Opaque Fashion Supply Chains Raise ESG Concerns
The fashion industry has faced increased pressures to meet ESG goals in recent years, with many calling for the whole sector to slow down production in aid of the planet.
One way in which fashion retailers clean up their supply chains is by partnering with organisations such as Better Cotton, a non-profit governance group that promotes better standards in cotton farming and works closely with fashion giants such as H&M and Zara.
However, Better Cotton is now facing whistle-blower allegations of data manipulation and conflicts of interest.
This has created more questions for supply chain leaders about the importance of supply chain transparency, and how they can make progress towards ethical and sustainability goals, further than ESG checkboxes.
The new revelations come after Earthsight’s Fashion Crimes Report found links between H&M and Zara’s supply chains and cotton produced by SLC Agrícola and the Horita Group.
The agribusiness giants are connected to illegal deforestation and conflicts with traditional communities in the Brazilian Cerrado.
Better Cotton later admitted that its claims that it was consulting local communities on land use and ownership as part of this audit were false.
Change starts from the top
Former Unilever CEO and influential business sustainability author, Paul Polman, explains to his followers why cases like this highlight the importance of supply chain transparency.
“Now is the time to lead or be led,” Paul says. “If we are comfortable, we are not doing enough.
“Less bad is no longer good enough. Set targets to win, not just to avoid losing.”
Similarly, Patagonia CEO, Ryan Gellert, comments that “Businesses for far too long have hidden behind this narrative that their number one role is to maximise shareholder wealth.
“That’s a fine little academic conversation to have, but we’ve outgrown it.
"The days of ‘business as usual’ are over.”
Not an isolated issue: ESG concerns reach many fashion supply chains
H&M is not the only one facing supply chain transparency questions- some campaigners are urging the Financial Conduct Authority to block Shein’s planned flotation on the London Stock Exchange due to its alleged use of forced labour in the supply chain.
Both examples highlight the increasing scrutiny brands are facing- not just from consumers, but from investors, stakeholders and wider markets too.
John Thorpe, Partner at Argon & Co, comments “The backlash around Shein’s bid to list on the LSE – given its alleged use of forced labour – highlights that consumers, businesses, and wider markets alike will not stand for unethical labour practices seeping into supply practices.
“This will likely not be the last case of a firm being blocked from listing due to poor labour standards,” John continues.
“But there is no blanket solution to stamping out modern slavery.
“Global supply chains are deeply complex and multi-tiered, meaning the traceability and visibility of supply chains can be a ‘finger in the air’ moment, particularly when a company is reliant on correct information being provided from their supply chain.
“Companies must probe beneath the surface of their supply chains to truly understand them and eliminate poor labour standards.
“This could mean identifying high-risk factories and implementing new audits, or deciding to exit certain locations.
“Central to this will be ensuring that companies must be more rigorous in vetting their suppliers at selection, conducting regular audits of their contracts, approaches and policies to ensure they are meeting the highest standards.”
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