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April 7, 2020

ETI issues guidance for brands over supplier payments

The Ethical Trading Initiative (ETI) is calling on its members to ensure workers in its supply chain receive payment for completed work during the Covid-19 pandemic and is urging dialogue over ongoing orders as it releases guidelines for brands.

By Michelle Russell

The Ethical Trading Initiative (ETI) is calling on its members to ensure workers in its supply chain receive payment for completed work during the Covid-19 pandemic and is urging dialogue over ongoing orders as it releases guidelines for brands.

The guidance was released to its members last week and the ETI says it is monitoring the response of its member companies. Its members include global firms, international trade union bodies, specialised labour rights organisations, and development charities.

“ETI understands that many brands are facing huge challenges throughout their supply chains and within their own business during this period,” says Peter McAllister, ETI’s executive director. “Equally, we know that many suppliers and manufacturers are feeling the impact and will also be concerned with business continuity, however, in the long run, we all depend on each other and ultimately, workers.

“Therefore, we expect that when difficult decisions are taken, the impact upon workers and suppliers is fully assessed and action is taken in collaboration to minimise this as much as possible.”

The ETI says it remains “vital” that businesses are transparent about the measures they are taking to minimise the impact of the crisis on workers in their supply chain.

“We will be monitoring the response from our members and we will want to see evidence that they are doing their utmost to mitigate the impact on workers, not just during the worst of the crisis, but in the medium to long-term too. Workers are in a desperate situation at the moment, and they need our solidarity and support more than ever,” McAllister says.

The ETI has anticipated three scenarios when orders may need to be canceled, and has offered guidance accordingly:

Future orders where no costs have been incurred by suppliers or factories

  • It is reasonable to cancel these orders without any further obligation, but we expect there to be dialogue with suppliers about post-coronavirus orders and support to retain capacity where possible. Ideally this could include a commitment to return with a commensurate order in future.

Ongoing orders where some costs have already been incurred, but more would be expected with a continuation

  • We expect members to have an inclusive dialogue with suppliers to fully assess the costs incurred so far with the aim of agreeing a reasonable way to share them. For work already completed, we would expect salaries to be paid in full by suppliers and for members to work hard to minimise the ongoing impact upon workers who will already be facing difficult circumstances. This will mean understanding the capacity of the factories to support their workforce and making extra efforts where necessary and possible.

Completed orders with full costs already allocated

  • Payment for completed orders should be honoured and within reasonable time. Brands should consider early payment and not withhold payments to suppliers as workers need money for medication, food or to survive periods of isolation. Brands should also avoid using Force Majeure provisions in contracts for economic reasons or summarily terminating contracts. Brands are asked to work with their suppliers to ensure workers continue to receive salary payments to bridge the time of technical unemployment and work with suppliers to ensure that workers receive compensation packages in line with national and international standards.

“This crisis has demonstrated more powerfully than ever the need for a long-term sector-wide improvement programme to establish permanent protections for workers in sourcing countries,” McAllister adds. “These must include employment injury, paid sick leave and unemployment benefits. We understand ILO and Better Work are leading on this and are keen to support their leadership on this initiative.

“ETI will work with other MSIs, trade unions and industry organisations to develop a practical programme involving international financial institutions such as the World Bank Group & International Monetary Fund, and we will expect all our members to be actively, and fully involved in this.”

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