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EXECUTIVE PERSPECTIVE: The human cost of the global fashion industry

20 January 2017

The internationally bestselling, award-winning author of four novels, Corban Addison writes large-canvas stories about issues of global injustice that combine the authenticity and on-the-ground research of investigative journalism with the intrigue, entertainment, and complex humanity of fiction.
Most recently, Addison spent months investigating the secretive supply chains of the global fashion industry. Having interviewed factory workers, owners, and stakeholders in locales ranging from Malaysia and Bangladesh to Los Angeles and New York City, his research culminates in the release of “A Harvest of Thorns” (HarperCollins / Thomas Nelson) in January 2017 — an action-packed, thought-provoking look at the enormously high cost of cheap consumer goods.  

We sat down with Mr. Addison to ask some basic questions about the human cost of the global fashion industry.

Thomson Reuters Sustainability: How do we measure the human cost of the global fashion industry?

Mr. Addison: As a storyteller, I think of cost less in terms of dollars and more in terms of pain. I think of the women I met in Dhaka, Bangladesh when I was researching my novel, A Harvest of Thorns—women who survived the Tazreen Fashions fire that claimed the lives of 117 of their co-workers and left them with disabling injuries, unable to work, and essentially penniless. I think of the young Bangladeshi migrant workers I met in Kuala Lumpur, Malaysia who had been duped by unscrupulous labor brokers into paying onerous recruitment fees requiring them to take out loans that took years to repay before they could send a dime home to their families. I think of the young garment workers in Jordan who were raped by their male managers and deported when they got pregnant.

The average garment worker making our clothes is one of the poorest of the global poor, and thus, in most countries, has few meaningful rights and little or no redress for the grievances she (most are women) suffers on a daily basis. This suffering is unquantifiable, except perhaps in the non-monetary currencies of blood, sweat, and tears. What we can say is that of the 40 billion garment workers in the formal sector (i.e. factories) worldwide, far too many of them work in conditions that none of us would consider humane. And the rest live on the edge of financial ruin, one injury or one pregnancy away from penury in places where the only safety net is family. As for the perhaps 30 million more workers laboring in the informal sector (e.g. house workers), their exploitation is largely endemic—the brutal fact of life.

As the global fashion industry is currently designed and calibrated, the human cost of making clothes is massive. To change that, someone other than the workers is going to have to pay a little more (i.e. brands at wholesale and consumers at retail), or earn a little less (i.e. brands in revenue and investors in returns).

TR: Is transparency around the facts difficult to achieve?

Mr. Addison: For smaller, ethically conscious brands like Patagonia and Adidas, supply chain transparency is relatively easy, at least on the factory level. They don’t do business with that many suppliers, and they have deep relationships with those they work with, so auditing is often unnecessary, and abuses are few. The picture changes when you go deeper into the supply chain, to the mills where yarn is spun and cloth is woven, and then to the fields where cotton and wool are harvested. Even the most ethical brands find it difficult to get full transparency at the mill and agricultural level—and not for lack of trying.

As for the larger brands, especially the cost-conscious multinationals in the discount and fast fashion markets, the notion of a truly transparent supply chain is largely just a dream in the heads of the good people in the compliance and CSR departments. Part of the reason is the sheer scope of their reach: they do business with thousands (sometimes tens of thousands) of suppliers in dozens of countries. Part of it is resistance from suppliers: when the brands are constantly demanding lower and lower prices and faster and faster lead times, suppliers do whatever they can to get the orders done, including cutting corners on human and environmental policy.

The most sophisticated of the big brands know, or have ways to find out, all of their first-tier suppliers (the ones that get the orders from the buyers and buying agents). Those factories get audited twice a year and are subject to whatever local oversight may exist in each country. But the first tier isn’t usually where the problem lies. It’s the second-tier and third-tier factories who get subcontracted orders from the first tier, often without the knowledge of the brand, that are the “lean, mean human-abusing machines,” to use the colorful words of my fixer in Malaysia. And, as I mentioned before, first-tier transparency doesn’t account for the textile, mill, and agricultural levels.

Unfortunately, transparency comes at a cost. I’m convinced it is achievable for any company, however large and diffuse its supply chain. But they have to be willing to pay for it. And if they’re a public company, that means their executives, board, and shareholders must be willing to go along.

TR: What can consumers do to help?

Mr. Addison: History teaches us that boycotts have limited utility. They are rarely large enough to matter to the brand, and they are fueled by anger and indignation, which are difficult to maintain across time. The greatest power we, as consumers, have is the money in our wallets. Every time we make a purchase, we cast a vote for the products we believe should be sold in the market. I’m fairly certain there isn’t a consumer alive who would willingly buy a product he or she knew was made by a victim of forced labor. But there’s no label for slave-made goods, and the labels that do exist tell us nothing.

The challenge for consumers is the lack of transparency. If given a choice, I think all of us would buy more ethically. But the sourcing habits of most brands are obscure. We get a lot of lovely smoke from PR departments, but it doesn’t tell us much. This, too, is where consumers can have an impact. We need to call our favorite companies and ask, “Do you know who is making your clothes?” There a group in the UK called Fashion Revolution that’s helping consumers to ask this question. We need to ask it, and ask it again, until the brands realize we really care and decide that its a worthwhile investment to actually answer it, not just for us but for themselves.

TR: Is it possible to stop this exploitation using the law? Has it been tried before?

Mr. Addison: I’m a lawyer by training, and I bring the law into all the stories I write. This particular story, and this particular issue, fascinated me because it showed me the limits of the law. Abuses that take place in the supply chains of goods destined for the US market (e.g. forced labor, sexual assault, and physical violence) are crimes. Yet if they take place outside the United States, US law can do little about it. Most US laws do not have extraterritorial reach. Until a couple of years ago, we had the Alien Tort Statute, but then the Supreme Court largely gutted it. Now, federal statutes have extraterritorial reach only if they contain an explicit provision to that effect. The two relevant statutes with extraterritorial teeth are the Trafficking Victims Protection Act and the Federal Corrupt Practices Act. The former has a private right of action; the latter can only be enforced by the Justice Department. Unfortunately, transnational litigation is expensive, and evidence and witnesses overseas are hard to develop and preserve for trial. As a result, both statutes are largely untested in service of supply chain transparency.

In my mind, what we need is a law that would require all companies of a certain size to undertake basic due diligence in their supply chains (for instance, mapping the first-tier suppliers and ensuring that all of them are on notice that forced and child labor will not be tolerated) and then to report to the SEC what they find, with a safe harbor provision that would shield them from public exposure when (and it is when, not just if) they find evidence of those abuses. We require banks to file Suspicious Activity Reports for money laundering and anti-terrorism purposes, and we shield them from exposure when they find out their customers are criminals. We should do something similar with consumer-facing brands sourcing goods for the US market. There would be a lot of resistance, I suspect, from the business community, just because it would take time and be expensive. But the alternative is to allow these endemic human rights abuses to continue virtually unchecked.

TR: Is it in investors’ self-interest to help? If so, under what circumstances?

Mr. Addison: Investors have more influence in the behavior of companies than consumers. They elect the board. They vote on key initiatives. They can file derivative suits to hold the board and executives accountable. The people who run big companies want to keep the stockholders happy. And stockholders want the business to do well, else they lose money. The nemesis of all shareholders is risk, especially the unknown unknowns. An opaque supply chain is replete with that kind of risk. Nike saw this in the 1990s when it was exposed for sweatshop abuses. Brands like Walmart and Gap and H&M have seen this. The greater the transparency, the lower the risk. For this reason, investors clearly have an interest in transparency—in the long-term, at least. But the pressures of quarterly reporting and the common strategy among funds to maximize short-term yield distorts the equation. To encourage investors to use their power in the interest of transparency, funds need to take a longer-term view of their investments, and companies need to be liberated from the shackles of short-term decision-making.

TR:  What inspires you to do this work?

Mr. Addison: I’m a consumer. I buy clothes and countless other products sight unseen, knowing nothing about the story behind them. Most of the brands out there don’t offer me an alternative. They’re quite happy with the illusion that products just magically appear on shelves and online for us to purchase because it keeps the money flowing and doesn’t upset the economic applecart. However, on account of my ignorance, I can guarantee that over the course of my 37 years I’ve unwittingly purchase goods tainted by all kinds of human rights abuse, including slavery. This bothers me a great deal. It bothers most people I talk to. As a consumer, I would like to know the truth and be given the choice to spend a little more for ethical merchandise.

Beyond that, I’m passionate about the business case for social responsibility, and I’m convinced it’s more than just feel-good fluff. Ben Heinemann, the legendary former general counsel at GE, makes a compelling case for “high performance with high integrity” in his book by that name. Lots of global business leaders are in agreement. I’m thinking of Sir Richard Branson, chairman of the Virgin Group, and John Mackey, CEO of Whole Foods, and Yvon Chouinard, the founder of Patagonia, and Andrew Liveris, CEO of Dow Chemical, who recently wrote in a short but powerful op-ed for TIME Magazine that corporations “must embrace a more inclusive capitalism—and redefine the role of business in society … Today, more than ever, you can do well by doing good. In fact, you must.”

My hope in writing A Harvest of Thorns was to popularize this perspective, to embed it in a fast-paced, entertaining narrative that readers don’t want to put down, and by that to energize all stakeholders (consumers, investors, brands, and government) to engage the issue and think of concrete ways we can make a better world.

TR: Is there an example of leadership that gives you hope?

Mr. Addison: I love to hold up Yvon Chouinard, the founder of Patagonia, as an exemplar because his book, The Responsible Company, is the most inspiring thing I’ve read on corporate social responsibility. But there are many other examples that give me hope. I mentioned Nike before. As a result of the bad press they received in the 1990s, they’ve done a complete about-face and become a leader in ethical sourcing. I was recently at a conference with senior people from Walmart, Target, and Gap. All of these companies have had their share of supply chain issues, but they have some great people thinking creatively about how to increase transparency and reduce social and environmental costs in their product chains.

On the investor side, I’m thrilled to see funds like Al Gore’s Generation Investment Management proving that socially responsible investment decisions can beat the market. And I’m delighted by the work of investor collectives such as the Interfaith Council on Corporate Responsibility that represent vast swaths of equity across the market and are engaging in effective dialogue with companies.

It’s easy to look at the scale of the abuses happening in supply chains and throw up our hands. But, at bottom, these are human problems, which means they have human solutions. With an industry like fashion, which touches all of us 99% of our lives, it’s imperative that we all find a way to join the cause.

Edited by Timothy Nixon, Managing Editor, Thomson Reuters Sustainability

Any opinions Expressed in "Youth Perspectives" are those of external parties and not those of Thomson Reuters.

Any opinions Expressed in "Executive Perspectives" are those of external parties and not those of Thomson Reuters.

Topics

Corporate Governance, Executive Perspective, Law, Youth Perspective

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