FASHION REVOLUTION | FASHION TRANSPARENCY INDEX 2021
SPOTLIGHT ISSUES
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5. SPOTLIGHT ISSUES ANALYSIS - DECENT WORK & PURCHASING PRACTICES
COVID-19 In March 2020, lockdowns were announced across the world, shutting down retail stores in most countries. In response, major multinational brands and retailers cancelled orders from their suppliers in an attempt to lessen the impact of potential lost profits. Workers’ Rights Consortium (WRC) estimates initial order cancellations were valued at a collective USD $40 billion, including finished products, delivered stock held in ports and warehouses, and mid-production orders, where in many cases suppliers had already paid for the raw materials and labour costs. These order cancellations had an immediate and profound impact on suppliers, who were left footing huge bills for materials and struggling to pay their workers, keep workers employed, provide furlough or severance pay and keep their businesses afloat. Consequently, the people who make our clothes were left to bear the biggest financial burden of the pandemic.
For the 2021 Index, we felt it was imperative to shine a spotlight on this issue and review what information major brands and retailers have been sharing with the public about their order cancellations and efforts to understand and support workers throughout the pandemic. In general, transparency on this issue is very low. We found that more brands shared information about order cancellations and their actions to reinstate orders where they had been cancelled than were sharing data about the pandemic’s impact on workers. We found that 18% of brands disclose the percentage of orders since the outbreak of Covid-19 where partial or complete cancellations applied, while 14% provided information about the orders that had not yet been reinstated or paid in full.
Since the outbreak of Covid-19, WRC research found that on average buyers have told suppliers they must cut prices by 12% relative to last year’s price for the same product and that suppliers will have to wait an average of 77 days after they complete and ship customers’ new orders before they receive payment. Prior to the pandemic, the average was 43 days. Additionally, we found that 14% of brands disclose the percentage of discounts applied on previously agreed payment terms and just 2% disclose changes in Free on Board (FOB) prices faced by suppliers in the past 12 months. FOB prices are up-front costs assumed by suppliers, holding them liable for transportation of goods, even if they are damaged or destroyed – this is in addition to the raw material costs suppliers also pay in advance.
According to labour rights experts, limited government intervention across garment producing countries, such as financial relief to help suppliers pay for workers’ wages, forced workers to find other ways to support their families. For example, according to the Society for Labour & Development, more than 3.6 million garment workers in India withdrew a collective USD $1.5 billion from their pension accounts, which workers usually put aside for their children’s educational expenses. Garment workers were already extremely vulnerable, working on precarious contracts and paid wages so low that they struggled to afford life’s basic necessities let alone save for unexpected events such as a global pandemic. During the pandemic, WRC research, which surveyed
