Living wages, purchasing practices, and the environmental cost of fast fashion production
This year, fashion revolution week is centered around the theme of MONEY, FASHION, POWER. The exploitation of workers and the environment in the fashion industry is an enormous issue that Anthesis is helping companies act on. In this blog, we breakdown three important focus areas in the fashion industry: living wages, purchasing practices, and the environmental costs of fast fashion production.
Fashion brands wield enormous amounts of influence in the garment industry with their sizeable buying power. We have seen examples of through choosing low-cost and low-wage economies to do business with and thus having a huge impact on supplier factories and their workers. The current buying model in some corners of fast fashion benchmarks prices by country and by supplier, perpetuating a global race to the bottom. According to the industry campaign group ‘Labour behind the Label’ to tackle living wages and better buying or purchasing practices have been unsuccessful. Price tags continue to fail to reflect the true social and environmental cost of production.
“Remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events.”
The legal minimum wage in most countries is extremely low, leaving workers stuck in a cycle of poverty. Most of the audit work on wage compliance has been focused on whether a workplace meets a certain level of compensation, usually the legal minimum wage. However, the standard of living is more complex than that. Even if a factory pays workers the minimum wage and meets other legal requirements (e.g., pay the legally required wage on time and in full; pay for the proper number of hours worked) this may still not be sufficient because of undue disparities in wages within the enterprise or because wages may not reflect worker productivity. In addition to meeting legal requirements, a factory must also consider prevailing wages and cost of living; rates of wage adjustments; pay systems such as the baseline for wages; overtime and wage deductions; and how pay systems are communicated and discussed with workers.
It is estimated that less than 2% of the people who make the clothes on our bodies earn a living wage. This means an estimated 98% of workers in the fashion industry are likely being held in systemic poverty and cannot meet their most basic needs. The research also shows that 75% of these workers are women between the ages of 18 and 24.
Collective bargaining is also important for implementing living wages as showcased in a recent report by Oxfam ‘Behind the Barcodes’. A case study in the report demonstrated that $8 was added to the monthly pay as a result of a collective bargaining agreement after Oxfam pressed international supermarkets – who bought fruit from the region – to back wage negotiations. Gender equality is also a key consideration in unanimously meeting living wages as gender pay gaps are common. There are additional needs and challenges faced specifically by women such as gender-based violence at work, or the burden of unpaid care and domestic work. Some of the brands have started addressing this issue and incorporating gender equality dimensions within their policies.
The United Nations and the International Labour Organisation (ILO) declared living wages a basic human right. After extensive research on living wages and discussions with other brands, NGOs and living-wage organisations, a number of international methods for calculating the living wage have been created, such as the Living wage foundation, Anker methodology and Asia Floor wage.
Recently, a ground-breaking proposal by global NGO, The Circle, called for new EU legislation to ensure garment workers in global supply chains are paid a living wage. In addition, Tesco has recently committed to paying the living wage gap to banana producers, as of January 2022. Anthesis is proud to have supported Tesco in analysing the living wage for their banana producers, helping them understand where there were living wage gaps in their supply chain, and ensuring they made actionable goals to change those gaps.
Another well-documented issue, explained by the Business and Human Rights Resource Center, is the occurrence of apparel brands exploiting the industry – exacerbated during the Covid -19 pandemic, where brands and retailers were cancelling or delaying payment of thousands of dollars and asking for discounts. The continued pandemic showcased irresponsible purchasing practices, such as demanding price discounts and longer payment schedules. This has of course directly impacted suppliers, but it also trickles ultimately back to the brands and retailers – see graphic. The onus is therefore on retailers and brands to assess whether their purchasing practices contribute to harm; implement control measures to prevent contributing to harm; and develop management procedures that purchasing departments should follow to mitigate against harm. Common problems include:
- Failure to pay wages and benefits required by law and buyers’ codes of conduct
- Use of excessive overtime (which may be forced)
- Unauthorised subcontracting with poor working conditions
- Increased use of temporary labour
Anthesis has worked with fashion apparel brands to help review purchasing practices in their organization, collecting feedback from the buyers and suppliers. These reviews have given brands a clearer picture of how its purchasing practices and decisions impact its suppliers, helping the brand understand the key risks and priority areas in its supply chain. Identifying these themes, comparing the company to the industry benchmark, and developing the subsequent recommendation roadmap have provided brands with the tools needed to mitigate those risks and build better relationships with their suppliers.
Environmental cost of fast fashion
A fast-paced fashion model requires fast-paced production, and unfortunately, quicker production exacerbates environmental damage. Use of unsustainable production methods such as toxic, water-intensive dyeing to produce the finished product means the fast fashion industry has become a detriment to our environment. High water use, chemical waste and carbon emissions are some of the impacts created from producing apparel garments.
A study by The University of Manchester highlights the need for urgent and fundamental changes in the fashion business model to minimise and mitigate negative environmental impacts. The Fashion Pact was created, where luxury and fast fashion brands developed a common agenda to begin more environmentally friendly ways of production.
What can businesses do?
Key activities on living wage:
- Build long term, mutually trusting relationships with suppliers and work together to understand the drivers of prevailing wage levels and how they can be influenced
- Consult with workers/managers to calculate living wage levels for the area/industry
- Advocate for mechanisms to set national minimum wages that equate to living wages
- Ensure cost of living wages are accommodated throughout the supply chain and if necessary, in product price
- Improve workers’ collective bargaining power and ensure their right to freedom of association is respected
Key activities on purchasing practices:
- Map out the procurement cycle to plan orders in advance accordingly with as accurate as possible forecasting and accommodating pre-production sampling
- Develop an open dialogue with the suppliers from the get-go
- Design and develop product in accordance with the procurement cycle
- Lock in cost negotiations up front with the suppliers
- Sourcing and order placement in line with the brands’ Code of Conduct which includes social and environmental guideline requirements
- Pay orders to the suppliers on time as per prices agreed in the contract. This includes payment agreed for bulk sampling
- Training the buying and merchandising teams on apparel production process in the shop floor (factories), garment engineering and open costing
Key activities on environmental cost of fast fashion with factories:
- Ask suppliers to the complete the Higg Facilities Environmental Module (FEM) to collect environmental data annually
- Benchmark facilities to identify best practice and areas for improvement
- Engage in conversation with facilities to understand context for the Higg FEM results and discuss options and ways to reduce impact
- Provide training, knowledge, funding etc. as necessary to support factories with their improvement trajectory
- Use Higg FEM to track progress
Companies have the opportunity to act on the issues currently plaguing the fast fashion industry, as described above. As our clients at Anthesis become more ambitious, we are seeing a greater focus and urgency around sustainable fashion. We are collectively discovering how to assist companies in reaching their fashion goals while keeping the environment and workers in mind.
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