The grades served as an indication of the extent to which the companies had developed a set of management systems that could reduce the risk of labour exploitation.
Only two of the 41 companies reported making sure all employees in the supply chain received a living wage, a finding Nimbalker says was shocking, but not unexpected.
“It was expected in the sense that this is a core issue. It’s an issue workers in developing countries talk about most, but paying a higher wage affects the bottom line of companies,” he says.
“But production costs are generally a fairly low percentage of the total cost, so these businesses could still be quite profitable, but they’re not interested in changing.”
Major ongoing issues identified in the report included the use of child labour in the Uzbekistan cotton fields and ongoing worker exploitation in Bangladesh.
“Some companies like Pacific Brands, Kmart and Kathmandu are taking steps in the right direction, but many aren’t. Thousands of kids are still working in the Uzbekistan cotton fields in poor conditions, with sewerage leaking into the canals.
Of the businesses assessed, 37% had taken steps to use responsible purchasing practices and 59% had a policy addressing subcontracting and homework, but only 15% of businesses published the names of their cut-make-trim suppliers.
In a positive, 56% of businesses were conducting unannounced audits on at least 75% of their supply chain.
“Businesses have no legal obligation to conduct audits against labour rights standards, but if a consumer body decided to buy ethically, they’ll let them know.”
While creating an ethical supply chain may seem a daunting, expensive task, all the experts agreed the cost of doing nothing is far greater.
“You can’t afford not to,” Dearin says.
“If you’re attached to a Bangladesh factory which collapses, it will affect your brand. Consumers will start to look for somewhere else to shop.”
From a best practice perspective, Nimbalker says 3Fish, Etico, Pacific Brands and Cotton On are good examples to follow when it comes to constructing ethical supply chains.
“They’ve invested the effort to have a good code of conduct and they knew at least who their cut-make-trim suppliers were and had a decent auditing process,” he says.
“They use things like offsite worker interviews where the employees are taken to a safe, comfortable space, unannounced visits so the factories can’t hide their child labourers and independent audits from credible bodies.”
For the fair trade brands, 3Fish and Etico, these companies also ensured workers were paid the living wage, had good dispute resolution procedures in place and had a grievance policy where workers felt free to report issues without reprisal.
Nimbalker recommends retailers preference suppliers which are renowned for their ethical standards and engage with them from the outset, but to create an ethical supply chain more than this is needed.
A 2004 research paper by Mick Blowfield from the US Centre for Corporate Citizenship found food retailers need to better consider the pricing of goods. Blowfield found if farm-gate prices are equal to or less than the costs of production, this can force the initial producer to exploit labour or engage in environmental mismanagement in order to reduce costs, rather than shut down production.
“In the agricultural sector it’s more complicated. Deforestation can occur because it’s cheaper for farmers to clear more land to expand production, then to improve productivity in a smaller space,” Dearin says.
“Equally if the farm-gate price for goods is too low, they’ll look for ways around this. Farmers will deforest rather than intensify. But for fashion retailers it’s more black and white because there are so many different sources – we know it’s possible to both make a t-shirt and allow the worker to be safe.”
When developing a code of conduct, retailers can look to the Organisation for Economic Cooperation and Development or International Labour Organisation for adequate minimum standards.
The ILO standards include provisions like freedom of association, allowing people to unionise, no child labour and no forced labour. Systems can then be built around this code to ensure all workers are protected.
Harcourt says the best way to examine a supply chain and build a code of conduct is through the eyes and ears of the workers.
“Workers themselves know where things can go wrong, they’re at the coalface. Use the internal eyes and ears as much as you can. Particularly with corruption in an organisation, it’s the employees who are aware of it,” he says.
Dearin says interviewing workers is crucial, as a common problem with Western organisations codes of conduct is they’re out of touch with the issues workers actually care about.
“A lot of things companies put into their ethical codes are great, but they don’t always address the issues that other people overseas see as important,” she says.
“Surveys with collectives in different countries like Indonesia and Kenya and have raised concerns and preferences and priorities of what the local people identify as key issues, in contrast to what’s addressed in Western codes.”
A study of social priorities in the Indonesian and Kenyan cocoa and tea industries found land-tenure security, fair and transparent legal systems, stable long-term buyer-seller relations and fair pricing and timely payment were the top ranked social issues, but these were not addressed in western businesses code of conducts.
Equally Harcourt says people should not expect other countries to adopt Australian standards.
“No one is saying to impose our minimum wage on workers in Indonesia or Bangladesh, it’s about improving their safety standards and meeting their living requirements.”
