Companies failing on ethical trade promises
Companies who have committed to improving conditions for the workers who supply them are failing to live up to their promises, according to a report by the Institute for Development Studies.
Garment factory worker in Bangladesh.
LBL
Many major UK companies, such as Tesco and Primark, are members of the Ethical Trading Initiative (ETI), which was set up to ensure adequate working conditions in global supply chains. Yet the report, The ETI code of labour practice: Do workers really benefit?, concludes that the impact of the ETI has, so far, been limited. This is, in part, due to the double standards of its member companies, whose promotion of ethical trade is undermined by their other business practices.
The three-year study, published in 2006, found no impact through the ETI in terms of worker organisation, and a very limited impact on payment of a living wage and provision of regular employment. The report found a moderate impact on reducing working hours. However, when the reduction of hours wasn’t accompanied by increases in pay, workers faced difficulties because their take-home pay decreased. The only major improvement found was better health and safety conditions in the workplace.
“Our wage is about 15% less than before because of less overtime. There is hardly anything left over after paying for rent and food.” Female worker, footwear factory in Vietnam
According to the report, factory managers across all case studies complained that it was difficult to improve labour practices given the purchasing practices of the UK retailers and brands buying from them. The most frequently cited problems were short lead times, inflexible deadlines, and falling prices. Also, suppliers complained that there were no market incentives in place to encourage good labour practices. If supplying factories meet retailers’ ethical code of conduct, there is no guarantee of reward for compliance.
“…downward pressure on prices and lead times appeared to be having a negative impact: in all countries and sectors suppliers reported that this limited their ability to make improvements in labour practices.”
The report recommends that brands and retailers should make ethical trade central to their core business practice, stabilise their supply base and develop long-term relationships with their suppliers. It also recommends that retailers and brands should “develop strategies to address the drivers of supply chain instability and complexity, such as short-term investment horizons, retailer price wars and high turnover fashion cycles.”
The report also called for “campaigns to raise consumer awareness of the adverse social effects of poor sourcing practices, rapid turnover of fashion goods, and falling consumer prices.”
People & Planet are currently developing a campaign to be launched in September 2007, targeting UK high street retailers to make them change their current business practices which makes it impossible for suppliers to improve labour conditions in their factories.