How to make your garment supply chain ethical
Introduction: Progress on the ethical agenda Ethical supply chains and business success are not mutually exclusive. Of course, campaigners have been promoting this message for years, but many large clothing brands would now willingly endorse the statement as well. Advocates of ethical trading may be frustrated by the length of time it has taken for this notion to gain acceptance in the global fashion industry, but they can now point to numerous examples of garment brands that turn a healthy profit without the spectre of dubious practices in their supply chains. Three garment brands appear in the 2014 World s Most Ethical Companies list, compiled by US research institute Ethisphere. The fact that Gap is included for the eighth consecutive year and H&M for the fourth year in succession (Levi Strauss & Co is a first-time honouree) proves that some of the world s largest clothing brands have taken a long-term approach to building ethics into their supply chain activities. The next challenge for the fashion industry is to significantly increase the number of clothing manufacturers among the list s 144 companies. Although progress is undoubtedly being made here, the Rana Plaza tragedy in April 2013 provided a horrifying reminder of the human cost of unethical supply chain management. With 29 brands revealed to have sourced products from the Dhaka factory building, where more than 1,100 people were killed and many others severely injured, the implications of the tragedy were far-reaching. Share 2
No dark rocks to hide under One consequence of Rana Plaza was the intensification of the media spotlight on companies operating global supply chains. Tom Seal, head of research at the Procurement Leaders Network, wrote in the Guardian in August 2013 that there are no dark rocks for corporations to hide under in the age of the internet and social media, and rightly so. All garment brands must now take up the challenge, and follow where the likes of Gap and H&M have led. In the short to medium term, the goal is not to receive plaudits from research groups but to eradicate unethical practices and human rights abuses - including human trafficking and modern day slavery - from all garment supply chains with utter certainty. In Europe, the recent move to mandate corporate social responsibility (CSR) reporting should create another powerful incentive for doing just that. In essence, some 6,000 large companies will soon be required by law to report on the non-financial impacts of their business activities (pending final approval by the European Parliament and European Council). This means publicly disclosing information about their policies on diversity, social and human rights issues, as well as the risks they pose to the environment, including through their supply chains. So how can garment retailers make sure their supply chains are ethically sound? Is it possible for companies to build ethical behaviour into existing supply chain relationships, or should they start from scratch? Read on for our guide to making your supply chain ethical. Share 3
Know your suppliers Thorough auditing is an essential part of building an ethical supply chain. Most retailers will already audit their suppliers on a regular basis, but does their existing process pay sufficient attention to ethical issues? Audits that are primarily conducted on the basis of evaluating the resilience and value of suppliers should be reconfigured to include ethical considerations as well. An ethical supply chain audit will evaluate everything from a supplier s factory conditions and wage policies to their process of sourcing raw materials. You need to be confident that every supplier in your network shares your values. Ask for details of their CSR policy and follow up on anything that could give cause for concern. Recent research from Procurement Leaders revealed that many companies still rely on their suppliers to self-audit. This is a high-risk approach that can leave your business exposed to unwelcome legal and reputational complications. Some suppliers, while ostensibly meeting ethical guidelines in the way they run their own production facilities, may subcontract orders to a third party when workloads increase. In cases like this, a self-auditing policy is unlikely to protect your supply chain from exposure to ethical abuses. When dealing with increasingly complex supply chains, knowing your suppliers inside out is no longer enough to ensure adherence to ethical standards. You also need to gather as much information as possible about your suppliers suppliers. Share 4
Know your company No business can demand the highest ethical standards from its suppliers if it does not enforce them itself. Aim to set an example to every organisation in your supply chain with your CSR programme and associated activities. It s important to go further than simply creating policies on ethical trading and corporate responsibility and then promoting these messages. Make sure the policies are understood at every level of the company and work hard to deliver on these promises. Transparency provides the foundations for building an ethical supply chain. Make details of all the suppliers you work with and the nature of your relationships publicly available. This is how you build trust with both consumers and suppliers. Share 5
Know the risks There are a number of significant risks to allowing unethical practices to go unchecked in your supply chain. Until recently, the most damaging consequence was arguably the reputational impact. Ever since the model of overseas manufacturing began to gather momentum in the 1980s, some of the world s largest brands have endured the catastrophic fallout of supply chain relationships gone wrong. In the 1990s, sportswear giant Nike was besieged by a major scandal stemming from revelations about how its suppliers in Asia mistreated employees at their sweatshops, forcing people to work long hours without breaks. Nike s reputation was badly tarnished (in 1998, co-founder Phil Knight admitted that the famous brand had become synonymous with slave wages, forced overtime and arbitrary abuse ), but the incident also had a direct impact on the company s bottom line. With college students protesting against the company and media coverage fuelling public outrage, Nike saw its earnings fall by nearly 70%. More recently, Apple was forced to confront what some commentators described as its Nike moment over Foxconn, the Chinese supplier responsible for manufacturing the iphone. The scandal grew following a series of suicides at Foxconn plants in 2010, with subsequent reports uncovering a litany of abuses, including the employment of underage interns. As our infographic The Cost of Doing Nothing illustrated, businesses have a lot to lose by turning a blind eye to the potential for unethical activities within their supply chains. Although the short-term cost of a rigorous auditing process may seem high, it is impossible to underestimate the long-term benefits. Share 6
Conclusion: An ethical future Ethical supply chain issues are by no means confined to the garment industry. As the 2013 horsemeat scandal demonstrated, the need for greater transparency exists throughout today s globalised business world. However, clothing retailers now have an opportunity to take the lead on enforcing ethical practices throughout the supply chain. The industry has endured some of the biggest recent scandals in terms of responsible sourcing, but has also developed a highly successful production model that continues to rely heavily on access to cheap labour in developing nations. By showing that ethical sourcing can also make good business sense, garment brands will encourage businesses of all kinds to develop responsible policies that make a real difference. Share 7
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