Workers in apparel supply chains are among the hardest hit by the Covid-19 pandemic. Even before the pandemic, workers had to survive on poverty wages; in the first three months of the pandemic alone, workers lost at least US$3 billion in income. Poverty, discrimination, a lack of labor protections, and restrictions on movement form the breeding ground for exploitation and forced labor risks— and the Covid-19 pandemic has dramatically worsened these factors. Workers’ already meager livelihoods were taken away and many lack the support of social and labor protections, which do not extend to (undocumented) migrant workers.

KnowTheChain’s third apparel and footwear sector ranking found that the 37 largest global companies fail to stand up for workers who face exploitation and are struggling to survive. On average, companies fail even to hit the 50% mark in the benchmark when it comes to addressing the worst forms of exploitation in their supply chains.

The results show that:

• Luxury apparel companies score particularly poorly, averaging 31/100. Italian luxury fashion house Prada’s score has worsened over time, at just 5/100, while peers such as the French luxury goods company Kering (41/100) and the German upper premium brand Hugo Boss (49/100) have improved significantly since the first benchmark in 2016. Also among the bottom five companies is US-based Tapestry (16/100), the owner of Coach and Kate Spade.
• The largest investors in the lowest-scoring five companies were all ESG investors. While this might be expected against the backdrop of a rise in ESG investing (investing that includes considerations for environmental, social, and governance factors) that has reached mainstream investing, it indicates that ESG investors are failing to use their leverage on supply chain matters.
• Despite some positive signs, the sector sorely lacks the substantive improvements in areas critical during the pandemic and to achieve a just recovery: responsible purchasing practices and remedy. The pandemic showed yet again that when companies do not pay suppliers for the orders they place, it is the workers who suffer. At a time when millions of apparel workers across the world are waiting for their wages to be paid, only four out of 37 companies (11%) could demonstrate several remedy outcomes for workers, such as repayment of unpaid wages or recruitment fees.
• Allegations of abuse were identified in the supply chains of more than half the benchmarked companies (54%), with some companies facing up to four allegations. More often than not, companies failed to ensure concrete remedy outcomes for workers, such as returning passports or reimbursing recruitment fees that may equal several months’ wages.

Companies should

• Ensure supply chain workers receive remediation, including by
  • supporting specific cases of reimbursement of recruitment fees, unpaid wages, benefits, and severance pay, and
  • contributing to funds for supply chain workers.
• Adopt responsible purchasing practices that enable living wages and decent work and disclose
  • key data points such as length of payment terms; and
  • supplier ratings received from independent parties, such as Better Buying Company Reports, highlighting forecasting, costing, and payment practices.
• Implement a worker-centric due diligence approach, which includes
  • disclosing supplier lists beyond the first tier and in line with the Transparency Pledge and the Open Data Standard for the Apparel Sector; and
  • supporting freedom of association and collective bargaining, effective grievance mechanisms, and worker-driven monitoring.

Investors should

• Use leverage with portfolio companies to ensure workers in apparel supply chains receive remedy, including for unpaid wages;
• Support human rights due diligence resolutions and/or vote (at annual general meetings) against management of companies that consistently fail to demonstrate respect for human rights in supply chains;
• Engage with workers and their representatives and support their perspectives, needs, and demands, especially in cases of severe human rights allegations such as forced labor, at portfolio companies.

Governments should

• Adopt mandatory human rights due diligence legislation that applies to the whole value chain and includes civil and criminal liability and avenues for remedy;
• Suspend imports of goods linked to severe human rights violations, including forced labor;
• Ensure public contracts are awarded only to companies that are able to demonstrate effective human rights due diligence and remediation processes, and that pay living wages.