MarketLine Blog

Good business: can clothing supply chains be managed ethically?

In April 2013, the Rana Plaza building in Bangladesh collapsed with the loss of 1,129 lives, mainly of apparel manufacturing workers. The proximate cause was that four extra floors had been built without a permit, and that a building designed for shops and offices was being used as a factory. But the collapse was an extreme example of the poor conditions suffered by all too many garment workers in low-wage countries.

The cutting and sewing of clothes is labor intensive and difficult to automate, so wages loom large in the costs of apparel manufacturing. Retailers who need to find the cheapest clothing to stock their stores will therefore tend to source it from low-wage economies. In fact, when economic growth in an apparel manufacturing country starts to increase the prosperity of factory workers, this particular activity tends to wind down there, while expanding into different countries where payroll costs are still low.

However, as manufacturers in these countries have to compete intensely on price and delivery times in order to win orders from the developed-economy retailers, their employees are frequently treated poorly. Working hours can be long and exhausting, incomes far below a genuine living wage, conditions in the factories dangerous to health and life. Poor and non-unionized workers are in a weak position compared to their managers, and reported abuses range from failure to pay wages to physical and sexual assault.

Not all factories are like this, but the issues are prevalent enough to be a problem for retailers. How can they assure themselves, and their customers, that the clothes in their stores are produced in an ethical way, without exploitation of workers?

The first step is for the retailer to commit to an ethical supply chain by adopting a code of conduct that its own employees and its suppliers must abide by. It must then disentangle the often complex network of suppliers involved: not only those it deals with directly, but also the sub-contractors that the direct suppliers outsource some of the work to, and then “upstream” suppliers, such as the cotton producers. Inspections of the factories are needed to ensure that the code of conduct is being, done in such as way that it is hard to fake compliance (for example, unannounced visits). It might be important to fund improvements, such as training the suppliers in safe working practices.

Clearly, many clothing retailers are taking this issue seriously. But at present, there is a lot of variation across the industry in the actual achievment of ethical supply chains. Without real commitment from those retailers who are dragging their feet, the lives of all too many apparel workers will remain grim.

Further reading

Ethical supply chain management: How retailers can ensure products are ethically sourced (MarketLine Case Studies)

Global Apparel Retail (MarketLine Industry profile)

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