WASHINGTON — KnowTheChain, a collaborative partnership seeking to spur more transparency in the global supply chain specifically on the use of forced labor, scored 20 leading fashion and retail companies in a new study based on publicly available information in seven key areas.
While most companies have systems in place to monitor and crack down on forced labor and human trafficking in their global supply chains, only a handful in a sampling of 20 publicly traded firms actually addressed “systemic causes,” according to the organization, which released a benchmarking study on Thursday.
In addition to public disclosure, two areas where the industry needs to step up action are in monitoring suppliers’ worker recruitment practices and engaging workers and enabling freedom of association to give them a stronger voice, the study found.
Researchers based their findings on publicly disclosed information from the 20 companies, as well as public disclosures provided in response to questions posed by the researchers. The researchers did not take into account any information from third-party auditing companies that the brands and retailers might use to monitor supply chains.
Several companies received low scores in certain areas because the information was not made publicly available. At least two of the companies — French luxury group Kering and Japan’s Fast Retailing Co. Ltd. — questioned some of the recommendations or findings in the study.
In addition, the individual score does not belie that there is forced labor in a company’s supply chain. But it does essentially reveal a lack of transparency.
Many of the low-scoring companies received some high marks for some of the publicly known steps they have taken to address the issue of forced labor.
Adidas, Gap, H&M, Lululemon and Primark received the highest scores in that order, while Prada ranked 18th; Kering ranked 17th, and Fast Retailing and Under Armour Inc. tied at 15th were among the lowest scoring in the study.
Belle International Holdings Ltd., a Chinese apparel manufacturer located in Hong Kong, received the lowest score and ranked 20th out of the group.
KnowTheChain is a project of Humanity United, which is a part of The Omidyar Group, which has as one of its principles Pierre Omidyar, founder and former chairman of eBay, and his wife, Pam. Partners in the endeavor include Business & Human Rights Resource Centre, Sustainalytics and Verité.
“We believe the issue of forced labor continues to happen because of opacity,” said Kilian Moote, project director of KnowTheChain. “So the lack of supply chain transparency, lack of understanding, really creates and is a driver for why forced labor continues to happen. In part, what we are trying to encourage is greater reporting on these issues by any company that we benchmark. Therefore, any information we use in our evaluation has to be publicly available.”
The study “highlights some encouraging work being done by companies to address forced labor in their supply chains,” said Shawn MacDonald, chief executive officer at Verité. “This benchmark also illuminates the need for more responsible recruitment practices, including eliminating recruitment fees for workers. This one important step will improve the working lives of the millions of people upon which we all depend for the clothes on our backs.”
The International Labor Organization estimates that 21 million people around the world are victims of forced labor “trapped in jobs which they were coerced or deceived into and which they cannot leave.”
The issue of forced labor in supply chains has received stepped-up scrutiny in the past year by the U.S. government.
Collectively, the 20 apparel and footwear companies in the study scored an overall score of 46 out of 100 for the sector, compared with two other sectors benchmarked this year, including information communications technology which received an overall score of 39, and food and beverage, which received an overall score of 30 out of 100.
While the study’s authors judged that overall score of 46 for the 20 apparel and footwear companies as a “relatively high” average, they noted that there were significant disparities in the transparency and efforts between the top- and lowest-ranked companies.
“However, the benchmark still finds significant room for improvement for companies to address forced labor in their supply chains,” the study said. “Eight of the 20 [apparel and footwear] companies, for example, still do not demonstrate awareness of and commitment to addressing human trafficking and forced labor. And, the average scores on benchmark themes such as recruitment (22) and worker voice (29) are low.”
Companies that scored above the average score of 46, in addition to the top five, include Inditex, PVH Corp., Hanesbrands, Gildan Activewear Inc. and Nike Inc. The study said these companies have taken initial steps across all seven areas. Ralph Lauren Corp. and L Brands Inc. scored right at the average of 46.
Most companies below the average, according to the study, take forced labor into consideration in their supply chain monitoring of first tier suppliers, but they typically have taken “limited or no steps,” or provided no transparency, in the areas of worker voice, recruitment and assessing risks further down the supply chain, according to the report.
Kering, which received a score of 27 in the study, defended its policies on fighting worker’s rights abuses and criticized the study for not taking into account that the company has taken steps to become more transparent in its reporting of forced labor policies and enforcement.
“Kering reaffirms that the group is strongly committed to fight all forms of negation of workers’ rights,” the company said. “The report acknowledges a number of initiatives that the group has been implementing in this field for many years, notably putting into practice our Code of Ethics and our Suppliers Charter. The major area of improvement identified in the report concerns the group’s information disclosure practices. In fact, this is an area in which Kering achieved further progress in 2015 and 2016, and which is not taken into account in this (2015) study.”
The company added: “As a group, we are continually working on ways of improving transparency practices.” The firm also said it “remains constantly attentive” to key social issues and working standards, and participates in a number of international initiatives, including the Sustainable Apparel Coalition.
Moote of KnowTheChain said Puma, one of Kering’s brands, has a “robust and leading practice” against forced labor, but he noted it is just one of the firm’s brands. He noted the organization would like to see the company “translate” Puma’s practices across the spectrum for all brands.
Fast Retailing said it valued the findings, but questioned why it had received a low score of 38 and ranking of 15.
“We value the work of KnowTheChain and will continue our efforts to improve in some of the areas it recommends,” said a spokesman for Fast Retailing. “However, we were surprised by the low scores we received in several of its assessment domains and realize this contributed to a lower-than expected aggregated score. Thus, we believe we are stronger than assessed, and are currently in contact with KnowTheChain to ensure it has all the correct and current information we have available to share and to ensure we have understood results correctly.”
The company pointed to the steps it has taken such as having suppliers sign its Code of Conduct for Production Partners, which stipulates the company’s commitment against the use of forced labor and outlines regular monitoring to ensure compliance with the code.
“Under Armour is proud of its sustainability program and we work hard, and continuously, to improve it,” the company said. “We appreciate the focus this report brings to the issue of forced labor and look forward to advancing our sustainability program.”
Moote said, “Even some of the companies that have scored low have taken steps — maybe they have policies on forced labor,” Moote said. “What separates the leading companies [from the others] are those that go beyond commitments and governance or monitoring and take specific steps, whether it is remediating known or uncovered abuses or understanding how to proactively engaged workers.”
The top-ranked brand, Adidas, which received the highest score of 81 out of 100, has systems in place that “demonstrates a number of leading practices across several of the benchmark themes,” the study said.
It outlined steps that Adidas has taken that make it a leader in the area, including training second-tier suppliers on forced labor, ensuring workers sign contracts with suppliers to avoid exploitation through recruitment agencies and make sure remedies are provided to workers when abuse is found. The remedies include removing wage deductions from recruitment agencies or relocating migrant workers to safer dormitories when issues arise.
“At Adidas Group, we have worked closely with the ILO and other local non-government organizations to safeguard the rights of migrant workers who are a group particularly at risk of exploitation through middlemen and unscrupulous employment agencies within our supply chain,” said William Anderson, vice president, social and environmental affairs at Adidas Group, who was quoted in the study. “Further, as part of our Modern Slavery Outreach program we are working with our tier 1 suppliers to train our tier 2 suppliers on modern slavery and we are developing collaborative models to address potential risks of modern slavery in our tier 3 raw materials supply chain globally. KnowTheChain recognizes the steps we have taken to address forced labor and human trafficking risks in our supply chain, and by pointing out gaps and achievements, it is a resource that can help drive improvement across our industry.”
A spokeswoman for Gap, which had the second highest score at 77, said it “explicitly prohibits” the use of forced labor in is Code of Vendor Conduct and Vendor Compliance Agreements.
“We also recognize the importance of increased transparency to bring about further change in our industry, and in September took the step of publishing the list of about 900 approved factories that manufacture our products around the world,” she said. “While we’ve made progress in addressing these complex issues, we know there is more work to be done. We are constantly striving to ensure that all women and men making our products are treated with dignity and respect, and that their work is entirely voluntary. We remain committed to working and communicating with a wide range of stakeholders, including organizations such as Verité and KnowTheChain, to develop solutions that matter most to workers and contribute most directly to improving their lives.”