Corporate responsibility: Fashion industry tackles exploitation six years after Rana Plaza tragedy

Lucy Trevelyan

Six years after the collapse of the Rana Plaza building caused the tragic death of 1,138 workers in Bangladesh, the release of the 2019 Fashion Transparency Index indicates progress is being made in the industry, though there remains considerable work to be done.

The report – published by not-for-profit organisation Fashion Revolution in April 2019 – ranks 200 of the biggest global fashion brands and retailers according to how much information they disclose about their suppliers, supply chain policies and practices, as well as social and environmental impact. The aim is to increase transparency and hold companies to account for the human and environmental impacts of their business practices.

2019 marked the first year any brand has scored more than 60 per cent, with Adidas, Reebok, Patagonia, Esprit and H&M all scoring above this threshold. Well-known brands in the 51-60% range included Asos, Marks & Spencer and Gap.

However, at the other end of the spectrum, there were still a large number of well-known fashion brands that disclose either nothing or very little publicly about their human rights and environmental policies, practices and impacts, according to the report. ‘While the numbers have improved, almost a third of companies scored in the zero to ten per cent range,’ says Akil Hirani, Co-Chair of the IBA Asia Pacific Regional Forum and Managing Partner of Majmudar & Partners, Mumbai. ‘More importantly, companies on average have managed extremely low scores in certain indicative metrics.’

For instance, Hirani says, only a quarter of companies appear to have disclosed their policies for management of pre-consumer waste – particularly disappointing given the worldwide consensus on the need to manage climate change. ‘Such results point to the fact that either most companies are unwilling to adopt policies on issues where public discourse exists or that public demand for certain practices does not translate into the material choices they make when they purchase products,’ says Hirani. ‘In either scenario, it seems that ethical management of supply chains and improvement of working conditions remains a distant dream in most parts of the world.’

Both supplier and consumer states need to work hand-in-hand if we are to see any substantive increase in transparency

Akil Hirani
Co-Chair, IBA Asia Pacific Regional Forum; Managing Partner, Majmudar & Partners, Mumbai

Emily Dorotheou, an associate at Mishcon de Reya, says that traceability remains the biggest issue, which reflects the vast and complex supply chains of global brands. Currently, only five per cent of brands disclose details of their raw material manufacturers. ‘There’s limited data for the purchasing practices of brands – a particularly significant issue for suppliers – how brands prioritise their human and environmental initiatives, and the outcomes of those initiatives,’ says Dorotheou.

Rising public demand for transparency in supply chains helps improve the treatment of workers, says Hirani. However, this is negated by the fact that equity markets reward companies with stellar numbers when they keep production costs low and sell at high margins. ‘The countries that need to improve the most have economies premised on the availability of cheap labour, such as the emerging Asian and African countries,’ says Hirani.

To see marked improvement, there needs to be a change in the thinking of regulators and market participants. For example, companies could be rewarded for ensuring humane worker conditions and pay parity. ‘Measures incentivising companies by offering benefits – such as tax or compliance exemptions – are likely to be the most effective way to increase compliance,’ says Hirani.

Across the world, some progress is evident. California has implemented transparency requirements in respect of corporate supply chains and other US states, as well as Canada, are considering laws requiring companies to disclose policies implemented within supply chains.

India updated its law prohibiting child labour in industry in 2016 – though activists have expressed concern about loopholes in the law. In the EU, France has a ‘plan of vigilance’ law, which obliges qualifying companies to identify and prevent human rights and environmental issues. The Dutch Senate meanwhile passed the Child Labour Due Diligence Act earlier in 2019, which requires companies selling products on the Dutch market to show they’re addressing child labour in their global supply chains.

Other examples of efforts to eradicate slavery, explains Dorotheou, include Brazil’s public ‘dirty list’ of companies found to be using forced and child labour, and China's introduction of public ratings for Chinese enterprises based on their compliance with labour laws.

However, country-specific laws to tackle supply chain exploitation typically lack any real sanctions for companies failing to tackle supply chain issues, and require updating. ‘There are also cross-territory differences,’ Dorotheou explains. ‘For example, the definition of “child labour” differs across countries, and countries impose different transparency and reporting requirements. A harmonised global approach would allow for meaningful comparisons and prevent regulatory arbitrage.’

Fashion brands also appear to be upping the ante, with Alyx for example recently announcing plans to use technology to allow customers reportedly full insight into the brand’s supply chains, tracking items from creation to point of sale. While improving transparency is no doubt the first step, says Hirani, this will not automatically alleviate exploitation. ‘Governments and regulators will have to take the initiative to mandate transparency and disclosures,’ he says. ‘Both supplier and consumer states need to work hand-in-hand if we are to see any substantive increase in transparency.’

A legal obligation on brands to publicly disclose their supplier lists and the outcomes of any supplier assessment and remediation processes would also assist in increasing transparency, says Dorotheou. Greater controls and legal prohibitions on unauthorised subcontracting would help to prevent workers effectively becoming invisible within supply chains, she says.

Dorotheou outlines what brands can do to improve working practices in their supply chains. For example, brands could require that suppliers’ factory workers are unionised and given obligatory information on hiring, as well as providing a mechanism for workers to report complaints or abuses. Brands could perform spot checks on their suppliers’ factories at least once per year, and improve their order estimates, as well as avoid making last-minute design changes or setting unrealistic deadlines and low prices, ‘all of which make working conditions worse and encourage unauthorised subcontracting.’