Wednesday, 11 February 2015
Get Paid To Play Nice
We bang on about supply chain here at the Pier, but with good reason. The global fashion industry is a broad church, taking in worshippers from all sides. Your new shirt could be made from Indian cotton, sewn in Bangladesh, with buttons and fixings coming from China. There are dozens of different processes in a piece of modern clothing, that can mean it travels thousands of miles before it makes the final trip from the shop to your wardrobe.
With that, of course, comes the potential for abuse. It's incredibly difficult for a big-name brand to guarantee that all the steps in the production of a given garment are carried out ethically and responsibly. Inspections, checks and contractual obligations can only go so far, and can be easily abused. It seems an impossible task to have a transparent and accountable supply chain if you're a global player.
That's a situation that one of the biggest names in fashion, Levi Strauss, is trying to change, and they're doing it by using their significant financial clout. Quietly announced last November, they are making an offer to their suppliers that will be pretty hard to resist.
Levi's have brokered a deal with the World Bank that allows them to offer low-cost funding to their suppliers from the International Finance Corporation if they sign up to and promise to abide by the brand's CSR: the sweetly named "Terms Of Engagement". These are some of the most worker-friendly guidelines on the market, using internationally recognised human and labour rights standards, like the Universal Declaration Of Human Rights.
The rates offered by the IFC are some of the most competitive out there, and are highly attractive to players in markets like South Asia, where competition is fierce and funding is hard to find. In early meetings with suppliers in Bangladesh and Pakistan, all Levi's vendors expressed interest in taking up the scheme.
The program has been very cleverly put together. It uses Levi's existing audit program, so no extra training or new processes are required. Vendors can simply sign up and carry on.
But the smart bit comes with the terms of the deal. It's been designed on a sliding scale, that isn't weighted towards a particular benefit--that is, you don't get a preferential deal just for allowing your workers to unionise. The more boxes on the list of Terms Of Engagement you tick, the better your score. More importantly, there are penalties for non-compliance. Meaning that if you comply with the TOE completely and provably, you get bonuses and discounts. In short, it's in a supplier's best financial interests to do the right thing. Levi's call this "the race to the top". Rewarding suppliers for doing the right thing is a surprisingly radical move in fashion, but there's evidence that it could be the lever needed to get solid compliance to a set of labour, human rights and environmental terms that would otherwise have been unthinkable.
Levi's take no prisoners in their CSR record, losing out only to Patagonia in sustainability, and scoring off the chart when it comes to auditing their suppliers. This is good news for those who wonder how accountable Levi's factories will be once they've signed up.
Levi's record in some areas, such as indigenous rights in Cambodia, are less stellar, but this new program shows a company that is willing to admit its mistakes and show that it has learned from them. Are we about to see a situation where factories in the global supply chain compete to see just how ethical they can be? It'll be fascinating to find out!