The jury is mixed when it comes to efforts to eradicate force labor from companies in the apparel and footwear business.
New research from the Business & Human Rights Resource Centre, in its KnowTheChain Apparel & Footwear Benchmark, 65 of the world’s largest apparel and footwear companies were benchmarked on efforts to protect workers in their supply chains from forced labor risks.
The report highlights key gaps in company practices – while also showcasing good practice examples and making recommendations for company action.
Poor Results
Allegations of forced labor were identified in the supply chains of almost half of benchmarked companies.
The average score was just 21 out of 100.
More than one in five companies (20%) scored a 5/100 or less, while more than one in third of companies (34%) scored less than 10/100.
“The fashion industry has long since been in the media spotlight for its endemic human rights risks and labor abuse scandals," said Áine Clarke, Head of KnowTheChain and Investor Strategy, Business & Human Rights Resource Centre, in a statement.
"Despite this, most companies are not adapting to the scale and scope of these issues across global supply chains." Clarke added. "Exacerbated by multiple crises in 2023 – including climate breakdown, international conflict and post-pandemic realignment – alongside an increase in strategic litigation, legislation and associated operational, reputational and financial risks, makes this ‘business-as-usual’ approach by so many brands short-sighted and misguided.
Clarke also noted the economic conditions. "“While the largest apparel companies have experienced staggering revenue growth and profit margins since the pandemic, those who work for them continue to face some of the most impoverished conditions. The largest apparel companies have experienced a combined growth of $42 billion since 2022, yet an estimated $71milion is still owed to workers due to wage and severance theft committed during the pandemic.
"This disparity is most evident in luxury fashion, where record revenue growth and profit margins seem increasingly divorced from workers, and working conditions, in global supply chains. For multiple years running, luxury brands such as LVMH (6/100) and Salvatore Ferragamo (4/100) have performed among the poorest in the benchmark.
Improved Results
The report did note that some companies had high scores with three companies --Lululemon, Puma and Adidas -- scoring over 50/100.
The highest performing company, Lululemon disclosed markedly stronger human rights due diligence efforts to address forced labor risks.
Clark noted that Lululemon (63/100) and Puma (58/100)" posted top scores on human rights performance, while reporting strong financial results to shareholders in 2022 and 2023 – despite increasingly complex operating environments. Unfortunately, these examples represent the practice of only a small cluster of companies, rather than the majority in the Benchmark – but they make clear prioritizing worker protections is both possible and profitable.”
Moving Forward
An accompanying Investor Briefing from the KnowTheChain team urged investors to engage with portfolio companies on key elements of corporate human rights due diligence: supply chain tracing, risk assessment, worker voice and remedy.
It also emphasized the importance of robust public disclosure as a mechanism for effective accountability and regulatory compliance – warning that companies which fail to take these steps are likely to be exposed to greater operational, legal and reputational risks in the future.
Key takeaways:
Companies seem ill-prepared for existing and upcoming legislation which requires them to know and show their supply chain risks. A concerning disparity exists between the number of companies sourcing high-risk raw materials for their apparel and footwear products and those demonstrating they know where these raw materials are sourced from and disclose the identified risks.
For example, while 98% of companies produce cotton garments, only 15% disclosed even partial detail on sourcing countries, putting them at risk of enforcement action from forced labor bans, such as the Uyghur Forced Labour Prevention Act, and emerging human rights due diligence legislation.
Lack of stakeholder engagement and poor performance on Worker Voice (15/100) compromises workers and increases exposure to operational and legal risks. Only 22% of companies disclose engaging with unions to support freedom of association in their supply chains.
Companies’ purchasing practices and sustainability commitments seem misaligned. Companies scored poorly on the theme of Purchasing Practices (12/100), which have the most known impact on working time, contracts, HR and compensation. This represents a threat to even the most robust human rights due diligence approach where these practices make it impossible for suppliers to comply with human rights standards.
