights Consortium (WRC). An upcoming report by the Washington, D.C.-based think tank, which Sourcing Journal has seen, will describe how brands’ actions violated their due-diligence obligations under international instruments governing responsible business practices, including the United Nations Guiding Principles on Business and Human Rights and the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises.
WRC is in agreement with Remake about the biggest offenders, naming many of the same brands on the negative side of its “Covid-19 tracker” based on public statements by the companies, direct correspondence with the WRC and information provided by suppliers.
The report flagged Kohl’s for paying shareholders $109 million in dividends just weeks after canceling more than a billion dollars in goods, much of which had already been manufactured, at the outset of the pandemic.
“It’s pretty clear that Kohl’s obviously has the money to be able to pay for its outstanding orders,” DeLaurentis said. “And it’s just choosing not to and choosing to prioritize his own cash reserves as well as making its shareholders happy.”
URBN, which owns Urban Outfitters, Anthropologie and Free People, was likewise “very intransigent” in its refusal to clarify its position on order payments, even though it borrowed $220 million at the start of the pandemic to preserve its cash flow. Supplier factories also complained to WRC that URBN has been “finding loopholes not to pay,” claiming, for instance, that a color is wrong or that it wants a different shade of red.
Other companies that demanded sizable discounts include Asda, which was a Walmart subsidiary at the time, Bestseller and American Eagle Outfitters. Asda imposed 40 percent to 70 percent price reductions on orders completed but not yet shipped and on in-process orders, the report said, while Bestseller suppliers told WRC that the company imposed discounts of up to 10 percent on some orders that were in production in early 2020. In April of the same year, Li & Fung told some American Eagle Outfitters suppliers that the company was levying a 20 percent price reduction on certain categories of apparel.
The Children’s Place, one of America’s largest children’s wear retailers, not only canceled millions of dollars’ worth of clothing orders from suppliers in Ethiopia, according to the report, but it also demanded retroactive rebates on products that had shipped before Covid-19 reared its head. Edinburgh Woolen Mill canceled and refused to reinstate orders, then warned the Bangladesh Garment Manufacturers and Exporters Association of legal consequences if it continued to speak to the press and campaigners. The trade group responded by threatening to blacklist Edinburgh Woolen Mill, which collapsed into administration a few months later. Other companies such as Esprit and JCPenney have cited bankruptcy as a reason for reinstating orders.
The issue of obfuscating responsibility also extends to the upper echelons of retail, DeLaurentis said. WRC placed brands such as Balmain and Oscar de la Renta on its “naughty list” because they’ve been non-responsive to attempts at engagement. Researchers also weren’t able to confirm that the companies were paying their workers despite their American arms receiving Paycheck Protection Program loans.
“While luxury brands may charge more for their apparel, oftentimes that doesn’t necessarily mean that they’re being produced in better conditions than more consumer-friendly brands,” DeLaurentis said. “What we see often is that either these luxury brands are being made in some of the same conditions at factories that produce lower-market brands, or they’re producing in Europe or the Global North but hiring migrant workers who are not being treated particularly better there than in other parts of the world.”
Of the companies mentioned, only a handful responded to requests for comment.
A spokesperson for American Eagle Outfitters said that although the company negotiated a “one-time discount on a small amount of unshipped orders” in April last year, it continues to take deliveries and pay invoices immediately. Bestseller told Sourcing Journal that it does not have any unresolved issues with any of its suppliers “related to last year’s disruptions caused by the pandemic.” Neither has it made hard cancelations or delayed payments.
A JCPenney representative also disputes WRC’s characterization, saying that the retailer has reinstated all previously delayed merchandise and paid suppliers in full with no discounts. The Children’s Place told Sourcing Journal that it has worked collaboratively with its vendors to compensate them in full for any canceled in-production and finished orders.
‘Well beyond what’s normal’
DeLaurentis said that the backlash to the cancelations has been such that few, if any, brands are yanking orders en masse the way they did last year. Instead, he said, they’re finding other ways to squeeze suppliers by insisting on lower prices or extending payment terms “well beyond what’s normal for the industry.”
“What we’ve seen especially recently is that brands are really hesitant to put in large orders or put in orders far out in advance because of the economic uncertainty and evolving health situation around the world,” he said. “So what brands are doing is they’re giving factories smaller orders and demanding shorter lead times, which is obviously putting additional pressure on the workers and constraining factories’ abilities to hire workers back if they laid them off during the pandemic.”
KG Ganeshan, managing director, SwellKnit Inc. in the Southern city of Tirupur, known as the knitwear capital of India, said that he has noticed a difference in payment negotiations. “Earlier, we used to get payments within 15 days. Now the money is only available after 60 days,” he said.
The downward pressure on prices has also hampered the factory’s ability to nimbly address increased material and shipping costs. “Although the buyers are aware of these changes, they are not ready to raise the price,” Ganeshan said.
Over in Bangladesh, Razzak Sattar, managing director of Utah Group, which has factories in Gazipur, echoed the sentiment. “Even though they are making more money today than two years back, and share prices are going up, buyers are not giving us the prices where we can survive,” he said.
DeLaurentis said that this buying strategy also opens up workers to further exploitation in the form of wage theft or mandatory overtime in order to “meet these unrealistic expectations.” “Because at this point, factories are desperate to get whatever orders that they can in order to remain operational,” he added.
The industry is in a “real moment of rupture,” with the intensification of multiple crises that have long defined garment production due to the pandemic and its economic fallout, DeLaurentis said. Without “swift” action, millions of workers who lost a substantial amount of income during temporary factory closures—and are earning less per month than they did before—will continue to go hungry. And if the sourcing pressures continue, more suppliers could go out of business, reducing employment levels further.
“There is the possibility that we could go to a place where brands are going to use the leverage that they’ve gained during the pandemic over workers to continue to exploit them at intensified rates [even] after we find ourselves in some way back to normal,” he said. “But I think there is also a lot of opportunity to kind to investigate and challenge these unjust relationships and power structures within the global garment supply chain.”
While meaningful transparency is critical, the problem with many brands is that they’re trying to “have it both ways, where they don’t want to talk about anything that’s happening in their supply chain, and they want to have everyone assume that they’re operating with the best of intentions,” DeLaurentis said.
“If these brands were straightforward with us, and if they were transparent, we would be able to report on their best behaviors if that’s what they’re actually doing,” he added.
Additional reporting by Mayu Saini.