Improved disclosure in fashion supply chain: Baptist World Aid Australia

Fashion retailers around the world continue to improve their disclosure and management of human rights risks in their supply chain, but “transparency remains a challenge in the industry,” according to Baptist World Aid Australia.

Baptist World Aid Australia published The 2018 Ethical Fashion Report: The Truth Behind the Barcode, the fifth edition of the report. In the report, the report grades 114 companies from A to F, based on the “strength of their systems to mitigate against the risks of forced labour, child labour and exploitation in their supply chains.”

“One of the big shifts since 2013 has been the increased willingness of companies to be held accountable,” said Gershon Nimbalker, advocacy manager at Baptist World Aid Australia. “This step towards transparency is commendable. The increase in the number of companies that are now publishing their full supplier list is strong. In 2013, it was 16% of companies. Five years on, it’s more than doubled. There are also more brands included – this year you have Jeans West, ASOS, and Gorman. That’s all great, but of course, on some of the most important measures where we want to see improvement, there’s still so much more work to be done.”

One of the areas of concern for Baptist World Aid Australia is the issue of a living wage, Nimbalker said.

“It is disappointing to see that living wages remain such a difficult issue,” he said. “Only 5% of companies can demonstrate they’re paying a living wage to workers at the final stage of the supply chain. Given how significant a concern this is for workers, we don’t think that progress is happening fast enough.”

“Payment of a living wage could transform the lives of millions by allowing people to lift themselves out of poverty; and, at the same time, drive economic growth within communities and nations,” the report noted. “Living wages also mean that parents earn enough to send their children to school, rather than to factories. This would mean that, where such wages are paid, the likelihood of other forms of exploitation, such as forced labour and child labour, fall dramatically.”

The report found that of the companies participating in the fashion report, 34% have adopted a methodology to calculate a living wage, but only 17% of companies could demonstrate that workers, in any part of their final stage of the supply chain were receiving a living wage.

Managing human rights risks in the supply chain is important to the long term financial sustainability of a company, Nimbalker said.

“When I talk to colleagues at work in the investment area, they say that there’s a strong correlation between the company’s supply chain and their long term performance, financially,” he said. “Living wages is increasingly an issue that what workers have as a number one issue, and it will start shaping the expectations of the customers. The brands that are able to demonstrate the long-term sustainability are the ones that are responding to the trends at the time.  If they don’t, these issues start becoming an area of competitive disadvantage for them.”

The percentage of companies publishing their full direct supplier list has increased from 26% in 2017 to 34% in 2018, and the median grade of companies is a C+. Eighteen companies received A-range grades, while 11 companies received F grades.

The report assessed companies on their gender policies and strategies, noting that only 22% “had both a policy and a strategy to address gender inequality and discrimination in their supply chain.”
The report noted that tracing raw materials remains a significant challenge, “with just 7% of companies knowing where all their raw materials, such as cotton, are coming from.”

In the five years since the report has been conducted, the scope has increased from 41 companies to 114 companies, and 128 brands to 407 brands. In this year’s report, 77% of companies have responded to the research. Traceability is going further in the supply chain – in 2013, only 49% of companies were working to trace where fabrics came from, which increased to 78% by 2018, and companies working to trace where raw materials came from increased from 17% in 20143 to 42% in 2018.

Additionally, “the percentage of companies tracing the presence of democratically elected unions and collective bargaining agreements in their final stage factories has had significant improvement since 2013, increasing from 24% in 2013 to 44% in 2018,” the report noted.

For the first time, the report also included preliminary data on the global fashion industry’s environmental performance.

Gershon Nimbalker discussed human rights in the supply chain at a 2016 panel moderated by The Sustainability Report: