The Christmas and Hanukkah season is upon us – usually great news for the clothing and retail industries. After all, it’s the time for joyous gifts of socks and ugly sweaters (did you know there is a website dedicated to ugly Christmas sweaters? Because, well, of course there is…). But the past weeks have also brought less welcome tidings to those industries, specifically concerning human rights issues in their supply chains. While this isn’t anything new, a number of related developments popped up in the same general time. For instance:
“In Singapore at the start of the month, the Sustainable Apparel Coalition – a non-profit alliance that makes up over half the global apparel and footwear industry – convened for their annual meeting. There was one big question on attendees’ minds: how would the coalition respond to claims of greenwashing?”
This was primarily in response to the Norwegian Consumer Authority warning that the Higg MSI “could not be used to support sustainability claims.” Others – including Adidas and Kering – had already stopped using Higg MSI, with “Kering citing concerns about the accuracy of the data.”
Then a Bloomberg investigation found that Shein – a Chinese company valued at $100 million, backed by U.S. private equity and the largest online-only company selling clothing to US consumers – was using cotton originating from China’s Xinjiang region. Under the U.S. Uyghur Forced Labor Prevention Act, goods produced with materials originating from China’s Xinjiang region – especially cotton – are prohibited from import into the U.S. According to Bloomberg:
“Laboratory testing conducted for Bloomberg News on two occasions this year found that garments shipped to the US by Shein were made with cotton from China’s Xinjiang region… In a statement, Shein didn’t dispute Bloomberg’s test results or say whether it uses cotton from Xinjiang.”
How, then, are these goods still being imported into the U.S.? Shein sells its products direct to consumers.
“Typically, its individual shipments to customers fall below an $800 value threshold that triggers reporting requirements to US Customs and Border Protection, meaning they’re not subject to the scrutiny applied to retailers’ bulk imports… Shein’s items escape such targeting under a so-called de minimis rule that lets goods of low value enter the US while avoiding Customs declarations or duties. Roughly 2.7 million such packages arrive in the US daily, a number that has almost doubled since the 2021 fiscal year, Customs data show.”
“Workers at the fashion giant Boohoo are forced to walk the equivalent of a half-marathon per shift in a sweltering warehouse in which night-time temperatures can reach 32C, an undercover Times investigation has found. Staff fulfilling online orders at the retailer’s warehouse in Lancashire label themselves ‘slaves’ and have complained of racism, sexual harassment, gruelling targets, inadequate training and ill-fitting safety equipment. The harsh conditions have led to workers collapsing in the aisles, with an ambulance called to the site once a month on average.”
What This Means
Although much emphasis in the ESG world these days is on climate and diversity/equity/inclusion, supply chain social risks are still top of mind for apparel and retail and shouldn’t be given short shrift. In the EU, new laws concerning supply chain due diligence are coming into effect and will require more effort and transparency from regulated companies soon. I’ve written previously about these risks and things to consider when developing and relying on ESG certification/assurance frameworks. Even though most ink these days is dedicated to carbon emissions and investor demands, it wouldn’t be prudent to believe that other ESG risks have gone away.
PracticalESG.com members can take advantage of a variety of tools to help manage these risks, including checklists on assessing your company’s ESG approach, using internal audit for ESG data verification, selecting ESG auditors/advisors, navigating the Uyghur Forced Labor Prevention Act and internal controls for E&S information, as well as Guidebooks on using the FTC’s Green Guides for marketing and E&S data validation.
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