APPAREL

Themes Key Findings

2018 Apparel & Footwear

The 43 Apparel and Footwear companies were assessed across the benchmark's seven themes, which were developed to capture the key areas where companies need to take action to eradicate forced labor from their supply chains: commitment and governance; traceability and risk assessment; purchasing practices; recruitment; worker voice; monitoring; and remedy. There are a total of 23 indicators across the seven themes. Each theme is weighted equally and determines the company's overall benchmark score on a scale from 0 to 100.

37

Overall Score 2018 Apparel & Footwear
42 Theme Score

Summary of Results

Purchasing practices is among the higher-scoring themes of the benchmark. However, less than half of the companies disclose how they are implementing responsible purchasing practices and sourcing raw materials responsibly (i.e., mitigating the risks of forced labor and human trafficking at the raw materials level), and less than half have a policy that requires standards to be cascaded beyond the first tier of their supply chains.

Purchasing Practices

Twenty out of the 43 companies disclose the steps they are taking toward the responsible sourcing of raw materials. Responsible raw material sourcing may be undertaken by engaging with initiatives that conduct due diligence at the raw material level, engaging with farmers at the raw material level, or by sourcing raw materials through certifications which include forced labor criteria. Eleven companies disclose that they source cotton through the Better Cotton Initiative (BCI), a certification which requires farms to adhere to a set of standards that includes the promotion of decent work according to the ILO core conventions. Some of these companies disclose the percentage of cotton sourced through this initiative, such as H&M, which reports that, in 2017, it sourced 47% of its cotton through BCI. Thirteen retail brands and two luxury brands state that they have banned cotton sourcing from Uzbekistan, either independently or through signing the Responsible Sourcing Network's Pledge.53 A few companies make reference to responsible sourcing of other raw materials such as leather and rubber. Adidas discloses that it requires its leather suppliers in Brazil to ensure that cattle farms used for its leather meet the requirements of the National Pact on the Eradication of Slave Labor. Additionally, it states it will suspend any suppliers listed on the Brazilian government's "dirty list," which catalogs companies found to be using forced labor.

Less than half of the companies (21 out of 43) disclose some information on responsible purchasing practices for the first tier of their supply chains. Ten of these companies provide detail on their approach to responsible purchasing practices and how it is implemented. Nike discloses that it engages with Better Buying, an initiative that works with suppliers to examine how the purchasing practices of buyers may impact their financial, social, and environmental sustainability. The company invited its first-tier suppliers to take part in Better Buying's survey on buyers' purchasing practices. Primark discloses that it trains its buyers on responsible purchasing practices and how their purchasing decisions can have commercial and human rights impact. Primark is also a member of the standard-setting Prompt Payment Code, which requires signatories to pay their suppliers on time and discloses that it pays all suppliers within 30 days.

Notably, 12 companies disclose details on how they reward their suppliers' good labor practices. While this number is low, it is significantly higher than companies benchmarked in the ICT and food and beverage sectors. Several companies state that they use a rating system that evaluates suppliers on their compliance with their standards, including those on forced labor. They disclose that this analysis is used in their purchasing decisions. For example, H&M states that it rewards suppliers who perform well against its standards with more orders, training opportunities, and longterm contracts. Gap reports using assessments to identify or select preferred suppliers that receive preferential treatment and consistent orders over two to three years. Inditex discloses that suppliers with the highest ratings on social audits account for 95% of its purchasing in 2016, showing that its purchasing practices directly correlate to suppliers with the highest degree of compliance with its standards. It states that its buyers use supplier audit ratings when deciding where to place orders.

Supplier Selection

More than half of the companies (27 out of 43) report that they assess potential suppliers for risks of forced labor before entering into a contract with them. However, only 11 companies provide detail on this process or report on the outcomes of such audits. For example, Gildan discloses that, in 2017, it assessed 23 potential suppliers, of which 14 were unable to demonstrate compliance with the company's standards and were therefore excluded from the selection process. As part of its assessment process, it discloses that it interviews workers to detect any indicators of forced labor or underage employees.

Twenty-nine out of 43 companies disclose a policy prohibiting unauthorized subcontracting in their supply chains. Twelve companies give detail on how they enforce this policy. Since this practice is commonplace in the apparel and footwear sector, it is disappointing that so few companies disclose details on how they implement this policy and prevent unauthorized subcontracting. Inditex's supply chain policy requires suppliers to declare all facilities and processes used to make each garment. To verify that production occurred onsite, the company conducts traceability audits, assessing the information provided by the supplier, comparing the audit to their production capacity and the time it took to complete the order. The company reports that it blacklisted nine suppliers for failing to comply with its requirements, demonstrating that it implements this policy to address unauthorized subcontracting.

Integration into Contracts and Cascading of Standards

The number of companies disclosing how they enforce their supply chain standards on forced labor is low. Half of the companies (23 out of 43) state that they integrate their supply chain standards on forced labor into contracts. However, only four companies (Gap, Lululemon, Primark, and PVH) disclose the language used in such contracts. Nineteen companies disclose a supply chain standard that requires their first-tier suppliers to cascade standards to lower-tier suppliers. An additional ten companies state that they require, or that they encourage, their suppliers to cascade standards, but do not disclose the means by which they do so. Lululemon's supplier agreements require that its first- and second-tier suppliers ensure that their own suppliers implement standards aligned with its supply chain standard. Apart from conducting on-site assessments on second-tier suppliers, the company monitors the compliance of high-risk subcontractors through audits.

Purchasing Practices

The company is taking steps toward responsible raw materials sourcing. It is adopting responsible purchasing practices in the first tier of its supply chains, and provides procurement incentives to first-tier suppliers to encourage or reward good labor practices.

Purchasing practices and pricing may both positively impact labor standards in the company's supply chains, and increase risks of forced labor and human trafficking. The company: (1) is taking steps towards responsible raw materials sourcing; (2) is adopting responsible purchasing practices in the first tier of its supply chains; and (3) provides procurement incentives to first-tier suppliers to encourage or reward good labor practices (such as price premiums, increased orders, and longer-term contracts).

Low: 0
High: 100
36

Supplier Selection

The company assesses risks of forced labor at potential suppliers prior to entering into any contracts with them.

The company: (1) assesses risks of forced labor at potential suppliers prior to entering into any contracts with them.

Low: 0
High: 100
46

Integration into Supplier Contracts

The company integrates supply chain standards addressing forced labor and human trafficking into supplier contracts.

The company: (1) integrates supply chain standards addressing forced labor and human trafficking into supplier contracts.

Low: 0
High: 100
31

Cascading Standards through the Supply Chain

The company extends its supply chain standards beyond its first tier by requiring that its first-tier suppliers ensure that their own suppliers implement standards that are in-line with the company's standards.

The company: (1) requires its first-tier suppliers to ensure that their own suppliers implement standards that are in-line with the company's supply chain standards addressing forced labor and human trafficking.

Low: 0
High: 100
56

Purchasing Practices: Notable Example

Puma

Puma discloses that it partnered with the International Finance Corporation to create a financing program for its suppliers to incentivize them to improve social and other standards. Through this program, it states it will offer working capital to suppliers that achieve higher sustainability standards.

Recommended Action

Purchasing Practices

Take steps to mitigate the risks resulting from purchasing practices, such as lack of provision of purchasing forecasts to suppliers, and incentivize good labor practices, for example through longer-term contracts, increased orders, or financial incentives.