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WRAP CEO Explains Why There’s No Tech ‘Panacea’ for Supply Chain Compliance

“The world is becoming an exceedingly more complicated place—and those of us who are part of supply chain operations know it was already plenty complicated to begin with.”

That’s according to Avedis Seferian, CEO and president of Worldwide Responsible Accredited Production (WRAP), the world’s largest independent, factory-based social compliance organization. At the Sourcing at Magic show in Las Vegas on Tuesday, Seferian spoke to the mounting regulatory and compliance challenges facing the apparel industry. In conversation with Ilse Metchek, president of the California Fashion Association, the supply chain expert said that while “the pace of change is accelerating,” brands have their work cut out for them when it comes to meeting the new standards being set by governments, NGOs and consumers in the modern age.

Global legislation regarding environmental and social justice is pushing the fashion sector to adopt more sustainable and ethical practices—and to report on its progress, sometimes in the face of major penalties. “This is happening across the world, not simply in a particular geography,” Seferian said.

The Uyghur Forced Labor Prevention Act, which took effect in June 2022, prohibits goods from China’s Xinjiang region from entering the U.S., and the law has already begun to impact brands sourcing apparel from the country. Meanwhile, new regulations are also taking shape on a state level. The New York Fashion Act could require any retailer doing business in the state to disclose environmental and social due diligence policies, and face fines for non-compliance with responsible business practices, while the Fashioning Accountability and Building Real Institutional Change (FABRIC) Act would mandate hourly pay in the U.S. garment industry. California saw the passage of the Garment Worker Protection Act in 2021, outlawing the piece-rate model in Golden State factories and guarding against wage theft.

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January saw Germany jump out ahead of the rest of Europe with the implementation of its mandatory due diligence law. The legislation requires companies of a certain size to identify, prevent and remedy problems related to people and planet across their operations, facing fines amounting to 2 percent of global turnover should they fail to do so.

“We’re seeing this desire on the part of civil society to really impose responsibility and liability—not just accountability—on the industry, and they’ve found that they have a listening ear in the halls of Congress and with state representatives throughout the country,” Seferian said. “This a seminal moment, and a moment that requires industry to step up to educate lawmakers, to educate the space, to educate each other.”

Much of the garment sector’s issues with compliance comes from a lack of visibility into supply chains. “Ninety-nine percent of our industry’s brands do not have a factory, so the alternative is to watch what your contractors are doing,” Metchek said. Brands are responsible for “every infraction” whether they own their production channels or not.

WRAP, which conducts supply chain audits and certifies factories that meet its standards for ethical and sustainable production, has seen an uptick in interest as factories across the globe strive for compliance. It received nearly 3,500 applications in 2022 alone, and as of January, counts 3,300 facilities across 40 countries as certified. Seferian estimated that the average certification process costs factories about $2,500. “There’s definitely been an evolution in the brand-factory relationship with regards to paying audits,” he said. “The model has now settled on the factory paying for it for a very simple reason: because this is really a prerequisite for doing business.”

Seferian cautioned brands not to think their responsibility ends with Tier One suppliers. “These laws are supply chain wide and need to be validated beyond just the first tier,” he said. While many companies have built more intimate relationships with those finished goods suppliers, those “claiming to have good handles on their second tier and beyond are truly deluding themselves,” because “the vast majority are in uncharted territory,” he added.

And while traceability technology and blockchain are gaining steam, he believes in-person audits remain essential. “We are very keenly following these technological platforms,” Seferian said, noting that software can aid organizations in mapping their supply chains, but may not yet have the capabilities to go beyond. “We’re seeing a lot of piloting—a lot of, ‘I want to try this and try that to see if it works,’ but we have not yet heard of a panacea.”

“I don’t think there is going to be a one-size-fits-all answer because this is just too complicated and too fragmented a space,” he added.