COVID-19 and the fashion industry: a catalyst for change?
8 October 2020: Revelations about poor working conditions in small UK clothing factories may not have proved to be modern slavery, but certainly acted as a wake-up call. Can this also prove a catalyst for change?
Many charities and NGOs have warned that COVID-19 and the global lockdown will lead to an increase in modern slavery and human trafficking.
Lockdown has created a perfect storm: an increased demand for some goods (such as PPE), a lack of access to overseas supply chains and a simultaneous fall in consumer demand for other goods (such as clothing).
These factors have placed pressure on manufacturers to produce and purchasers to supply goods quicker or cheaper (or both). Workers already laid off or fearing lay off are more willing to accept (or less able to resist) lower pay and poor working conditions, or more prone to being forced into modern slavery or trafficked.
Why the fashion industry?
In July 2020, newspapers claimed that limited PPE and a lack of social distancing in small clothing manufacturers were to blame for a sudden spike in COVID-19 cases in Leicester. Low pay (below the national minimum wage) and no sick pay meant workers were compelled to come to work even when ill. As the companies involved were small, they were not subject to audit or other third-party checks and (apparently) operated below the radar.
Their customers, however, were leading fashion retailers and brands. Most follow a business model based on low margins and fast turnaround times and a reward policy based on aggressive performance targets leading to an overemphasis on cost reduction. This is to meet the demands of a market – whether high or low end – hungry for new designs and a ‘throw-away’ culture that can only be sustained by low retail prices. In turn, suppliers have to accept low margins and workers low pay. This is not new, but the real shock was that this was going on in the UK in 2020.
The fashion industry’s shareholders, retailers and consumers have been quick to condemn such practices. In response, many well-known brands have undertaken reviews into their supply chains, but their experience should prove a wake-up call to all industries.
What about the Modern Slavery Act – shouldn’t it prevent slavery?
The Modern Slavery Act (MSA) imposes a legal obligation on some organisations to produce an annual Section 54 Transparency in Supply Chains Statement (s54). The statement outlines the risk of modern slavery within their supply chains and what they are doing to mitigate it. It does not mean an organisation is preventing all slavery, but that it is in a position to identify if or when slavery might be occurring – only then should it take steps to prevent it recurring.
The hope is that consumers and stakeholders will base their purchasing and investing decisions on the s54 statements and vote with their feet.
As it turns out, once the various agencies concerned had inspected the factories in Leicester they found that no offences had been committed under the MSA.
So if the problem is not slavery, what is it?
It is a fact that poor working conditions are a problem here in the UK, not just overseas. HMRC regularly shames companies that do not pay the national minimum wage, and the Health and Safety Executive prosecutes companies that endanger their employees.
For some, such as those working in the gig economy, the lack of sick pay may compel them to work when they are ill. Lockdown and recession have just exacerbated the inherent weaknesses in the system.
What now for the fashion industry?
The fashion industry needs to demonstrate to their customers, investors and other stakeholders that they take the issue seriously. They need to act, not just talk, and they need to act in the long-term, not just apply a quick short-term fix.
Purchasing policies, at the very least, need to change. Many organisations, for example, ask their suppliers if they pay the minimum wage and sick pay, but do they actually check this and refuse to deal with suppliers that do not abide by such legal requirements? Do their contracts include the ‘right to audit’ and do they look beyond their tier 1 suppliers? If they find evidence of slavery or poor working conditions what do they do about it?
Purchasers, when negotiating contracts, must move beyond ‘price’ (or rather the lowest price possible) as the deciding factor, with little regard for what this price may mean for workers.
In most countries (and certainly in the UK), there is a legal obligation to pay a minimum wage, limit working hours, provide sick pay and offer a safe working environment. Moreover, modern slavery and human trafficking are criminal offences. It is the government’s role to enforce the law but retailers and manufacturers in the fashion industry can set themselves apart by demonstrating they are not just law-abiding but responsible employers. It is in their interests too; as recent events have shown, accusations of slavery, even if unfounded, can prove very damaging to an organisation’s reputation and its bottom line.
A catalyst for change?
It would be naïve to assume slavery only exists in the fashion industry. Slavery in one form or another exists in most industries and countries, including the UK. Poor working conditions are also prevalent. COVID-19 has simply highlighted the public health risk that such practices pose to us all.
Many have spoken of the need to build back better, but if this is to be more than a platitude then all industries and the accountants working in them need to heed the lessons and take action. This is more than just a moral imperative: ignoring slavery could prove very costly to us all.