Sourcing Journal – What Constitutes Ethical Sourcing Anyway?

By Tara Donaldson

Despite the fact that ethical sourcing can be quite an intangible concept, loosely and differently defined by each company or entity, it’s something today’s consumers are increasingly demanding of the brands they buy from, which renders it required for success.

Though today’s consumers have little education about how clothes are made, garment sector tragedies and news about unfavorable working conditions in low-cost sourcing locales have quickly turned them into more conscious shoppers.

“The bottom line for companies is: ‘What do your customers expect from you,’” Mara M. Burr, senior VP for global strategy advisory firm Albright Stonebridge Group and former deputy assistant U.S. Trade Representative for South and Central Asian Affairs, said during a panel at last week’s United States Fashion Industry Association (USFIA) Apparel Importers conference. “The bar is ever-changing and ever-moving when it comes to what you need to do.”

But even if companies are discerning what they need to do on an as-it-happens basis, it is still the industry’s responsibility to call attention to ethical sourcing and to carry it out, Sourcing Journal founder and publisher Edward Hertzman said.

What are the major problems with compliance?

Companies can be quick to put compliance requirements in place, but not all consider whether workers’ lives are really improving because of the rules on ethics they establish and whether consumers even care about the good they’re doing.

“I do believe after Rana Plaza, factories are paying more attention to compliance and I do believe factory workers have a better quality of life at work, but at home they may not have a much better life,” Hertzman said.

The deadly building collapse in Bangladesh that killed more than 1,100 workers in April 2013 and alerted international media about subpar conditions in the garment sector may have yielded improved compliance in the immediate aftermath, but with companies battling increasing input costs and constantly chasing better margins, worker wages have hardly risen enough to be considered a living wage, and in some cases, working conditions are only marginally better, if at all.

Bangladesh began conducting inspections of its garment factories following the tragedy, but whether the reports on conditions are accurate or justly reflected remains a concern.

In Dhaka, Burr explained, inspectors would get paid $0.25 to do an inspection and then have to spend hours in traffic taking buses to the facilities to conduct the assessments. Some factory owners would offer those inspectors $20 to look the other way and many would just get back on the bus.”

“That’s the way the system was working,” Burr said. “So as sourcing executive, you need to look at the legal framework of the country you’re working on. Will they enforce laws? Do they have the capacity to do inspections?”

When it comes to consumers, do they even care that workers may not earn a living wage or work in safe environments to make the clothes they wear?

“I think they [consumers] care about if they’re going to get the Friends & Family deal this weekend,” Hertzman said. “There are small pockets of groups that like to shop responsibly, but not the majority of consumers.”

Beyond just ethics and consumer concerns, the biggest problem with compliance is that there’s no standard for what should be considered compliant.

“It could be Eddie Hertzman compliant and all I want is for there to be a roof on the building,” Hertzman said. “The definition of compliance is still very, very vague. We need an industry standard or universal standard.”

Is an industry-wide compliance standard even possible?

“The idea that there’s a panacea for all of our social responsibility, that is a still born thought to be honest,” Avedis Sefarian, president and CEO of Worldwide Responsible Accredited Production (WRAP) said. “We can never know what all the problems could be and therefore what we need to get good at is managing how to handle problems as they arise.”

The other problem, Burr added, is that companies aren’t willing to share their best business practices—even if it is for the betterment of the greater industry.“When you’re moving to saying, ‘Here’s how I’ll asses a factory, this is what’s important to my company,’ it gets to a point where companies become very uncomfortable,” she said.

A single, unified rule on compliance could be little more than a pipe dream, Seferian said. With varied sourcing environments, some rules on compliance could apply for certain companies and not for others. Even though WRAP, for example, is the single most recognized standard for social compliance in the sector, it still isn’t accepted everywhere.

“We’re not going to be able to get to that ideal paradise,” Seferian said. “Responsibility may be shared, but liability isn’t and there’s always going to be that factor.”

So what’s going to help cure the ills of compliance?

“I think we need to stop targeting countries and start targeting factories. I could take you to some of the most beautiful, compliant, water treatment factories in Bangladesh. And in China there’s some factories so scary you’d never even imagine. When we talk about compliance issues we always talk about Bangladesh and that’s not fair,” Hertzman said, adding that pulling out of a country with compliance and safety issues is the worst thing a company could do. “Then the factories are going to be so desperate for orders, who knows what they’ll do. When we look at compliance we have to look at solving a global problem.

Seferian added, “We are in a better place today than we were 20 years ago or 50 years ago. The problem is never going to go away entirely, we’re just going to get better and better at dealing with it.”

The key, he said, is making sure those with the right responsibilities have the capacity to deal with those responsibilities and execute them in a way that will actually result in improved compliance conditions.

And, Burr said, “We need to be careful that we don’t slip into the idea that only one sector is responsible for curing the ills of compliance.” 

The solution isn’t only within the apparel industry either—other industries, like food and auto, have minimum standards in place that have kept conditions more in line, Hertzman explained. “It’s going to take someone from the outside coming in because I don’t know if we’re [the apparel industry] is incentivized enough to make any real change.”