This story originally appeared on Forbes.com and is authored by Elizabeth L. Cline. It appears on PayUp Fashion.com with the author’s permission.
While we were tending to our sourdough starters and settling into our sweatpants during the pandemic, one of the “most audacious financial heists in corporate history,” according to Scott Nova, Executive Director of the Worker Rights Consortium, was going on right under our noses. A new report, “Unpaid Billions,” co-authored by the Worker Rights Consortium (WRC) and the Penn State Center for Global Workers’ Rights, draws on U.S. and European apparel import data to illuminate the grim toll of big brands’ unethical dealings during the pandemic.
When coronavirus hit, powerful apparel companies “canceled” orders—a polite way of saying they refused payment to their garment suppliers for clothes they explicitly ordered months before the pandemic and that were already cut, sewn, and finished or nearly completed—worth billions. The trade data reveals that a staggering $16.2 billion went missing from the supply chain, at the very least, nearly $2 billion of which is owed for garment worker wages. The report also estimates a total of $40 billion worth of orders initially went unpaid during the crisis.
“We could see the cancellations in the data, and we could see it by country,” says Mark Anner, report co-author and director of the Center for Global Workers’ Rights. “And it’s had a dramatic impact on worker’s rights.”
I’ve written about this unfolding saga for months and joined the calls to get the factories paid back. After enormous public pressure, close to two-dozen apparel retailers have committed to paying for orders, worth about $15 billion, including Gap, Levi Strauss, Nike, H&M, Zara, PVH, and VF Corp. But those that have not made a commitment to pay or have asked for retroactive discounts include many household names (and solvent companies, meaning they have the money to pay but choose not to), such as Ross Dress for Less, Topshop, The Children’s Place, Urban Outfitters, Bestseller, and Kohl’s, according to a tracker updated by the WRC. The Daily Star, a Dhaka newspaper, has kept a far more extensive list of the smaller and medium-sized companies who’ve canceled, delayed orders or asked for discounts.
Some brands say they’re working with suppliers to ease the devastation of these decisions. A Kohl’s rep says its looking into “liquidation opportunities” and “re-ordering” some product, in addition to other strategies. It adds that it had the “contractual right” to cancel orders, which are estimated at $150 million dollars of product from Bangladesh and Korea alone. Bestseller’s press representative says that the company has “continued to pay all our suppliers.” It remains on the Worker Rights Consortium tracker for imposing discounts on those goods so steep that the labor rights groups claims it wipes out suppliers’ profits. The WRC report estimates that another billion has gone unpaid to suppliers just for retroactive discounts.
Fashion’s unpaid bills have been catastrophic for garment workers. A September report co-written by the European Center for Constitutional and Human Rights, the WRC, and the Solidarity Center’s International Lawyers Assisting Workers Network (ILAW Network) showed that these debts have led to mass layoffs (at least one million garment workers in Bangladesh, 150,000 in Cambodia), while the Clean Clothes Campaign found that millions of workers remain unpaid for the work they did at the beginning of the pandemic. As Bangladeshi garment worker activist Kalpona Akter said earlier on the crisis, and I’m paraphrasing, “For brands, the orders are a loss of profits, for workers it means losing food.”
But the missing money isn’t just an issue relevant to fashion—and shouldn’t spark outrage merely out of concern for the world’s poor. When huge corporations aren’t held accountable to the people they harm—and are able to lock hard-working humans into poverty while shoring up profits in the middle of a crisis—we lose faith in our institutions. Americans on both sides of the aisle view the pandemic as evidence of the failure of globalization; and are clamoring for more localized supply chains. That’s bad news for the millions of people around the world who will continue to make most of the products we buy, and who simply want fair pay and social protections.
What’s more, Americans have more in common with sweatshop workers than we might realize—and onshoring won’t solve these issues. The apparel sourcing system is startlingly similar to many other precarious jobs that Americans now hold, whether we toil as gig economy workers, delivery people, freelance writers, janitors, and so on. What all of these jobs have in common is they are contracted out (what Harvard economist David Weil calls the “fissured workplace”), and workers in these sectors lack rights because of outdated labor laws and poor regulation that closes them off from wealth amassed by the big companies they work for. Inequality is increasing in the fashion supply chain (Oxfam estimates that the average fashion CEO earns a garment worker’s lifetime pay in four days), but it’s happening across American society, too. The invisible hand of the marketplace is not working for many people.
We’ve also tried decades worth of awareness-raising for sweatshop workers, and we’ve allowed big companies to lead change on social and environmental issues in their factories. That strategy has failed. As the canceled orders show, the interests of multinational corporations are often pitted against workers. What was good for brands during the pandemic was terrible for garment workers, and vice versa. We shouldn’t put brands in charge of stamping out sweatshops when they’re incentivized to create them. A recent report by the MSI Integrity project shows (and the canceled orders drives home) that voluntary codes of conduct fail to reliably “detect abuses, hold corporations to account for harm, or provide access to remedy.”
Meanwhile, Anner’s prior research has shown time and again that conditions for garment workers in many apparel-producing countries are not getting better or have stagnated. In fact, this latest WRC study shows that the prices brands are paying to suppliers have plummeted even further since the start of the pandemic. “Some of the brands have taken the orders but pushed down on price even more,” says Anner. “And these workers were already hanging by a thread.”
The fashion industry will likely never pay its bills to workers and suppliers in full. That’s why calls for reforming supply chain rules and holding corporations accountable for the human rights abuses they cause are growing louder. That is very encouraging. But to make the necessary changes will require more consumers and leaders in the West to understand that this isn’t just a sweatshop problem that impacts people far away.
The foundation for this crisis was laid long before the pandemic. Garment workers earn poverty pay sewing clothes for some of the world’s most profitable companies (just 20 brands control 97% of industry profits), and they have no safety net, little access to unemployment insurance, and few backup job options. “This is about the immense power imbalances that define global supply chains,” says Nova. “Brands used their power to put in place a one-sided payment system. It allowed them to take advantage of suppliers during this crisis. That same power allows the brands to get away with it.”
This power imbalance, as the pandemic revealed, has allowed corporations to bend the rules of business in ways that inordinately disfavor suppliers and protect themselves. The ECCHR/WRC/ILAW report, called “Farce majeure: How global apparel brands are using the COVID-19 pandemic to stiff suppliers and abandon workers,” examined the unethical contracts that underpinned the cancellations. In the case of Kohl’s and Arcadia Group, the contracts with suppliers included language allowing brands to cancel without payment for a host of reasons. Arcadia Group’s contract permits canceling orders without payment for any reason, the report found. Other companies, including Urban Outfitters, used force majeure, or act of God clauses, to wiggle out of their deals, even though many had the money to pay. As the “Farce majeure” report notes, the canceled orders, no matter what unethical and one-sided contracts exist between brands and factories, are likely in violation of both the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises. And thus contracts must be reformed moving forward.
The solutions for the fashion industry couldn’t be clearer: We need new rules and regulation to govern global supply chains and hold brands accountable for the workers that make their products, no matter where they live. This will incentivize companies to pay better wages, help workers develop a safety net to protect them in crisis, and spread the wealth from fashion out more evenly. Negotiating new international rules is challenging in our political climate and big brands have a lot of power and are highly invested in the way things are, but change must come. It could set a precedent that would benefit a large number of workers within fashion and beyond.
The “Farce majeure” report lays out a clear and compelling roadmap for change, calling for immediate review of international supply chain regulations; new laws that outlaw abusive contract terms between companies and suppliers; national laws where brands are headquartered that sanction companies for human rights abuses in their supply chains (France’s Duty of Vigilance Law is an example; California will get another chance to pass its Garment Worker Protection Act in 2021); and binding agreements on the factory level between unions, factories, and brands that establish better wages and working conditions. The report also calls for a full regulatory and legislative investigation into the power imbalance in the supply chain that led brands to cancel to begin with.
How will we realistically get any of this done? I certainly hope that the brands who were good corporate stewards during the crisis and who’ve paid their bills will lead the way. But we need public, international institutions, and national governmental support, too. To those ends, International Lawyers Assisting Workers Network (ILAW Network) is a new global network of more than 400 lawyers in 58 countries formed to promote better supply chain regulation. PayUp Fashion, a new initiative that grew out of the original #PayUp campaign, and which I’m a part of, is using citizen power to help galvanize the public around brand accountability and these long-needed legal reforms. Alongside Clean Clothes Campaign, we believe that brands must come together with international institutions and governments to provide a financial safety net to garment workers through the pandemic, as just a first step.
The labor rights abuses in apparel might seem distant and abstract, but they are a microcosm of what’s happened across American society. Economic concentration is too high, wages for working people are low, and power is entrenched, making change feel illusive. But it’s not too late to reform the way we do business, even across borders and vast distances and long supply chains, to protect everyone and give all workers access to the ladder of prosperity. The apparel industry—as one of the world’s largest employment sectors both at home and abroad—has a vast potential for positive impact and is the right place to start.
UPDATE – 10/15/20 – This story has been updated to better reflect the details of the ECCHR/WRC/ILAW report, “Farce majeure,” and the contributions of ILAW, at the request of that organization.