Date: Wednesday, February 8, 2023
Source: Sourcing Journal
Three years after Covid-19 upended the planet, its shockwaves are reverberating throughout the global supply chain. The apparel industry failed the stress test in the most spectacular fashion, with everything, most of all social protection systems, proving inadequate. As millions of garment workers went without pay due to shuttered factories, many were pushed to the brink of starvation and destitution.
But even now, there’s little to suggest that the sector is better equipped for another crisis of similar proportions, a broad swath of experts recently told Cornell University’s Global Labor Institute. Many of the buyers, suppliers, workers and NGOs it interviewed for its latest report, which was underwritten by the International Labour Organization, said that the industry is continuing down a “repeat” or business-as-usual path, albeit with a growing divide between the largest or most reputation-sensitive actors and everyone else. A “regain” scenario based on structural and sourcing changes, such as increased nearshoring and automation and improved commercial terms, is appearing less likely with each passing day.
What this spells for the broader fashion supply chain, according to Jason Judd, the organization’s executive director and co-author of the report, is less of the “V”-shaped recovery that aggregate trade data suggests and more of an uneven “K”-shaped one that brings a “quick return to the norm” for large business and a “divergent, downward trajectory” for other segments. Workers and small, low-cost manufacturers that lost the most in the pandemic to date, in other words, have the most to lose in a future shakeup, despite efforts by the likes of the #PayYourWorkers campaign, the Sustainable Terms of Trade Initiative and, more widely, the European Union’s mandatory due diligence legislation, to shift the industry closer to what Judd dubs the “renegotiate” path, where structural, sourcing and governance improvements become mutually reinforcing instead of being relegated to individual silos.
Indeed, while everyone agreed that there was a need for stronger social protections, no one wanted to pay for them, Judd said. Neither can anyone agree on who should ultimately be responsible for the bill, whether it’s brands, national governments, international development partners or the World Bank. North American and European buyers balk at labor campaigners who “continue to look at the private sector as…the primary source of social protection.” Lawmakers in garment-producing nations, on the other hand, are loathe to introduce policies that could raise production costs and, in so doing, drive businesses to cheaper shores. Any possibility of a global severance fund is “not resolved either,” he added.
Costs are a fundamental tension of the garment industry, said Sabina Lawreniuk, a research fellow at the University of Nottingham’s School of Geography. She recently co-authored a paper on how Covid-19, far from helping the garment industry build back better, has accelerated a race to the bottom.
“Brands are always looking for kind of the cheapest places, the cheapest cost to manufacture,” she said. “So essentially, different countries are always competing against each other to offer those cheaper costs, which means that countries are always racing to lower minimum wages, to offer kind of fewer protections to encourage brands to come and manufacture there.”
Lawreniuk’s research followed 200 female garment workers in Cambodia over a period of 24 months from January 2020. As canceled orders from brands triggered a knock-down effect, the average worker shed 25 percent of her expected income while struggling to repay household loans worth an average of $4,731. Even an emergency wage subsidy scheme that provided suspended workers with $70 per month failed to meet the basic needs of workers and their families. To cope with income reductions, workers cut basic food expenditure by an average of 38 percent, resulting in food insecurity, with 20 percent of households experiencing incidences of hunger.
Coupled with the government “reneging” on commitments to elevate the minimum wage and the “horrible trend” of cracking down further on trade unions, Lawreniuk and her colleagues could only conclude that the industry has “built forward worse,” with the behavior of global brands incentivizing the rollback of any marginal gains from before the crisis. With the cost-of-living crisis in the West causing a decrease in orders, there’s a sense that few lessons have been learned despite the “lofty commitments,” she said.
Covid-19, Lawreniuk said, showed that “this whole system of corporate social responsibility, this idea that we can trust brands to kind of protect workers” has fundamentally failed. In its place, regulation must step up.
“We can’t outsource responsibility for manufacturing to countries like Cambodia,” she said. “What we saw in Cambodia is that every brand, from the high street to luxury, was equally culpable. We need to take a long, hard look at the responsibility of brands in places like the U.K.”
Whether regulation could create more consensus was another question the Global Labor Institute sought to answer, particularly in light of tightening rules in Europe and elsewhere. So far metrics such as adequate social protections don’t show up in ESG ratings; regulators could make this a requirement for qualifying as a “sustainable business.”
“It’s possible that over time, along with lots of other things, the quality of the social protection system shows up on the list of things companies need to take into real consideration when they make sourcing choices,” Judd said. “And that could mean pressure on national governments and employers to make the necessary investments in financial and political systems because they might otherwise be punished by firms that say they can’t take the risk.”
What’s important is that the industry does not wait for another catastrophe before it deals with these difficult issues. You can’t build “on the fly,” he noted.
“This new round of conversations we’re having is where do you focus?” Judd said. “And how do you capture what’s left of the energy and the anxiety of the Covid crisis to drive the creation of these systems that have been put off now for decades?”
With the threat of a global recession looming, Judd said that he hasn’t observed a déjà vu so much as the same “familiar slow burn” as “everything’s getting a little softer” and orders are falling. He’s concerned about another “long burn,” too: climate change. Its impact may not show up as a Covid-19-like spike, but it’ll be felt on a “massive scale.”
“From a worker perspective, it’s reasonable to expect that things will get worse, not better,” Judd said. “And that governments, industry—meaning manufacturers, the employers, brands—and their global allies, meaning the World Bank, the ILO, we‘re going to have to seriously accelerate the creation of these social protection programs. Otherwise, lots of workers will go without and that will feel familiar.”