UK clothing industry needs watchdog to prevent brands from abusing suppliers
* All opinions expressed in this opinion piece are those of the author and not of the Thomson Reuters Foundation.
Millions of factory workers have been left out of work following canceled orders, reflecting growing problems in the fashion industry
By Charlotte Timson, Managing Director of Traidcraft Exchange
As Covid restrictions are lifted, at least some UK retailers are bouncing back. Fashion sales exploded in March, with Primark posting record sales in the first week of reopening.
Indeed, despite their crocodile tears, many fashion retailers including Primark, Matalan, Sports Direct and Next had already announced profits in the fall of 2020 covering the period of the first lockout.
But this facade of returning to normal should not mask the devastating long-term consequences of the actions of these same retailers last year. As soon as the first lockdown was announced, UK fashion retailers began canceling orders – although the clothes had already been made and in some cases even shipped. They demanded discounts from suppliers and delayed payments by weeks or even months.
The ripple effect of these decisions on the people with the least power and voice – the workers who make our clothes – will last a long time. As a result of these order cancellations, millions of garment workers around the world have been made redundant. Many were not paid for the work they had already done and others did not receive their correct severance pay. This has forced many people into poverty.
But what we saw last year came as no complete surprise. Retailers have abused their position of power over their suppliers for years. Almost a decade and a half ago, Traidcraft Exchange identified some of these issues in “Material Concerns,” a responsible clothing buying guide.
However, the extent and magnitude to which fashion retailers shifted the risks and costs onto their suppliers during the pandemic came as a surprise. Sadly, UK clothing retailers were among the worst offenders. In June last year, a Bangladeshi newspaper pointed out that UK retailers collectively owed their Bangladeshi suppliers US $ 1 billion. US retailers owed half a billion US dollars, with German, Swedish, Dutch, French and Spanish retailers each owing their Bangladeshi suppliers a hundred million dollars. Primark, Mothercare, Debenhams were cited as the most indebted brands. These values give an idea of the magnitude of the amount of money that was withdrawn from the Bangladeshi economy at that time.
Under pressure from activists in the UK and around the world, some retailers eventually pledged to pay their suppliers. But their actions highlighted how their business model allowed them to pass risks and unforeseen costs on to their suppliers. The suppliers we spoke to are too afraid to sue retailers for fear of losing future orders.
The millions of destitute workers following canceled orders add to a growing body of evidence of something deeply wrong in the clothing industry. The Rana Plaza factory collapse in Bangladesh eight years ago that killed more than 1,100 people. The revelations of sweatshop conditions at garment factories in Leicester and India last summer. The use of forced labor among Uyghur Muslims in China. All of these are the consequences of faulty fashion retail business models.
So how can we ensure that in the future, clothing retailers cannot wreak such havoc on their supply chains, including the millions of workers who make our clothing?
There is a precedent for what could happen. The UK has a good track record in tackling the abusive purchasing practices of major food retailers. In 2013, the UK set up an independent watchdog for supermarkets – known as the Groceries Code Adjudicator. In 2014, 79% of UK supermarket food suppliers said they had experienced abusive purchasing practices. As a result of the monitoring, by 2021 that figure was reduced to 29% of suppliers.
In 2016, the supermarket watchdog was able to investigate Tesco’s relationship with its suppliers and force Tesco to review its practices and pay suppliers amounts owed, amounting to millions of pounds.
The UK’s Parliamentary Environmental Audit Committee recently recommended that the government establish a clothing trade arbitrator. It could be done according to the supermarket watchdog model. Secretary of State for Business, Energy and Industrial Strategy Kwasi Kwarteng has confirmed that the government is looking into this issue. Rather than wait for the next tragedy, we hope the government will act quickly to stop the disastrous practices of fashion retailers.