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September 20, 2022

Week in review: Overseas sourcing – a careful balancing act

Overseas sourcing, and the complexity it brings for global brands, was thrust into the spotlight last week with fresh research into Myanmar suggesting brands cannot trust due diligence is being carried out effectively at present, news that prompted Primark to end its sourcing operations in the country.

By Hannah Abdulla

On direction from the Ethical Trade Initiative, which urged garment brands and retailers sourcing overseas from Myanmar to reassess their presence in the country, after a report found human rights violations are taking place, Primark said it would be making a “responsible exit”.

ETI says companies are unlikely to be able to meaningfully consult with workers or their representatives whilst their suppliers are subjected to demands which threaten the rights of their employees and counter efforts towards openness, adding there is a “culture of fear” within supplier factories.

But concerns around ethical sourcing overseas are not limited to Myanmar. Earlier this month the ETI reiterated calls to businesses to redouble efforts in detecting forced labour in their operations and extended supply chains after a report from the Office of the United Nations High Commissioner for Human Rights (OHCHR) confirmed crimes against humanity are taking place in the Xinjiang Uyghur Autonomous Region (XUAR) of China.

Xinjiang – and allegations of forced labour – are not new. Some brands – in particular US and EU-based ones – have taken steps to lower their leverage on China per se in a bid to avoid links to forced labour in their supply chains.

According to the US Office of Textiles and Apparel, in the first half of the year, in value terms, only 13.2% of US cotton apparel imports (OTEXA code 31) came from China, falling from 14.4% a year ago and much lower than nearly 30% back in 2017. Together with the high compliance costs associated with the UFLPA and available alternative sourcing options, the possibility that US fashion firms could suspend importing certain products such as cotton apparel from China entirely, cannot be ruled out.

With that in mind, it was interesting to see the board of directors at Nike last week move to rebuff a shareholder proposal to halt sourcing goods and raw materials from China until the US government Business Advisory is lifted or rescinded.

While the proposal noted Nike’s transparency efforts were limited to tier 1 and did not extend to its raw material sourcing and manufacturing at other tiers, the board of directors argued the proposal was “ineffective and unnecessary”.

It’s worth noting that last year, Nike, along with H&M, found itself in hot water with its Chinese consumer base which threatened to boycott the brand over its position statement on Xinjiang.
The boycott hurt Nike’s sales. But with a 40-year history in China, Nike says it is determined to stay the course in China.

It begs the question, is China too important a market for brands to risk offending?

Brands urged to weigh Myanmar presence on human rights concerns
The Ethical Trade Initiative (ETI) is encouraging garment brands and retailers sourcing overseas from Myanmar to reassess their presence in the country after a report found human rights violations are taking place.

Primark to end Myanmar sourcing on ETI guidance
Primark has confirmed it will be making a “responsible exit” with regards to sourcing from Myanmar, following a damning report from the Ethical Trade Initiative published earlier this week.

Nike board votes down proposal to quit China sourcing
The board of directors at Nike Inc, has voted against a shareholder proposal to halt its sourcing of goods and raw materials from China as concerns surrounding human rights violations in Xinjiang continue to mount.

Wacoal reiterates Sri Lanka commitment, expands production
Lingerie manufacturer Wacoal has reiterated its support for Sri Lanka, announcing plans to further expand its manufacturing capacity in the country.

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