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Building more resilient garment supply chains

Building more resilient garment supply chains

09-10-2020 | Insight
Garment industry supply chains have been rocked by Covid-19, but corporate commitments to pay living wages remain on top of the agenda. That was the main message from a forum staged to discuss the work being done by Platform Living Wage Financials (PLWF), which forms part of a major engagement project at Robeco.
  • Laura Bosch Ferreté
    Laura
    Bosch Ferreté
    Engagement specialist
  • Peter van der Werf
    Peter
    van der Werf
    Engagement Specialist

Speed read

  • Pandemic has led to millions of workers’ livelihoods being at stake 
  • Issues addressed at Platform Living Wage Financials webinar 
  • Four key takeaways on how to accelerate payment of living wages 

The platform is an alliance of 15 mostly Dutch financial institutions with EUR 2.6 trillion in assets under management that aims to improve conditions in the clothing manufacturing sector, which is heavily reliant on low-paid workers.  

Its engagement efforts are focused on the 29 companies in the garment industry and 16 in the food, agricultural and retail sectors. The platform uses a methodology upgraded this year to rate how these companies are succeeding in paying living wages across their supply chains.  

At the core of the problem in the garment sector is that clothing produced for many well-known and often high-priced high street brands are produced by low-income workers, sometimes in dangerous ‘sweat shop’ factories. 

This issue has become more pressing as the coronavirus pandemic has led to millions of workers being laid off, furloughed, or simply not paid at all, the 2020 PLWF forum heard. The event on 6 October was staged as a webinar due to Covid-19 restrictions, with contributions from representatives of brands, trade unions and international organizations.  

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Issues to be addressed

Delegates said the biggest problem faced this year was Covid-19 had disrupted supply chains that were already fragile. Issues to be addressed include: 

  • The need to build more resilient supply chains in the post-Covid-19 world 
  • Build robust long-term relationships between brands and manufacturers 
  • Commitments to assist hard-pressed factories so they can pay workers 
  • Greater collaboration with unions to achieve collective bargaining 

“The fashion industry has been severely affected by the Covid-19 pandemic in 2020, impacting not only garment brands but also their supply chains,” says Laura Bosch Ferreté, the Robeco engagement specialist representing Robeco on the platform. 

“Workers in low-cost manufacturing countries have been hit hardest given the lack of robust social protection systems in these markets. They are more exposed to sudden termination, lack of severance pay, inadequate social security and health insurance.”   

“This epidemic has shifted investor focus on how companies treat their employees, customers and suppliers. If there ever was a time for working towards a living wage, it is now.” 

Bosch Ferreté says the principal challenge is how to close the gap between commitments that are being put forward by brands, and the actual actions taking place on the ground. Despite widespread acceptance of the need to raise living wages, none of the companies assessed had sufficient processes in place to guarantee the full payment of living wages across its own operations and supply chain. This is where engagement activities will focus in the coming years. 

Four takeaways for the garment sector

She says there were four main takeaways from discussions at the webinar regarding this core objective. “The first is to improve data availability so that companies are better able to understand what are the wage levels being paid by suppliers, and how that compares to living wage benchmarks,” she says.  

“The second is the topic of purchasing practices. It is important that brands commit to more sustainable practices by building long-term supplier relationship, which will enable them to better account for the labor cost in their procurement work.” 

“Thirdly, it is important to make room for social dialogue to happen and to ensure freedom of association and use collective bargaining agreements as a tool to really drive wage improvement. This goes back to the importance of industry-wide collaborations with not only brands, manufacturers and workers, but also with governments and other stakeholders who can collectively contribute to accelerate the systemic change that is needed in the industry.” 

“The fourth takeaway is the need to bring the rest of the garments industry on board. Legislative changes on mandatory human rights due diligence can really contribute to building a more resilient supply chain at the end of the day. We see some promising signs with lawmakers in the Netherlands who are preparing to bring such a proposal before the Dutch parliament.” 

Expanding to cover the food sector

As the PLWF last year expanded its focus to include the food, agricultural and retail sectors, a second webinar was held on 7 October to discuss progress in those industries. They are at an earlier stage compared to the garments sector, as few companies have made a policy commitment to addressing living wages, the forum heard. 

“Most companies are yet to develop a clear understanding of the living conditions of workers and farmers – some of which are well below the poverty line – in their most vulnerable supply chains, despite increased transparency among NGOs and academics,” says Bosch Ferreté. “It is also unclear if companies provide remediation of wage issues to all workers including in their supply chains.” 

However, there has been a silver lining, as Covid-19 has had a surprising positive side effect for many retail employees who became key workers across the globe. During the pandemic, many employees received widespread pay premiums, hazard pay, one-off bonuses and even paid sick leave” says Bosch Ferreté.  

“Although employees played a prominent role in systemically important positions, this has not been translated into the necessary corporate commitments to continue to pay employees a living wage once companies wind down these additional payments.” 

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