CGWR is calling on all buyers to “respect the terms of their purchasing contracts”

CGWR is calling on all buyers to “respect the terms of their purchasing contracts”

The fashion industry needs to re-think how it does business, in light of the impact of Covid-19, and purchasing practices must be reformed for social and environmental sustainability, a new academic paper has suggested.

'Abandoned? The impact of Covid-19 on workers and businesses at the bottom of global garment supply chains,' published by the Center for Global Workers Rights (CGWR), gives an analysis of recent developments in garment supply chains, with a focus on Bangladesh.

According to the report, since the coronavirus pandemic took hold, more than half of Bangladesh suppliers have had the bulk of their in-process, or already completed, production cancelled.

When orders were cancelled, 72.1% of buyers refused to pay for raw materials already purchased by the supplier, and 91.3% of buyers refused to pay for the cut-make-trim cost of the supplier, CGWR says. As a result of order cancellations and lack of payment, 58% of factories surveyed report having to shutdown most or all of their operations.

"All parties are feeling the extreme burden caused by Covid-19," the report explains. "However, not all parties are equally situated to find the liquidity needed to cover their expenses. As shops, outlets, and malls are ordered shut, retailers and brands are taking an enormous hit to their bottom line and cash reserves.

"However, the hit on supplier factories, who generally operate on paper-thin margins and have far less access to capital than their customers, is that much more extreme."

CGWR is calling on all buyers to "respect the terms of their purchasing contracts" and pay suppliers for orders already in production or completed. Suppliers, for their part, must also ensure payments are used to cover all legally-mandated wages and benefits, including severance payments to dismissed workers, it adds.

There are also calls for the government of Bangladesh to continue to "mobilise all the resources at its disposal" to subsidise suppliers and provide wage support for workers during the crisis.

"Going forward it is necessary to re-think how the industry does business. Purchasing practices must be reformed for social and environmental sustainability. This includes stable orders, timely payments, and pricing mechanisms that cover the total cost of sustainable production, from living wages and proper benefits to tax revenues that allow governments to build proper social safety nets. And it includes allowing worker participation to be an integral part of this process through full respect for the right to form unions and bargain collectively."

Swedish apparel retailer H&M has said it will pay and take delivery of goods already manufactured by its suppliers, as well as those in production. The retail group is thought to be the first, and only, retailer to have agreed to pay its suppliers for cancelled orders where products have been manufactured.

Click here to see how the outbreak's development has impacted the industry.