Fashion Sophomore

BY KATE ABNETT APRIL 26, 2015 11:55

The reputations of most high street fashion retailers are tainted by the staggering human costs of making the products they sell. How has Marks & Spencer managed to be a gentle giant?

A garment worker takes part in M&S' 'Labour Link' mobile phone survey | Photo: Courtesy Marks & Spencer

LONDON, United Kingdom — A chain is only as strong as its weakest link. In fashion’s global supply chain, that link is the unethical state of its garment factories.

“In Cambodia I met with workers who are fainting in their workplaces due to malnutrition and exhaustion, sometimes over a hundred at a time... I went to Sri Lanka last year and met 70 factory workers who had all been fired for joining a union, after they asked for their annual pay increment to be paid.” Anna McMullen is the policy director at Labour Behind the Label, a co-operative that campaigns for garment workers' rights. She reels off the problems like a round of gunshots: “Poverty pay; excessive working hours; repeat short-term contracts and casualisation of the labour market; systematic and violent undermining of freedom of association; dangerous workplaces.”

Since the late 1980s, western fashion brands have taken their production on a tour of the globe — first to China and, then, to poorer countries, such as Cambodia and Bangladesh. The geographical trail went from West to East, but the real journey was a race to the bottom, in search of factories that could offer the lowest costs. The brands created ripples of new jobs in the markets where they established production contracts. But media reports of unethical working conditions crashed in waves upon the shores they had left behind.

In the UK, Marks & Spencer is not only a household name but something of a cultural institution. ‘Marks and Sparks’ is where much of the nation buys its school shirts, first suits and, famously, its underwear. In addition to its 798 stores in the UK, M&S has also opened 455 stores in international markets, including Western Europe, India, Russia, China and the Middle East.

But like most high street clothing brands, Marks & Spencer’s 2,000 third-party suppliers are largely based in the developing world: 50 percent of its production is based in the Far East; 30 to 40 percent on the Indian subcontinent (the remaining 10 to 15 percent is made in Europe). And yet, M&S is confident that its supply chain is ethically sound. How?

In 2014, Ethical Consumer magazine named Marks & Spencer the most ethical high street fashion retailer. It was one of only four clothing companies included in Ethisphere's 2015 Most Ethical Companies list.

“When Rana Plaza happened, there was a big panic from lots of retailers,” said Krishan Hundal, who is responsible for ethical sourcing at Marks & Spencer. “We didn’t panic. We’ve been dealing with some of our factories in Bangladesh for 15 years. We know every factory, when it was last visited, who was there and what the standard is. It sounds obvious but it’s still quite unique!” According to Hundal, M&S has 60 factories in Bangladesh, which a local team visits twice a week.

Through long-term relationships with suppliers, closely monitored by local teams, M&S has made the prevailing system of garment manufacturing march to its own ethical tune. Take subcontracting, often cited as a core cause of human suffering in the supply chain. When vendors sub-contract production to other facilities, the brand that placed the original order is often left with little clue as to where — and under what conditions — its products are made.

“That was the problem at Rana Plaza,” said Fiona Sadler, head of ethical trading at Marks & Spencer. “Most of the people that were sourcing actually didn’t know they were in there.” Factories working for M&S can use sub-contractors — but only if M&S has inspected, audited and approved that sub-contracting facility first.

“Many companies will go round to audit a factory and point out everything that’s wrong and then just walk away and say, ‘See you in six months’ time!’ And the poor factory’s left thinking, ‘What do I do now?’” said Hundal. After an audit, M&S sends in one of the 27 full-time compliance managers in its regional teams, who draws up a corrective action plan and supports the factory to act on it.

When we have a very good factory on ethics, they also deliver outstanding quality: they have less returns, less rejects, less issues from our customers.

Back in 1999, M&S was one of the first companies to publish global sourcing principles, outlining standards on ethical issues, from protecting workers’ unions, to working hours, wages and safety, signed by then-CEO Peter Salsbury.

In 2007, M&S launched ‘Plan A’, an ambitious initiative that now includes over 180 commitments on social and environmental issues and reports its progress each year. Under Plan A, M&S has trained half a million workers on employment rights, healthcare and financial literacy since 2010 and every supplier factory has had its building structure independently assessed. The company also carries out anonymous mobile phone surveys of workers to unearth any issues not visible in audits. In 2014, 75,000 workers in 40 factories participated in this scheme.

According to Claudia Coenjaerts, president of the Fair Labor Association, publicly traded companies like M&S often struggle to invest in ethical policies: “It seems easier for privately held companies to make decisions that come at a cost.” But even though M&S has had a tough few years — in January, the company reported its 14th consecutive quarterly drop in clothing sales — its CEOs (formerly Stuart Rose, currently Marc Bolland) have stuck by Plan A as a non-negotiable part of the business.

“Plan A proves that an effective sustainable business plan ultimately delivers value for shareholders,” argued Mike Barry, director of Plan A. “Last financial year, it delivered a net benefit of £145 million.” When it launched, Plan A was predicted to cost the company £200 million over five years. By 2013, M&S reported that it had saved the company £320 million.

“When we have a very good factory on ethics, they also deliver outstanding quality: they have less returns, less rejects, less issues from our customers,” said Hundal. When M&S grades the performance of its suppliers, it gives equal merit to sustainability as to commercial and technical improvements. “It’s very difficult now to keep your staff in some countries where there are becoming potential labour or skills shortages. The only way you’re going to protect those garment workers is if you treat them really well.”

This begins with a ‘living wage,’ generally defined as that which enables a worker to cover basic costs of living. According to Anna McMullen, legal minimum wages in Bangladesh are around a quarter of what would be considered a living wage.

M&S has created a buying tool that calculates a living wage, which has been factored into the prices it pays to factories in Bangladesh, India and Sri Lanka. M&S’s Ethical Model Factory programme in Bangladesh also aims to “ensure the cost price benefits are paid to workers.” In the first three pilot factories, worker absenteeism dropped by 85 percent, while staff turnover fell by 65 percent. As a result, productivity increased, leading to a rise in salaries between 12 and 42 percent.

While Labour Behind the Label ranked M&S in its highest tier of companies taking action on implementing living wages, questions remain about how M&S factors these wages into pricing. In 2014, the company’s sales of general merchandise — mainly clothing — were £6.1 billion. M&S clothing generally costs more than retailers such as H&M and Primark, but on items such as knitwear the company has similar price points to brands such as Uniqlo and Gap, which have been the subject of labour scandals on poor pay.

“Without worker involvement in holding suppliers to paying this, or scrutiny over the calculation, how can we know that these aren't empty promises?” asked McMullen, who challenged the company to publish the actual wage figures that are paid by its suppliers.

In response to prolonged financial woes, Marks & Spencer is now increasing the direct sourcing of its products in a bid to keep up with its competitors. Though M&S targets an older consumer than most high street chains, the discrepancy in speed is clear: M&S adds new products to shop floors every four to six weeks; H&M and Topshop do so at least once a week.

“We set up our supply chain for our brand values,” said Hundal, noting that operating without clear forward planning can make things “difficult” for suppliers. “Obviously some businesses are much more ‘fast fashion’ than we would be.”

Indeed, fast fashion’s practice of buying in irregular orders with quick deadlines to respond to fluctuating demand and keep up with changing trends exacerbates problems like excessive overtime and replacing full-time staff with casual workers (to whom employers pay less benefits). Will speeding up production require that M&S reshape its ethical policies?

“We’ve just said, our approach to ethics is our approach to ethics,” said Krishan Hundal. “We can’t deviate from that.”

Aways good to see people making a change!

Published 15 February 2015 12:17, Updated 17 February 2015 06:06 by BRW.com

Catherine Taouk says she’s learned the error of her ways and is now helping other organisations turn their supply chains ethical.

Fast fashion is on the way out. Consumers are demanding more ethical options and retailers need to invest in the process of investigating what’s occurring in their extended supply chain.

That’s according to Catherine Taouk, who spent 15 years working at her father’s teen fashion brand, Supre, which specialises in mass-produced, cheap fashion. Supre was sold to The Cotton On Group in October, 2013.

“Since leaving Supre, I’ve learned that there is another way to do business, and it’s not this ruthless, cut everyone down to make money style of business that’s operating in the fashion world today,” Taouk says.

“I just wish I’d have known what I know today about ethical fashion back in my unconscious Supre days, about the impact our decisions were having on others,” Taouk says.

“We had millions of those pink Supre polypropylene bags on order constantly, and if I think now of the dyes that went into those bags that were reusable, but not recyclable. But I’m making up for all of the things I never knew now.”

Taouk joined Supre in 1997 as part of the sales and development team during a financially tumultuous period in which the brand entered voluntary administration. She was an instrumental figure in the brand’s transformation as it soared into a new stage of the business cycle, before her parents sold to the Cotton On Group.

Supply chain

Since leaving Supre, Taouk has absorbed herself in Conscious Capitalismevents, saying she’s learned the error of her ways. She’s also absorbed herself in books and documentaries that highlight unethical dramas in the supply chain, admitting an animation depicting force-fed geese then plucked for their down for use in ski jackets reduced her to tears. Now, she wants to show others in the fashion world how to be more sustainable in their approach to running their business.

As the Australian dollar falls and the federal government signs a free-trade agreement phasing in zero tariff for imports from China, it’s time for the fashion industry to change, she says.

“When I look back on my Supre days, I realise that the most profitable years were when we had true purpose. During those periods when we weren’t always focused on the money and the bottom line, rents, wages, ratios and all those things that made the business not so much fun any more, we were in fact more profitable.”

Taouk, who was the CEO of boutique fashion brand Princess Polly for three months last year, has returned to running her business consultancy to help brands adopt more strategic, responsive strategies and services and embrace changes in the marketplace.

But she’s going one step further, teaming up with supply-chain compliance specialist Despina Karlsson to launch the “Raw to Store” program, helping fashion manufacturers banish unethical manufacturing procedures from their supply chain.

She’s knocking on the doors of Australian fashion houses and offering to conduct an internal appraisal to help uncover problems in the supply chain and find alternatives. The audit will be conducted in conjunction with the University of Sydney, which plugs manufacturing data into an integrated sustainability analysis system to uncover supply chain flaws.

Short-term expenses

Taouk realises it’s going to be a slow burn and take longer for big companies to look deeper into their supply chain.

“Long term, retailers can be more profitable by being open about their supply chain, even though in the short term, there will no doubt be a fear that products will cost more. But the products will last longer and consumers will vote with their wallet.”

Taouk hasn’t invited Supre to be audited by Raw to Store yet but intends to.

Cotton On Group chief financial officer Michael Hardwick says the acquisition of Supre has given the fashion brand access to the group’s extensive network of existing suppliers.

“As all Supre products are now manufactured through this network, the brand is subject to the group’s ethical-sourcing program.

“We have, and will continue to further develop our ethical-sourcing program to ensure it not only meets, but exceeds the expectations of our customers, our team and our partners,” he says.

Taouk’s timing as she moves toward ethical fashion advice is impeccable, say industry analysts.

In Melbourne, fashion business consultant Elizabeth Formosa has noticed an increasing number of clients pursue ethical fashion business models. The founder of Fashion Equipped says the desire among retailers to produce ethical fashion is higher than it’s ever been as environmental and social issues are top of mind for younger generations.

“Many fashion retailers are challenged by the information and resources available to them locally. Especially for designers who don’t have a great deal of capital in the start-up phase,” she says.

Industry shift

Ethical Clothing Australia agrees. The garment-factory fire in Bangladesh in 2012 in which more than 100 workers who stitched garments for Western retailers died has cast a dark shadow on the fashion industry. The fire was the catalyst for a much greater media and public dialogue about ethical manufacturing, according to spokeswoman Sigrid McCarthy.

“We definitely feel this tragic event prompted more people to start questioning the origins of their purchases, and demand greater transparency throughout supply chains,” McCarthy says.

“This big shift toward more ethically produced fashion is here to stay and the fashion industry is slowly but surely realising this. Just like the food industry, there’s growing demand for ethical products within the textile, clothing and footwear industry, and companies are being pressured to take responsibility for their actions.”

Government support is following, with the Victorian Labor government recently announcing $2 million in funding over the next two years to Ethical Clothing Australia’s accreditation program. It will work with local textile, clothing and footwear brands to ensure their Australian-based supply chains are transparent and legally compliant.

Procurement industry specialist Tania Seary, based in London, agrees consumers are starting to seek out more sustainable and ethical fashion brands and that procurement processes are more important than ever.

However, the founding chairman of The Faculty Management Consultants has also noticed many global apparel companies shift supply chains to riskier countries such as Bangladesh, Vietnam and Myanmar, where low labour costs and standards mean lower retail costs for price-conscious consumers.

“Fashion manufacturers have an insatiable appetite for cost reduction. I’ve heard many stories of factories in third world countries manufacturing for multiple brands that will insist on eye masks during a dangerous process for one brand, but not insist on safety equipment for the cheaper run to follow to make savings.

“Fashion retailers just can’t plead ignorance any more. Some of the issues in these economies around child labour and unsafe practices are having major ramifications on brands as consumers speak out against fast fashion houses and vote with their wallet,” Seary says.

Fashion manufacturers need to start realising it’s their responsibility to track and audit when happens within their extended supply chain to find out what’s really happening down the line, she says.

“It’s up to fashion manufacturers to physically walk the supply chain, ask the questions and do the checks. It’s about deciding what your company’s non-negotiables are and considering the ethics you want your business to integrate into your supply chain.”