Due Diligence for Responsible Supply Chains in the Garment and Footwear Sector
Last month, Sedex product manager, Tom Sewell joined the OECD Forum on Due diligence in the Garment and Footwear Sector to discuss key issues and risks related to due diligence in global garment and footwear supply chains.
Due diligence is the processes through which enterprises can identify, prevent, mitigate and account for how they address their actual and potential adverse impacts.
The garment and footwear sector employs approximately 75 million people globally. Enterprises working in these sectors have the potential to generate growth, employment and skill development. However, human rights abuses, labour exploitation and environmental degradation are a common thread throughout the sector’s supply chain. It is therefore incredibly important to take a due diligence approach when operating in the sector.
Angel Gurria, the Secretary General of the OECD, emphasised that the industry urgently needs to progress three key issues to uphold human rights:
- Purchasing practices
- Exploitation of foreign migrant workers
- Environmental/climate impacts.
We have put together some key learnings from the forum for organisations applying due diligence in their supply chain.
Challenges in achieving responsible global supply chains
- There can be a tendency for brands to pick and choose a specific human right standard rather than applying the full range of international labour standards. It is an important duty for companies to protect people against human rights abuses and uphold health, living standards and equality.
- During a poll, Forum participants identified regulation as the biggest gap between uptake and implementation of due diligence.
- Poor purchasing practices by buyers and retailers can result in up to 22% lower wages for workers. Aggressive price negotiation, inaccurate forecasting, late orders, power imbalance between buyer/supplier, short lead times and last-minute changes put suppliers under intense pressure and lead directly to poor working conditions and low pay for workers.
- Garment and footwear production generate between 5 – 10% of global pollution impacts and accounts for an estimated 8% of global climate change impacts.
- Investors are moving beyond due diligence only considering the environment, social and governance (ESG) based on the performance of the potential investee(s).
Recommendations to uphold due diligence
- Brands should emphasise the need to address systemic issues collectively rather than working on small individual initiatives. For example, WWF recommended brands should identify key sourcing region’s issues and join collaborative efforts to address governance matters. The Forum emphasised the importance freedom of association’ unions can have on better wages and working conditions. Freedom of association is the right of workers to join and form trade unions and bargain collectively. Collaborating with workers’ representatives helps to provide broader views and can help increase broader morale and productivity. Freedom of association and collective bargaining is a fundamental human right, even though many countries still restrict workers from forming unions.
- To uphold good purchasing practices, purchasers need to constantly consider the potential impact of their decisions on suppliers. Purchasing practices are where companies can have the greatest impact on upholding human rights and responsible pricing is associated with nearly 10% higher wages. Companies can implement responsible purchasing practices by ensuring production timelines and demands are realistic and building positive relationships with suppliers.
- Carrying out audits and engaging with workers in supply chains can help to identify and address migrant labour exploitation. Sedex offers our ethical and social audit methodology SMETA, and the Worker Wellbeing Assessment to identify and share how workers feel about their job and provides an opportunity to share perspectives not captured in audits.
- Addressing living wage issues should be at industry level as it is an issue that cannot be achieved by retailers and brands alone.
- Businesses should establish pro-active approaches to anti-bribery and corruption. For example, companies should seek to understand how third-party auditors combat bribery and corruption in their own operations.
- The OECD Garment Guidance recommends enterprises to create supplier contracts with the obligation to support supply chain due diligence. Contracts should focus on the risks in the upstream production e.g. enterprises that relies on the extraction of raw materials e.g. cotton production.