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Op-Ed | An Industry in Denial: Fashion’s Struggle with Compliance

As much as brands talk about compliance and concern for workers' rights and safety, the unfortunate reality is that price is still king, says Edward Hertzman.
By
  • Edward Hertzman

NEW YORK, United States — On a hypothetical evolutionary chart of industries, the apparel business is an 800-pound, unregulated gorilla, glamorously disguised and hiding in the shadows of other industries, which are monitored by bodies like the Food and Drug Administration (FDA), the Consumer Product Safety Commission (CPSC) and more. Despite supplying one of our most basic necessities and being a $1 trillion per year business, the garment industry still operates in a rather archaic way. Today, we can Skype with our factories and store our files in the cloud, but the industry as a whole is content with working with its head in the ground.

And is it any surprise? The news above ground isn’t pretty. Thanks to fast-fashion retailers, which are rewarded by consumers for bringing new (albeit poorly made) styles quickly to market at bargain basement prices, the industry has been forced to fundamentally re-examine its supply chain. Margins have shrunk as the cost of goods rise and retail prices are driven down by heavy promotion, which consumers have grown to expect.

In order to fight this downward pricing pressure, product must be cheaper and arrive faster, which often means relying on several moving parts in several different countries and employing agents to manage production. Any delay is devastating for every partner along the supply chain. But, at this rate, tragedies like Rana Plaza will also continue to devastate the industry, for as much as brands talk about compliance and applaud themselves for signing agreements like the Accord on Fire and Building Safety in Bangladesh and the Alliance for Bangladesh Worker Safety, the unfortunate reality is that price is still king. And adding the cost of compliance with new health and safety standards makes it even harder for companies to hit their target prices, proving that, in many ways, the deep-rooted issues that caused the Triangle Factory fire in New York City in 1911 are the same as those that, over 100 years later, resulted in Rana Plaza.

To make any kind of progress, it’s important to first understand the major dysfunction that currently exists in the garment sector, or as David Birnbaum, founder of Third Horizon, a garment industry consultancy, wrote in a recent op-ed: “To the suppliers, customers are bunch of extortionists who care only about FOB price. To the academics, suppliers are a bunch of exploiters who, unless policed 24 hours a day, will invariably employ 10-year-old children, 70 hours per week, in slave-labor conditions, just to earn a few extra cents profit.” No relationship, not even the most barbaric, can succeed with such strong levels of distrust, resentment and misunderstanding. So why is fast-fashion or, as I see it, the whole apparel industry, designed to be so compliance unfriendly?

It doesn’t help that apparel manufacturers leach off underdeveloped countries where the skill levels of workers are often as low as their wages. Nor does it help that the industry lacks any widely accepted compliance standards. Each brand has its own set of standards for its production “partners” to abide by and towards which factory owners must invest their own money without any assurance that brands will place orders with them, or give them any consistent business.

Since the retail market has been soft, companies need any competitive advantage they can find, even if that means factory hopping in search of the lowest cost. And if, for any reason, product is delayed, damaged or needs to be fixed, brands are often unsupportive of their factory partners. Indeed, in this buyer-factory relationship, it is the factory that always has the short end of the stick. Production issues are born by the factory. And any compliance issues that need to be addressed must be done so at the factory’s expense. It’s a tough way to do business, made harder by the fact that many factories are already working on razor thin margins and extreme deadlines — often because brands do not submit approvals on time or make last minute changes to product. So how can factories keep their doors open? By cutting corners, imposing longer shifts and subcontracting production to other, even lower cost and possibly non-compliant factories.

With so many parts to the supply chain, ensuring compliance is becoming incredibly difficult. It explains why many companies are hesitant to sign agreements such as the Accord on Fire and Building Safety in Bangladesh and the Alliance for Bangladesh Worker Safety. A garment's tag may name only one country, but as we all know, a brand most likely has multiple offices across the world responsible for ordering trims from Hong Kong and fabric from mainland China, while getting the final garment stitched in Vietnam, Cambodia, Bangladesh or all of the above. To make matters even more complicated, brands often appoint agents to manage factories, trim suppliers and fabric mills, removing themselves from the equation entirely. Keeping eyes and ears on each part of this supply chain is virtually impossible and leaves companies very susceptible to compliance woes.

Brands can engage third party auditors to be their watchdogs, but in countries where the minimum wage can be under $100 a month, bribery runs rampant. A factory owner desperate to get a shipment out can easily pay off inspectors for what may seem like a nominal fee, but can amount to six months of income for locals. In countries like Bangladesh, where it is the government’s responsibility to shut down factories that have failed inspections, the local authorities have their reasons to keep these factories running. Unions might ensure workers fair wages and work conditions, but what happens when these unions becomes corrupt, as many do?

And what about the many other parts in the supply chain, like the cotton farmers, the fabric mills and the trim producers? At what point does the brand take full responsibility for the product with their name on it?

Ultimately, I have more questions than answers. But if you think the negative impact caused by fast-fashion can be solved if factories simply incur more compliance costs, brands pay more for product, or consumers dig deeper into their pockets, think again.

We will need to tap into the kind of whizz kids that grew the $25 billion phone app industry to help modernize this Neanderthal we so lovingly call our industry. Let’s actually take ownership of what we produce. Rather than inventing new ways to trick consumers into buying more and more often, let’s develop faster and safer ways for products to be made by a highly skilled workforce. Let’s watch a country like Bangladesh flourish, rather than be ravaged by abandonment. And maybe, then, we will see fewer store closures, less discounts and less tragic headlines. Forget evolution — what the apparel industry needs is a revolution.

Edward Hertzman is the founder and publisher of Sourcing Journal, a trade journal covering the apparel and textiles supply chain.

The views expressed in Op-Ed pieces are those of the author and do not necessarily reflect the views of The Business of Fashion.

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