The “Fast Fashion Purchasing Practices in the EU” report is based on interviews with suppliers, experts and trade union representatives in six EU member states – Bulgaria, Romania, Croatia, the Czech Republic, Italy and Germany and aims to raise awareness of the volatile, risky and unbalanced trade relations between apparel brands and manufacturers in Europe.
Among the key findings is a “general trend” of lowering prices, shortening lead times, increasing order changes, lengthening payment terms, and increasing shares of “hidden” costs, such as the production of initial samples, being shifted to apparel manufacturers in Europe.
“This leaves suppliers in financial trouble, unable to make investments and pay wages,” says the Clean Clothes Campaign on its website.
“Research has also found that written contracts between buyers and suppliers are rare, and when they do exist, their terms are heavily skewed in favour of brands and retailers.
“Pricing is key, but it typically begins with the brand or retailer estimating the desired retail price; material, labour and other costs of production are only considered after that. Consequently, research found gaps between what suppliers are paid for labour and what would be required to cover the employers’ costs, including mandatory social security contributions and taxes.
“In some cases, suppliers accept low prices just to maintain the relationship or to survive, sometimes without making any profit. Moreover, where suppliers rely heavily on one buyer, the risk of bankruptcy is very high.”
Among its recommendations, the report from the FTAO and CCC Europe calls for:
- The payment of orders within 60 days;
- prices that cover production costs and guarantee living wages for workers; compensation for changes of orders;
- and a clear definition of the terms of risk and ownership of goods.
Recommendations also include a call for the European Union to adopt a directive that would ban unfair trading practices in the garment sector such as late payments and prices below production costs; ensure effective enforcement; and provide detailed guidance on how brands and retailers can ensure and uphold
freedom of association, collective bargaining, and living wages throughout their supply chains.