Connecting the dots – the challenges of ethical sourcing

Many big garment retailers have taken steps to promote ethical sourcing by endorsing official safety initiatives, auditing programmes and workers unions throughout their supply chains. However, a new report argues that the real problem comes from beyond the big manufacturing players, thanks to subcontracting which is rife throughout the industry. So what goes on behind the scenes in the global garment industry, and how difficult is it for ethical fashion brands to find out where their products really come from?

Consumers are becoming increasingly aware of how and where their clothes are produced, and H&M recently claimed that they are experiencing increasing public demand for sustainable and ethically sourced garments. H&M numbers among the many signatories on the Bangladesh Accord on Fire and Building Safety, set up alongside the Alliance for Bangladesh Worker Safety to support ethical sourcing and address concerns about garment factory conditions, in response to the collapse of Rana Plaza last year. Worldwide protests and public condemnation marked this industrial tragedy as a ‘turning point’ for ethical standards in the fashion industry - but how much has really changed in Bangladesh? Are these accords actually working?

New York University's Center for Business and Human Rights recently published Business as Usual is Not an Option: Supply Chains and Sourcing after Rana Plaza. The report argues that too little attention has been paid to “connecting the dots” between new safety initiatives and ongoing challenges in the garment industry. The report cites indirect, unauthorised sourcing as the most prevalent sourcing model within the garment industry in Bangladesh, despite the trend for transparent sourcing slowly growing among ethical fashion brands.

Many approved manufacturers subcontract parts of their orders to other smaller factories in order to cut costs or meet demanding deadlines, meaning that retailers unknowingly lose control over where garment labels, trims and packaging are produced and in what conditions. Indirect sourcing therefore increases supply chain risk, leading retailers to unwittingly support an unregulated and often unethical industry, as subcontracting slips from their authority and is left to its own laws.

Regulations such as the Bangladesh Accord on Fire and Building Safety and the Alliance for Bangladesh Worker Safety, which work to promote ethical sourcing, can only be applied to official ‘known’ manufacturers. In reality, the greatest risks in the garment industry most likely come from illicit facilities. New York University’s report estimates that these two major initiatives encompass fewer than 2,000 factories in Bangladesh, while the country’s total number of facilities producing for the export garment sector stands at around 5,000 to 6,000 – and as many as 2,000 of these are entirely unregistered facilities.

It can often be impossible for retailers to find out just how far webs of subcontracted factories stretch once orders slip from their approved and known suppliers in the secondary supply chain. Several major fashion brands whose labels were found in the rubble of Rana Plaza denied that any orders had been placed with the factory, meaning that unauthorised sub​contracting had most likely occurred. If suppliers are not forced to report subcontracting, retailers will never be able to connect the dots between the products in their store and the factories in which they were produced.

Ethical fashion brands must therefore stop unauthorised subcontracting to keep control of their supply chains and guarantee sourcing standards. With supply chain policies so difficult to enforce in developing countries such as Bangladesh, automated technological tools can offer a better solution.

For instance, Segura’s production tracking system allows garment manufacturers to order trims and packaging from a pre-approved list of suppliers directly through the software platform, creating a real-time ‘paper trail’– connecting all the dots. If orders are filled without the use of an approved supplier, the break in the supply chain is flagged up for the garment retailer to address. In this way, ethical sourcing is not encouraged, but demanded – and manufacturers are forced to play by ethical fashion brands’ rules.

Originally published 21/07/2014