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‘Like Live Grenades’: What Suppliers Say About Fashion’s Purchasing Practices

When the coronavirus outbreak exploded into a full-fledged pandemic in March 2020, Morocco’s garment manufacturers suddenly found themselves in a state of emergency.

“It felt like Armageddon overnight,” Fatima-Zohra Alaoui, general manager of the Moroccan Association of Textile and Apparel Industries, or AMITH, said at Canadian nonprofit Fashion Takes Action’s virtual WEAR conference on Tuesday. “Overnight all our orders were canceled. We had members calling in saying, ‘What do we do?’”

Similar scenes of distress unfurled in Bangladesh. In India. In Vietnam. In Cambodia. In Lesotho. In fact, as Western fashion brands and retailers invoked force majeure clauses to slam the brakes on billions of dollars worth of contracts, their suppliers in the East felt like a distant afterthought. Many of them would face financial ruin. The millions of workers they supported, too, now unemployed or with reduced wages, would teeter on the brink of poverty and starvation.

“Basically what we saw on the side of the buyers [was that] they took a lot of actions, attempting to save themselves without any regard for the consequences,” Alaoui said.

As countries slowly reopened, suppliers were inundated with new orders, and with them, demands for faster lead times and deeper price cuts, meaning they “went from one extreme to the other,” she said. “And the problem is that in both cases our manufacturers didn’t have anyone to turn to to ask for better purchasing practices.” Factory owners, Alaoui noted, are often reluctant to complain to buyers because they fear retaliation.

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It’s for this reason that garment manufacturers across the globe have banded together through the Sustainable Terms of Trade Initiative to push for a new contract framework, including a buyer code of conduct that supports a more equitable partnership between brands and suppliers. To increase their leverage, a number of national garment associations, including AMITH, have joined the Platform on Sustainable Textiles of the Asian Region, or STAR Network, to determine common positions on payment and delivery terms and other “red lines.”

The problem today, said Matthijs Crietee, secretary-general of the International Apparel Federation, a trade association for clothing manufacturers, is that “modern market requirements,” such as flexibility and improved sustainability, are “squeezed into an old-fashioned sourcing system,” where risks and costs are “chucked over like live grenades to the suppliers upstream.” Without fair prices, however, factories aren’t able to meet their social and environmental requirements.

Another issue, according to Margreet Vrieling, associate director of the Fair Wear Foundation, is that companies tend to wall off the buying and sustainability teams from each other, allowing little communication between the two.

“It’s very important that responsible purchasing practices are not something that only the CSR department [handles] but they should be integrated and have the commitment of the C-suite, and there should also be reporting throughout the organization on them,” she said.

Brands should also shift from a top-down approach to a “sourcing dialogue,” where buyers and suppliers collaboratively agree on their engagement, Vrieling added. This ties in with collaborative planning, fair payment terms and sustainable costing, which together can generate benefits for “both sides to come out stronger.”

‘Perverse incentives’

Purchasing practices are one of the issues that more than 220 civil society and trade union organizations raised in an open letter highlighting “specific flaws” ​​in the European Commission’s draft corporate sustainability due diligence directive, which was published in February.

The proposed measure, organizations such as the Asia Floor Wage Alliance, Clean Clothes Campaign, Fairtrade International and Oxfam wrote on Tuesday, gives “considerable weight” to codes of conduct, contractual clauses, third-party audits and industry initiatives, which have “proven to be insufficient means to identify and address human-rights violations and environmental damage” and therefore cannot be considered proof of effective and meaningful due diligence.

“It is also clear that companies’ own purchasing practices generate serious adverse human-rights and environmental risks and impacts, therefore companies must be explicitly required to address the risks and adverse impacts of their own purchasing practices,” they said.

Plus, the fact that the draft legislation limits the due diligence obligation to “established business relationships” also risks generating “perverse incentives” for companies to restructure their value chains in order to sidestep their responsibilities.

“Essential value-chain transparency and disclosure requirements are also missing in the proposal,” the letter noted. “We believe that the directive must require companies to map their value chain and business relationships and publish the relevant information.”

The directive shouldn’t affect only the largest companies, either. At present, the measure will apply to EU fashion companies with at least 250 employees and a net worldwide turnover of more than 40 million euros ($42 million), which excludes roughly 99 percent of firms operating in the bloc.

“The European Parliament and EU member states must bring SMEs within the scope of the proposed directive,” the organizations said. Other missing elements, they said, include climate due diligence, protections for non-EU-based workers against retaliation, responsible disengagement when a business relationship ends and the executive board’s responsibility to provide oversight of the due diligence process.

“We are putting forward the above changes in order to ensure that the European Union does not legally mandate a mere tick-box exercise and consolidate a broken system that allows ongoing systematic corporate harm to people, the planet and climate,” they added. “It is now crucial that co-legislators improve the directive in line with these recommendations.”