The push for supply chain transparency
More businesses than ever are opening up their behind-the-scenes production processes to outside scrutiny, but can a global supply chain ever be truly knowable?
The distance between a company’s base and where their products are made has never been greater. The tides of globalisation and shareholder primacy have long since pushed Western businesses to shift their production to parts of South Asia where labour is cheaper. Yet this has led to supply chains which are as opaque as they are remote, in countries where the rights of workers and environmental protections are less stringently enshrined by law.
Following the 2013 Rana Plaza garment factory collapse in Dhaka, Bangladesh, which killed 1,100 people, an increasing number of activists, NGOs and consumers have been calling for businesses to make their supply chains more transparent, to not be seen as profiting from a workplace that would never be legally or morally acceptable back home.
The rush for radical transparency
When Patagonia published The Footprint Chronicles in 2008, a website that allowed people to dig into the supply chains of its products, it was typical outlier behaviour from the ethically minded outerwear company. Now Nike, adidas, IKEA and Esprit are just some of the megabrands that publish detailed supply chain reports.
By doing so, a brand can enhance its perceived trustworthiness and potentially reduce the risk of incidents which cause reputational fallout.
Julian Lings, Senior Sustainability Manager at Icebreaker, has noticed the benefits to internal morale since they published their first transparency report in 2017. Earlier this year at ISPO, a tradeshow for outdoor sports, he shared his vision for “radical transparency” at the clothing brand. “It’s been both a challenge and source of inspiration for the whole company,” he said. “It’s not been perfect, but it’s a learning that has brought value and confidence internally about our commitment to do better.”
The power of external auditing
The problem with self-reporting is audits can lack a consistent format that’s easily digestible for consumers. And they’re harder to authenticate than one done by an independent agency.
“Lots of companies do self-reporting and there can be a lot of truth in those claims in terms of sustainability and working hard to improve labour standards in their supply chain,” says Annabel Meurs, who works on brand liaison at Fair Wear. “But that claim becomes a hundred times more credible if you have it independently verified by a third party.”
Fair Wear is a multi-stakeholder initiative based in Amsterdam which, for the last 20 years, has produced annual accountability audits. Their client list includes Jack Wolfskin, Schoffel, Filippa K and Acne Studios, and the reports are compiled using long-term local partnerships in the field.
Meurs thinks it’s hard for a brand to really get into the weeds of their supply chain operations without having expertise on the ground. “You need the local knowledge of the labour laws and to be able to interview workers for an audit. You’ll never get reliable answers if a brand asks their supplier how can we improve our own practices? No factory manager is ever going to give you an answer to that,” she says.
Along with interviewing employees and observing the factory’s protocol over an extended period, Fair Wear operates a local helpline where workers can call in anonymously with complaints.
“Complaint sounds negative but, in our experience, we’ve seen so many successes,” says Meurs. “An individual problem for a worker is often easily solved if the brand gets involved. In some cases, it’s as easy as a phone call, other complaints are much more complex.”
She says this ties into one of the biggest wins you get from being transparent about your production location, in that it enables collective bargaining for better working conditions. “If you have three or four Fair Wear brands in the same factory, your leverage is going to increase and so is your impact,” says Meurs. “If combined and you’re buying, say, 60 per cent of the factory’s capacity, then the owner is going to listen.”
Fair Wear publishes the details of all conflicts and resolutions on its website to maximise accountability and help guide others in the future. And the organisation provides extra help for clients during crises, such as how to work fairly with suppliers during the coronavirus pandemic and the recent troubles in Myanmar.
Is a genuinely transparent supply chain possible?
Growing up in Dhaka, Professor Muhammad Azizul Islam was surrounded by densely packed garment factories supplying far-away companies. Seeing tired workers leaving buildings late at night inspired his future research career and he’s now an expert in supply chain transparency at the University of Aberdeen.
Bangladesh is the second largest exporter of garments after China. Islam is sceptical of the potential of social audits to bring meaningful change to the lives of garment workers, especially when audits are done internally. “Workers are scared, they are weak actors,” he says.
After the Rana Plaza collapse, he looked into the social accountability systems of the factories on the site. “Companies, including Walmart, sourcing from those factories had a social audit mechanism in place, but it didn’t protect the workers; they were killed because the owner of the factory forced them to stay and work,” says Islam.
In a research paper from 2018, published in Accounting and Business Research, Professor Islam describes social audits as “symbolic and ritual strategies that help maintain existing inequalities rather than… improving corporate responsibility or… the welfare [of workers].” He thinks companies use social audits to legitimise their operation and to “feel they are doing the right things”.
Over the last decade he doesn’t believe workers’ lives have changed dramatically despite more and more companies doing audits. “Multinationals are getting richer and richer, and suppliers are getting richer,” he says. “10 years ago, they had one house and one car, now they have three houses, three cars, a driver… they become MPs, they’re rich and more powerful in society. But workers are still vulnerable; their jobs are not secure.””
A political problem
Professor Islam wonders if surveillance, despite its negative connotations, might be helpful in terms of keeping an eye on the suppliers’ behaviour and monitoring the fairness of working hours and conditions, rather than to spy on the workers.
But most of all he believes political reform is necessary for things to genuinely improve. “Governments in the West play a significant role in creating change. If the UK government wants there to be no corruption in Bangladesh, they can threaten to pull out of the whole supply chain. Trade relations should be tied up with other human rights issues,” he says.
“You need to create a democratic environment. Every change that happens in the UK is because of democracy and the way Oxfam, Greenpeace, No Sweat and other social enterprises raise their voices and speak out. We need these alternative, critical voices that aren’t funded by corporations to hold multinationals accountable.”
Ther professor is supportive of the modern slavery acts in the UK, Australia and California, but would like them to go further. “I see a label with Bangladesh, but that’s not sufficient; I need to know the factory. If governments asked companies to disclose this, it would be a big change,” he says.
Several brands, including Jack Wolfskin and Nudie Jeans in Sweden, are now using labels with QR codes so their products can be traced directly to where they’ve been made and by whom. Meurs from Fair Wear believes measures such as this will become law. “It’s an irreversible trend,” she says, and the brands that have already begun to make their supply chains accountable will be at a clear advantage.
What about those who haven’t? According to Jan Lorch, chief sustainability officer at outdoor brand Vaude, brands should “do it before you have to”. He says supply chain transparency will be a significant part of the European Union’s Green New Deal. “Regulatory measurements with a burden to comply will become even more important in the future,” he says. “The sooner we adapt to global development, which helps and does not punish, the better.”