As the COVID-19 pandemic hit and retail stores started shutting down, many global fashion brands responded by cancelling billions worth of orders. This passed the financial burden of the disruption onto the most vulnerable people at the bottom of supply chains in order to protect company profits.
And while some brands have committed to paying what they owe for goods already produced or in-production, others are wielding their power over suppliers and have refused to pay.
The impact of these decisions on the estimated 40-60 million workers employed by the global garment industry has been unprecedented, with millions of mostly women and migrant workers in the Global South left facing destitution without wages, laid off without severance, or working with reduced pay.
How did the fashion industry end up in this position, and what were the pre-existing conditions that left garment workers in danger?
At Business & Human Rights Resource Centre, we conducted a survey of 35 fashion brands and retailers on their response to the pandemic (26 responded) and gathered other publicly available information to cover gaps. The results of this research is available on our new COVID-19 Apparel Tracker, which monitors brands’ responses to the pandemic and the impact on workers in their supply chains.
Our research has shown that despite some leading brands like adidas, Inditex (Zara) and Fast Retailing (UNIQLO) publicly committing to pay for orders placed before the pandemic, a significant number have sought to cancel orders, delay payments or demand 'huge discounts'. Billionaire Sir Philip Green’s Arcadia Group (Topshop) – whose stores recently reopened – is among the worst offenders, refusing to pay for millions of pounds worth of goods ordered before the pandemic, despite repeated pleas by suppliers. Last week a Bangladeshi supplier warned their business was on the brink of collapse, which would leave 2,000 garment workers facing destitution as a result of Arcadia Group’s continued refusal to pay its bills.
Primark has extended its payment times by up to 180 days (six months), while New Look has reportedly suspended payments to suppliers for existing stock indefinitely. By contrast, three brands (Hermès, N Brown, Zalando) said they have shortened payment times for some suppliers to help during the crisis.
Refusing to pay for orders and delaying payments leaves suppliers with immediate cashflow problems which risks leaving garment workers without wages owed to them.
While 23 companies said they have taken steps to make sure workers are paid for March and April and nineteen companies reported helping suppliers through access to local finance, large numbers of workers have not received wages or are being paid only part of their wages, prompting large protests by workers in Cambodia and Bangladesh.
Trade unions, civil society organisations and manufacturing associations in garment-producing countries have appealed to buyers to not cancel orders and to fulfil existing contractual obligations. By making brands more transparent about paying for orders amid the pandemic through our tracker, it is hoped that suppliers and labour groups can cross-reference brand commitments with the reality on the ground.
This will include recording concerns about non-payment for orders and reviewing reports which contradict brands’ survey responses.
Our research also revealed that eight companies (23%) have requested a 'retroactive discount' from suppliers for orders already placed. Debenhams has reportedly requested a 90% discount. As suppliers in the fashion industry often operate on razor-thin margins, these practices can have a devastating impact on workers.
We know that pushing suppliers hard on price drives down workers’ wages and leads to corners being cut on health and safety. Turkish suppliers have told us that constant pressure by European brands to lower prices undermines suppliers’ ability to offer decent working conditions. Accepting orders below cost is common in the industry.
Similarly, UK suppliers producing for British fashion brands have indicated they have felt pressure to sell below cost price to keep a competitive advantage and secure future orders. This chimes with reports of workers being paid just £3 to £4 an hour in poor labour conditions in garment factories in Leicester and Manchester.
All of this demonstrates that these abuses did not begin with COVID-19.
Retailers squeezing suppliers for discounts after orders are placed is not unique to the pandemic – it is common in the fashion industry, especially among high street brands.
In August 2019, Asos wrote to its suppliers to ask them to accept a three percent discount on products in an attempt to improve profitability after the company issued two profit warnings, which one supplier slammed as “incredible”. Given the unequal power dynamic between retailers and suppliers, most have no choice but to accept these blows or end up with unused stock and jeopardize future business.
Retailers squeezing suppliers for discounts after orders are placed is not unique to the pandemic – it is common in the fashion industry.
Challenges to pay workers on time was also common among suppliers before the pandemic. 40% of suppliers faced payment terms of more than 60 days under normal business conditions, an arrangement which directly affects workers’ wages. Answering questions on their business practices pre-pandemic, most brands indicated their usual payment times are between 60 and 90 days. Better practice does exist: Tchibo said it usually pays its suppliers within 15 days, and G-Star Raw said it pays suppliers immediately after they release garments from the factory.
While the pandemic is unprecedented, the abusive practices by clothing brands that have been exposed are not. The fashion industry is built on an exploitative business model which relies on minimising production costs at the expense of garment workers to maximize profit.
Our research shows the COVID-19 pandemic has exacerbated the pre-existing and profound power imbalance in fast fashion’s international supply chain between clothing brands, suppliers and workers.
While garment workers are facing a humanitarian crisis, at least five brands are still paying shareholders dividends, despite having made no public commitment to pay for placed orders in full. This unjust model that places profits over people needs to change.
The fashion industry is built on an exploitative business model which relies on minimising production costs at the expense of garment workers.
Brands need to urgently overhaul their purchasing practices and how they treat suppliers. To start, companies should work in close collaboration with suppliers to reduce negative impacts and consider shortening payment times and other measures to ease the financial burden. UK brands should also consider signing up to the UK Prompt Payment Code which commits signatories to pay their suppliers within 60 days, work towards adopting 30 days as the norm, and avoid any practices that adversely affect the supply chain.
And those brands that continue to act with impunity must be held accountable. Binding industry standards are needed to enforce fair purchasing practices and stop the exploitation of garment workers for profit.