Lack of Supplier Voice Could Thwart Sustainability Legislation’s Intent
As environmental and human rights legislation begins to reshape the contours of the supply chain landscape, one group of stakeholders is feeling left out of the whirl of activity taking place: apparel suppliers. Now they have words, not only for one another but also for the people who appear to be unilaterally making decisions for them.
“From what we understand, this is the first time that suppliers who are direct competitors when it comes to selling to some of the same customers and brands have come together to work on something that we recognize as a really salient issue,” Ilishio Lovejoy, ESG manager at Simple Approach, said at a briefing last week.
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Lovejoy has a unique vantage point. As policy and research manager at the advocacy group Fashion Revolution, she was able to stay on top of the tectonic shifts in regulation. This changed, however, when she joined the Hong Kong-based manufacturer.
“It became apparent to me that I had a very minimal understanding of how these legislations were going to impact suppliers and the value chain throughout,” she said. Lovejoy soon found she wasn’t alone.
So Simple Approach reached out, first to the New York-headquartered Transformers Foundation, then to Hong Kong and Bangladesh’s Epic Group, Sri Lanka’s Norlanka Manufacturing and India’s Shahi Exports, along with German developmental agency GIZ’s FABRIC initiative. In partnership, they commissioned a report that would provide their fellow clothing suppliers with a better understanding of how they’ll be affected by discussions in the halls of power in the United States, the United Kingdom and the European Union, a.k.a. the global North. Yet the burden of any new laws, they say, will fall, for the most part, on the shoulders of those in the global South who are already disproportionately bearing the brunt of sustainability demands.
The problem made itself known from the get-go. Crowdsourcing helped identify at least 60 different legislations that would shake up their supply chains. Because of time and resources, the suppliers had to narrow things down to 12 based on their severity and applicability.
On Thursday the coalition released “An Apparel Supplier’s Guide: Key Sustainability Legislation in the EU, U.S. and U.K.,” distilling their findings into a dozen fact sheets that cover a broad swath of liability hot spots from the U.S’s Uyghur Forced Labor Prevention Act to the U.K.’s plastic packaging tax to the EU’s corporate sustainability due diligence directive.
The report also identified some trends for suppliers. For one thing, they’re most likely going to face increased demands from their buyers for full supply chain visibility and traceability, which will result in increased reporting requirements and data requests. For another, they can expect stiffer codes of conduct and contract clauses from brands seeking to protect themselves from potential legal investigations and penalties.
Dr. Vidhura Ralapanawe, executive vice president at Epic Group, said that a lot of the law drafting has happened from a “fairly brand-centric perspective,” creating a top-down approach that can stymie effective implementation.
“The risk is that we will get buried in substantial paperwork, which is not useful for us as manufacturers because you’re trying to meet so many different aspects of so many different brands, who are trying to implement the same idea in their own way,” he said. “And whether that will meaningfully address the fundamental issues remains to be seen.”
Lovejoy pointed out that since EU member states could interpret the same legislation in slightly different ways, suppliers could experience not just an increase in requirements, but one that could be “tenfold or more.” There will also be an uptick in expectations for suppliers to implement due diligence processes or grievance mechanisms with conflicting needs or duplication of work.
Something that the coalition agreed on is that the lack of clarity and dearth of guidance makes it difficult for suppliers to prepare for the upcoming transition. The report recommends that they engage with their customers about their methodologies for implementation because of the room for multiple interpretations. Suppliers, if they haven’t already, need to allocate sufficient resources across multiple departments, including legal, sourcing and human resources, to understand—and, more important, proactively comply—with the new laws, since they’ll touch on nearly every aspect of their business. Most of all, suppliers should seek out opportunities to speak to policymakers to “contextualize policy implications” and “shape their development and delivery.”
“We do believe that legislation is well-intentioned and we do support the intentions of legislation,” Lovejoy said. “[But] we feel there’s really been a lack of supplier voice within legislative development, and that has resulted in legislation that may be resisted and quite hard to implement as well.”
Lovejoy urged lawmakers to involve production experts when looking to regulate the supply chain, noting that doing so can lead to legislation that is “better informed, more equitable and more impactful with buy-in from the start.”
Sourcing that spans multiple continents is by nature complex, but most legislators are neither “well aware” of the dynamics in the supply chain nor of the relationship between brands, suppliers and workers, said Evre Kaynak Czyszczewski, who oversees social and environmental responsibility at W.L. Gore & Associates and is an adjunct Instructor at the University of Delaware.
As for brands, they “have their own view of how supply chains work,” she said. “And I cannot say that they’re not aware of the challenges that suppliers have in terms of traceability, transparency and all that, but there is very little engagement from the brand side in terms of how are we going to address these challenges.”
Czyszczewski said that instead of imposing more requirements on suppliers, brands need to be more transparent about what the challenges are so that manufacturers aren’t struggling to keep up with the developments that affect them the most.
“This is not being acknowledged in the formulation of the legislation, in the formulation of the compliance requirements or in the interpretation of the compliance requirements,” she said.
Gauri Sharma, assistant general manager of communications and sustainability innovation at Shahi Exports, said she worries that less-than-mindful legislation could amplify the transactional nature of the buyer-supplier relationship, particularly if it’s writ large in contractual terms.
“As a manufacturer, it’s quite scary to think that, you know, we were hoping to move to more of a partnership-collaborative model as an industry, but the legislation shows that it might be going the other way: more and more transactional, more fragile in some sense,” she said.
So far, few suppliers have had clear or constructive conversations with their customers about how they are interpreting or plan to interpret the morass of legislation, Lovejoy said. In brands’ defense, everything is coming “so thick and fast that they are probably still trying to get their own heads around this,” she said.
“But again, there is an opportunity we identified of doing this together, of actually sitting down together and analyzing these legislations and saying what does this mean for the brand, for the supplier, for the mill and for everybody involved? And how can we come up with an effective system to use in that?” Lovejoy said. “So that’s one of the things that we would really love to see this report encourage.”
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