Most initiatives by responsible buyers are in response to public pressure

Most initiatives by responsible buyers are in response to public pressure

Britain’s Modern Slavery Act (MSA), which began coming into force on 31 July, sets new disclosure standards on an extraordinary number of garment businesses. But its legal niceties won’t really determine the law’s impact, says Mike Flanagan, who believes public opinion matters more.

The MSA requires all firms with global sales over GBP36m ($56m) "which carry on part of a business" in Britain to make an annual public statement about each year’s progress in eliminating slavery and human trafficking from their supply chains and operations.

It sounds far more far-reaching than disclosure requirements anywhere else – like California’s Transparency in Supply Chains Act - in three key ways:

  • It affects almost any substantial company, anywhere. Such as Alibaba, Li & Fung and major Chinese manufacturers like Dishang Cherry – which all have European admin centres or sales offices in the UK. And foreign retailers – like Macy’s and Lands' End – with no UK outlets, but a healthy web business selling to the UK.
  • It covers the whole of a supply chain. Such as how garments are made in Argentina for a Spanish brand’s sales to the Americas.
  • Its definition of a supply chain includes suppliers of both goods and services. So it covers employment practices in farms, call centres, docks and haulage companies far removed, in distance and in ownership, from a New York or Tokyo head office.

But its legal requirements are limited:

  • Its definition of slavery differs from most. Relying on agreements like the European Convention on Human Rights, the MSA seems not to cover some abuses – like adult forced labour on Uzbek cotton fields, or the use of prison labour – that those conventions allow. There’s no shortage of current practices in our industry the MSA would expect firms to avoid – like trafficked Vietnamese in Chinese garment factories, or Bolivians in Argentinean sweatshops. And a disturbing number of scandals – like arguably exploited Bangladeshis deprived of their passports in Jordan, or child mill workers under bonded labour contracts in India – look like what the MSA is trying to eradicate.
  • Enforcement provisions are limited. The UK government can get a court order compelling companies to post a report. There are no sanctions for not filing or for telling untruths, and no apparent plans for tight report monitoring or pursuing companies with UK sales but no UK assets.
  • "We’re not doing anything" is a legitimate report. And the current guidelines suggest firms need only describe their supply chain, the risks of involvement with modern slavery, how they train relevant management, and annual key performance indicators. There’s no legal requirement to actually reduce modern slavery.

I don’t think these transparency rules are meant to eliminate modern slavery by threatening fines or prison. The hope is they’ll create pressure from public opinion for firms to demonstrate annual progress in eradicating it.

Few of the steps developed by responsible buyers – from Bangladesh factory inspection initiatives to the ZDHC programme to eliminate toxic discharges – resulted from legal demands: they came from businesses responding to public pressure.

Public opinion matters more

What brands think about public opinion affects how they behave far more than legislative detail.

Amazon, for example, whose supporters claim is soon going to be America’s largest apparel retailer, has produced a Californian trafficking disclosure which activist group Know the Chain believes "addresses the majority of [Californian] requirements". But that hasn’t stopped Ethical Consumer giving Amazon’s published policy the "Worst Ethical Consumer rating for supply chain management". One is judging Amazon’s legal compliance; the other is analysing Amazon’s commitment to how suppliers treat their workers.

Amazon is unique among major apparel retailers in ducking any real commitment to ethical sourcing. Unlike far smaller retailers, it makes no contribution – of cash or manpower – to the Bangladesh inspection programmes or the ZDHC commitment. Since appointing its first sustainability executive a year ago, there have been a few environmental initiatives – but Amazon still lags decades behind Wal-Mart in taking responsibility for workers in its supply chain.

Unsurprisingly, Amazon’s evidence to the UK Parliament on the MSA was a shocking parody of the worst kind of purchasing irresponsibility. Its anti-trafficking programme amounted to lots of suppliers filling in forms - verified with just 363 audited factories in 2013 – for the whole of $54bn worth of merchandise procured. As long as a supplier ticked the right boxes, Amazon was happy.

Amazon’s judgement might be well-founded. Some activists will be outraged if Amazon just recast its current California declaration for the UK – but many customers will be completely unmoved.

Amazon’s apparent conviction that it’s too cool to worry about ethical sourcing might accurately reflect what it’s hearing from customers and pressure groups. Almost every US campus has campaigns to boycott Wal-Mart and VF for choosing the Bangladesh Alliance inspection programme instead of the Accord. But no such campaign exists against Amazon, even though it has no inspection programme at all.

In the US, anti-Amazon feeling is a fringe issue, in a way anti-Wal-Mart feeling isn’t. The financial press and serious stockbrokers constantly investigate the sourcing ethics of mainstream apparel retailers, yet Amazon mostly attracts criticism just for paying little tax.

Britain’s MSA rules will probably be satisfied by transparency declarations avoiding any discussion of Uzbek forced labour, Chinese prison workers or Bangladeshis in Jordan, and simply saying they’re doing nothing to investigate trafficked Vietnamese or Bolivians.

The evidence of the past 20 years says public opinion, fuelled by smart activists, won’t be. The likes of H&M and Next – who dominate British apparel retailing – will be galvanised by the MSA rules to ensure all obnoxious practices start getting eradicated, whatever international conventions say.

I’d like to think no retailer will be able to gain competitive advantage without incurring the costs of honouring the spirit, and not just the letter, of the MSA. For the past few years, such optimistic belief has been justified.

Don’t blame governments if public opinion tolerates a less ethical sourcing policy at Amazon than at Wal-Mart.