“You will note that we are able to cancel any order at any stage. This includes orders in production and orders in transit. Where we cancel an order, we are not responsible for the cost of the Goods, the cost of any fabric, or any other cost at all, including the cost of any trim or component.”
Today, 24th April marks 7 years since the worst industrial disaster of the 21st century and in the history of the fashion industry. Rana Plaza - a complex of garments in Dhaka, Bangladesh manufacturing clothes for large western fashion brands - collapsed claiming 1,134 lives and injuring over 2,500 workers, some with life altering injuries. The causes of the disaster were traced back to the cut-throat profit maximising practises of the fashion brands. They promised to change.
Topshop parent company Arcadia Group has cancelled over $100 million worth orders in Bangladesh alone.
7 years on, as COVID-19 wrecks havoc throughout the world, fashion brands have sadly shown us nothing has changed. Those cut-throat practises they promised to change continue unabated. The above quote was from the CEO of Arcadia Group - which owns brands such as Topshop, Dorothy Perkins, Miss Selfridge - Ian Grabiner as he justified the reasons for cancelling over $100 million worth of orders from suppliers in Bangladesh. These are orders which have already completed production or are on-going.
The worst part is, Arcadia Group aren't alone in enforcing their savage policies. No one has bothered changing.
Cancelled Orders, Discounts & Delayed Payments
US based labour rights group, Worker Rights Consortium, estimates cancellations from brands globally can exceed $20 billion. In particular, the consortium says Arcadia Group only sources 5% of its purchases from Bangladesh. Therefore, Arcadia Groups' total cancellations globally will far exceed the $100 million it is cancelling in Bangladesh alone [link].
At the time of publishing this article, over 13 well known global fashion brands or their parent companies have said they will cancel orders which are ready for shipment or in production, and/or have asked for large discounts and longer payment periods.
Brands such as H&M, Target and Inditex (which owns brands such as Zara, Bershka) have now promised to honour their initial agreements with suppliers after public backlash over their initial decisions to cancel orders, seek discounts or longer payment periods [link]. However, public outcry seems to fall on deaf years at the likes of GAP, C&A and Arcadia Group.
Even in the case of the brands which have promised to honour their contracts, it is not a straightforward matter. Brands place orders with suppliers and transact using what is known as a letter of credit (LC). The brands' bank promises to honour the payment once the shipping documents have been furnished by the supplier. However, brands have the sole authority to decide when they want the shipment to be made. Under these circumstances, it is still unclear if and when suppliers will receive their payments. So it's too early to celebrate the commitments these brands have made.
Data from Centre for Global Workers' Rights report published March 27, 2020.
Walking on Thin Ice
With fashion brands extracting a majority of profits in the industry value chain, very little is left for everyone, even when times are good. So in a time of crisis, when brands refuse to pay, delay payments and/or ask for large discounts for what suppliers have already spent money on making for the brands, suppliers are left in a perilous situation. Suppliers are walking on thin ice and when the cracks start to appear and the ice gives away, the first to fall through are the garment workers.
Already among the worst paid workers in global supply chains, garment workers are being fired or furloughed without severance pay and in some cases without salaries already owed to them. In Bangladesh alone, over 1.2 million garment workers are estimated to have been furloughed or fired without pay. On a monthly minimum wage of TK 8,000 (roughly around $96) garment workers in Bangladesh live from hand to mouth with hardly anything left to save.
Garment workers in Bangladesh block roads demanding overdue wages (photo courtesy AFP)
Late Payment = No Payment
Some brands are in negotiations with suppliers for extended payment terms. From the usual 30 to 45 days credit period, brands are now asking for anything between 120 to 150 days. Garment manufacturers don't have large cash reserves. Large brands don't pay advances on the orders placed. However, manufacturers have to pay for raw materials and labour until receiving payment from the brand.
“They never said they will pay. They only said that we’ll not cancel the goods. Cancelling the goods or not taking the goods — for my workers, it is the same. The worker is not getting the money”
Faced with a cash crunch, many factories will be compelled to close or reduce operations. Of 316 factories in Bangladesh surveyed by the Centre for Global Workers’ Rights between March 21 and 25, 58% responded that they will have to close all or some operations due to non-payment or delayed payments. Against this backdrop, countries are estimating mass scale layoffs of garment workers [link].
Things Need to Change - We Can Create Change
There is a significant power imbalance in the global fashion industry. Together, large fashion brands have cornered suppliers into a corner, so much that almost all contracts favour the brand, only. Brands carry no financial impact until they take delivery of the very products they mandate suppliers to make. No advance payments are made, cancellations are at the sole discretion of the brands and they decide when they want to take delivery of the goods.
We need to rise and demand brands we purchase from ensure that no worker goes hungry. If there ever was a time to use our privilege to demand action, this is the moment. Our consumptions decisions make an impact and collectively we can amplify it so the women and men who make our clothes don't go hungry and live in fear.
Here are few actions we can take.
- Check if the brands you are buying rank well in Fashion Revolutions' Fashion Transparency Index
- Purchase from brands who are transparent and have clear commitments to protect workers along the supply chain
- Demand answers from the brands you buy from by writing an e-mail to them and follow up until they answer
- Post on social media the brands' response or lack of it
- Learn about the different ways you can become a Fashion Revolutionary
- Support global petitions such as this from Remake
Big western brands are breaking their promises and we can't allow them to continue their savage profit maximising policies. Women and men in countries like Bangladesh, Sri Lanka, Cambodia and Myanmar shouldn't go to bed in hunger and fear. Together, we have the power to make sure fashion becomes and industry of opportunity and inspiration.