Contents

• Dynamics of Fair Trade: Ethical Aspects of the Purchasing Process
• For Workers, Unequal Competition and Unfair Outcomes
• Integrating Corporate Social Responsibility into the Core Activities of Apparel Businesses

Marsha A. Dickson is professor and chairperson in the Department of Fashion and Apparel Studies at the University of Delaware and is lead author of the book Social Responsibility in the Global Apparel Industry.

When colleagues at Cornell and Colorado State universities were working with me during 2003-2005 on research to identify the corporate social responsibility (CSR) knowledge and skills needed for management of the design/product development, buying/merchandising and sourcing functions of apparel brands and retailers, we were sometimes met with puzzled looks from compliance/CSR professionals who suggested those employees really did not need to know anything since CSR was being handled by their departments. We maintained our beliefs that some CSR knowledge was needed across business functions, if for no other reason than to enable employees to respond intelligently to friends’, family members’ and customers’ questions about what their companies were doing to solve the myriad of CSR problems being highlighted in the news.

In 2004, the nongovernmental organization Oxfam International raised concerns that corporate purchasing practices negatively impacted workers in factories around the world¹. Since then, it has become increasingly clear that the decisions and actions taken by brands and retailers can conflict with the mandates given by the brands’ and retailers’ CSR departments, forcing suppliers to choose whether to meet their buyers’ business demands or to comply with their codes of conduct. There is now widespread agreement among those involved with CSR that employees in a range of business functions have an important role to play in CSR.

The term “purchasing practices” refers to the day–to–day activities used by apparel brands and retailers to develop products and bring them to market. The term encompasses activities associated with development of sample garments; forecasting sales/volume; negotiating with suppliers on cost, delivery and other terms; planning promotional strategies; testing product aesthetics and quality; and other tasks. The activities are typically organized in a process calendar, with deadlines for various work to be carried out in order that the factory can assure production and delivery by the negotiated date.

Since purchasing practices have been raised as a concern related to CSR, some businesses have quietly examined their own actions to determine the extent they are negatively affecting workers. Yet others have been loath to do this self–analysis, and virtually all brands and retailers have been unwilling to publicly discuss the actual impacts their corporate behaviors have on workers. Their hesitancy is understandable since the creation and delivery of product is the core of the business, and changes to purchasing practices bring with them the real chance that brands and retailers will not have in their stores the right product, at the right price, and at the right time. For businesses interested in taking leadership roles in CSR, tampering with their purchasing practices is perceived as potentially limiting their competitiveness against less responsible businesses.

The information that has been made public about how purchasing practices affect workers is relatively sparse. The most comprehensive report, which was commissioned by the MFA Forum, involved interviews with seven international brands and four of their local offices in Bangladesh, along with seven buying houses and 17 suppliers in the country². When I read the findings for the first time, I immediately knew that the types of problems identified, while uncovered from only a handful of brands and their suppliers who participated in the study, were in fact very likely to be widespread and the result of standard practices in the apparel industry. I reflected on how I personally had contributed to the problems and knew that others in my own academic field had as well. For example, I recall teaching a class of senior merchandising students the importance of negotiating the lowest possible price with the supplier that would support the required margins of the company and that further negotiating longer payment terms would allow the goods to be sold before the supplier ever needed to be paid. It never crossed my mind at the time how those terms would impact the supplier’s cash flow and its ability to pay the workers!

Since the MFA Forum report was released in 2007, I have had the opportunity to interact informally with countless factory managers, employees of brands and retailers, CSR professionals and students returning to school after internships or employment with a wide range of apparel brands and retailers. What have I learned from those interactions?

• Employees (and their managers) frequently disregard the deadlines set out in their companies’ process calendars. Decisions are made late and, regardless if made on time or not, inaccurate and incomplete information may be passed on to suppliers.
• Despite heavy reliance on data and holding out as long as possible to get the closest thing to real–time data as possible, forecasts for volume, store counts and style features are often wrong and sometimes nowhere close to initial predictions.
• Brands and retailers place so much importance on having in their stores the same/similar products as their competitors that the fashion industry—sometimes considered one of the world’s most creative industries—has lost a lot of its creativity. The realization that a key product is ”missing” sets off a mad dash to get the product in the store no matter what it will require the supplier to do.
• Employees involved in developing and bringing product to market sometimes have little or no knowledge about production, supply chains or the costs that must be covered by the supplier. In these cases, it is difficult or impossible for them to know if their expectations of suppliers are feasible, let alone reasonable.
• There is an over–reliance on spreadsheet-type data management that means information that is exchanged between employees and between the business and its suppliers may not be accurate.

What are the impacts of these mistakes? I have learned that some very well-managed factories, with strong production management skills and a workforce that can be utilized in various jobs, can overcome some problems created by their buyers. However, not all factories can be described as having these management capabilities and resources. As a result, some or all of the following impacts are likely:

• Production is subcontracted to unauthorized factories not known to the buyer and with substandard quality and CSR practices;
• Workers are forced to work excessive hours of overtime in a rush to meet unrealistic production deadlines;
• Wages and benefits will be underpaid and/or overtime premiums will be ignored due to costs that were unanticipated in the initial contract;
• Records of hours of work and wages will be falsified to hide the above breaches of the code of conduct;
• There will be illegal use of temporary and/or child labor to produce an increased volume of products and/or to meet shortened deadlines for shipping;
• Product quality will be diminished due to overwork, unauthorized subcontracting and unavailability of quality raw materials for quick delivery to the factory;
• Future orders will contain hidden costs as suppliers try to earn back what they lost from overtime pay, air freight and/or chargebacks; and
• Suppliers face increasing and sometimes immediate financial instability, which can lead to further abuses related to retrenchment and business closure³.

While we often assume that it is the “big” transnational brands and retailers causing these problems, small businesses are unlikely to be immune. I especially worry about the large number of new startup businesses claiming to offer ”ethical,“ ”sustainable“ and/or ”fair trade“ fashion. Employees of these businesses, while well–intentioned, may have similar shortcomings in knowledge as described earlier, not recognize the unintended consequences of their actions and be unable to identify and remediate problems in the factories due to lack of experience in CSR.

So what is to be done to reduce the negative impacts purchasing practices have on workers? Again turning to my interactions with students and others involved with the industry, I make the following recommendations:

• Make sure the right people are hired for the job. Hiring employees with knowledge of fashion consumer behavior and fashion forecasting, in addition to number crunching, can improve forecasts and help businesses better forecast the needs of their customers. Increasingly, fashion and apparel programs are integrating CSR topics into their coursework.
• Bring back creativity and uniqueness by allowing designers and buyers to use their intuition and skills to anticipate what their customers will want to buy next. Relying on past sales data will never allow you to fully predict the future.
• Educate your existing workforce to make sure they fully understand costing and global production and the scope of suppliers, activities and components needed to bring product to market.
• For costing and other challenges, suppliers typically have a wealth of experience that can be drawn upon for solutions. When suppliers quote costs that are too high, ask their advice on how to change the style in order to lower the cost. When suppliers say they cannot meet your deadline, ask for ideas about alternative solutions.
• Empower your employees and suppliers to contribute ideas for changing behaviors that contribute to factory compliance problems. Then incentivize the behaviors that contribute to compliance by creating metrics for corporate staff and rewarding compliant suppliers with more/larger orders.
• Implement a Product Lifecycle Management (PLM) system to assure that everyone has access to the same information and to facilitate the ability of suppliers to anticipate what will be required to produce an order.
• Create realistic process calendars and enforce their deadlines. It is unreasonable to expect that changes can be made when, for example, a shipment is already on the vessel.

As the faculty in my department contemplated how to assure that all of our graduates had understanding of CSR and the role they play in it, we benefitted from the advice of one of our advisory board members, Gregg Nebel with the Adidas Group, who reminded us that, ”It’s not just about how much money you make, it’s how you make the money.“ Every brand and retailer would benefit from observing this idea in his or her day–to–day activities and long–term strategies.

Footnotes

¹Oxfam International. (2004). Trading away our rights: Women working in global supply chains. Available from http://www.oxfam.org/en/policy/report-042008-labor.

²Harley, J. & Faiz, N. (2007). Assessing the impact of purchasing practices on code compliance: A case study of the Bangladesh garment industry. Retrieved January, 2008 from http://www.mfa-forum.net/themicworkinggroups/PurchasingPractices.aspx.

³It would be valuable to confirm these observations with formal research conducted across a wide array of apparel brands and retailers.

Top