23.Garment production is one of the world’s biggest and most labour-intensive manufacturing industries with estimates of those directly employed ranging from 25 to 60 million people. Since the 1980s many leading Western fashion retailers have been ‘chasing the cheap needle round the planet’ and sourcing their clothes from countries with low labour costs and poor environmental governance. This shift in production has been facilitated by a 90% fall in shipping costs between the late 1950s and 2015, as shipping containers revolutionised trade in goods. Most of the garments sold in the UK are produced in Asian countries. In evidence, Dr Mark Sumner noted that this fashion model means that consumers in the UK ‘are getting pleasure and enjoyment from fashion and that is coming at a cost to workers and the environment in exterritorial, overseas production routes as well as agriculture.’
24.Fashion supply chains provide a source of jobs and GDP growth for people in poorer countries with the garment industry providing a crucial source of foreign exchange (when payments and investment are made in the local currency). However, poor pay and conditions are standard in global garment supply chains according to evidence submitted by the global trade union IndustriALL. It stated that:
Workers work long hours, often far beyond legal limits, for poverty wages and in conditions that breach Occupational Health and Safety (OHS) standards. Continual downward price pressure by companies keeps wages low while their real value declines against inflationary increases. The wages of most garment workers are no higher than the level of the minimum wage in their country, which in many cases is well below the level of subsistence. Excessive working hours are a continuing and entrenched problem. Production peaks are managed by relying on excessive overtime. Workers are compelled to work extremely long hours in order to supplement their basic earnings towards a level where they can support themselves and their families. Precarious employment conditions are rife, with temporary contracts, agency work and sub-contracting the norm. Violations of the right to freedom of association are commonplace, unionization rates are extremely low and collective bargaining is rare.
25.A 2016 report into Corporate Leadership on Modern Slavery found that of 71 leading retailers in the UK, 77% believed there was a likelihood of modern slavery occurring at some stage in their supply chains. The majority of global garment workers and artisans are women and girls, ‘the bulk of which make far less than a living wage, persistently face poor working conditions and live in poverty.’ Most work long hours up to six or seven days a week with reports of being burnt out and physically unable to continue beyond their 30s. We were told that women and girls face the brunt of the exploitation in the fashion industry, often at the bottom of the value chain working in the fields or factories. It is notable that the majority of fashion CEOs are men. All of the Chief Executives of the top ten UK fashion retailers (by market share) are men. Sarah Ditty, who was then policy director of Fashion Revolution, argued that the ‘fashion industry and all the problems that persist across the value chain is a huge feminist issue.’
Key facts & figures on the social cost of our clothes
Most of the garments sold in the UK are produced in Asian countries.
Over 90% of workers in the global garment industry have no possibility to negotiate their wages and conditions, according to the global trade union IndustriALL.
Leicester has the second highest concentration of textile manufacturers in the country with 700 factories employing 10,000 textile workers.
Written evidence from HMRC shows that UK-based garment factory owners have been forced to pay out almost £90,000 to employees for non-payment of minimum wage.
26.Poor working conditions in fashion supply chains hit the headlines on 24 April 2013 when the Rana Plaza building in Bangladesh collapsed. The building housed five garment factories where 1,138 people died and another 2,500 were injured, making it one the largest industrial disasters in history. The victims were mostly young women. The Fashion Revolution campaign was founded by Carry Somers and Orsola de Castro in response. Fashion Revolution argue that the Rana Plaza disaster was the ‘direct result of the opaque, complex and speedy way in which the industry functions today’. The Bangladesh Accord on Fire and Building Safety was set up in the aftermath of the Rana Plaza disaster to improve factory standards through building inspections by structural engineers and safety training. Five years since, the vast majority of factories are behind schedule implementing the Accord, a cause for concern as workers continue to be put at risk. Bangladesh saw widespread protests by garment workers over low wages in early January 2019.
27.The sustainability consultancy Eco Age argued that unrealistic pricing throughout the supply chain is a major issue ‘from fabric buyers needing to prioritise cost targets over sustainability, to manufacturers being left without profit margins.’ It says retailers impose ‘unrealistic requirements on suppliers that compete to offer the lowest prices and shortest lead times, often resulting in corner cutting, impacting both worker welfare and the environment.’ Apparel supply chain consultant Olivia Windham Stewart said that she feared the voice of suppliers was not being heard in the debate. She said:
While wages low and working conditions can be poor, many apparel companies continue to report profits in the millions or billions of dollars; they continue to deliver returns to shareholders; their owners continue to appear at the top of rich lists from Spain, to Sweden to Japan. Meanwhile, what do suppliers experience? In the five years since the Rana Plaza incident, the price paid by lead firms to supplier factories in Bangladesh has declined by 13%, with a resulting 13.3% decrease in profit margins from 2011 to 2016 . This in a context where brands are asking more of suppliers in terms of compliance and remediation–i.e. higher costs. A number of Bangladeshi suppliers told me directly, and off the record, that UK brands were not prepared to adjust their prices in response to exchange rate fluctuations after the Brexit vote. This means suppliers were being asked to produce the same quantity and quality of work at a significantly reduced price.
28.This pressure on suppliers to offer unrealistically low prices was also recognised by manufacturers. UK factory owner and chairman of the Textile Manufacturer Association of Leicestershire, Saeed Khliji, has been quoted as saying:
None of the retailers are giving us an ethical price. An extra £2 or £2.50 on a garment would sort everything out. Instead they squeeze us for pennies. If they don’t sell everything, they send it back and charge us for the carriage. If we are an hour or 30 minutes late with delivery they fine us £500. I have been told of one retailer who is making £2 million a year from fines.
29.Garment workers’ access to trade union representation is low according to IndustriALL. In many garment producing countries, collective bargaining structures are weak or absent: over 90% of workers in the global garment industry have no possibility to negotiate their wages and conditions and so are not able to claim a fair share of the value that they generate. IndustriALL argues that collective bargaining at industry level is ‘the missing mechanism’ which would enable significant progress to be made towards living wages for garment workers. It argues that Corporate Social Responsibility (CSR) programmes have failed to address the problems of poor working conditions and low pay in the garment industry. It says that CSR programs rely largely on auditing and compliance to attempt to improve conditions in the factories that produce for them:
These unilateral, voluntary and nonbinding efforts have overwhelmingly failed to improve wages and working hours or to ensure respect for workers’ right to join a union. Not only have they proved to be ineffective, but, in giving reassurance that something is being done, have become obstacles to finding genuine solutions to the root causes of low pay and excessive working hours. Where freedom of association is respected, and workers are allowed to organize unions and bargain collectively, workers are able to defend themselves from exploitation and obtain decent incomes and working conditions. Where these rights are denied, the CSR model is unable to fill the gap.
30.We asked fast fashion retailers how they could pay workers decent wages while charging such low prices. Paul Lister of Primark said that its business model enabled it to sell T-shirts for £2 and still make a profit:
That is a question that is often put to us. I think it is because our business model is slightly different from perhaps others. We do no advertising. You will have seen no billboards, no television advertising. Primark has never done any significant advertising at all. That can save us, in any year, £100 million to £150 million compared to some of our larger rivals. That goes straight into price, so that keeps our pricing low.
With our arrangements with our factory, we often buy on longer lead times, in quiet periods for the factories, and then we pay the factories early. If you are a factory owner, you will be able to give Primark a better price to reflect that. Then from the factory through to the store, we keep our costs to the absolute minimum and in the store our margins are very tight. Our published margins are between 9% and 12%. It is our business model that takes us to the £2 T-shirts.
31.After significant decline in recent decades, the UK garment manufacturing industry has experienced renewed growth recently as retailers have commenced or increased sourcing from UK suppliers. In some cases, this is for ethical reasons, such as Huit Denim setting up in Cardigan or Phoebe English producing her clothes where she can oversee production in the UK (both of whom gave evidence at our hearing at the V&A museum). In other cases, clothing production has been ‘reshored’ to small garment factories in the UK because of their ability to rapidly supply ‘fast fashion’ retailers like ASOS, Boohoo and Missguided. This presents opportunities for regional economies as it can offer local garment manufacturers entry points into global value chains as well as employment opportunities for communities. However, we also heard concerns about working conditions and illegally low pay in the garment manufacturing hub of Leicester.
32.Leicester has the second highest concentration of textile manufacturers in the country with 700 factories employing 10,000 textile workers. These workers produce around one million items of clothing per week for online retailers. Unite the Union said that while the majority of the factories are compliant, there are a small number of factories which break the law to maximise profits. As low-end supply chains, garments have become marked by intense cost competition and unstable orders.
33.A study by the University of Leicester in 2015, commissioned by the Ethical Trading Initiative, examined concerns relating to both registered factories and smaller unregulated production units in Leicester. The study concluded the majority of the city’s garment workers were paid below the National Minimum Wage, do not have employment contracts, and are subject to intense and arbitrary work practices. Workers’ rights issues included excessive working hours, night shift subcontracting and poor health and safety conditions in the workplace. We received anonymous evidence from a former employee at an online retailer who visited a factory in Leicester where the fire door was padlocked shut. Leicester has also been identified as a hotspot for human trafficking by the Stop the Traffick coalition’s Centre for Intelligence-Led Prevention (CfILP). Stop the Traffick found abuse in the garment industry among other sectors.
34.The National Minimum Wage (NMW) was introduced in 1999 and is currently £7.83 for workers over 25. In April 2019 this will increase to £8.21. HMRC enforces the NMW in line with the law and policy set out by the Department for Business, Energy and Industrial Strategy (BEIS). In 2018, journalist Sarah O’Connor carried out an investigation for the FT newspaper which revealed how small garment factories in Leicester supplying British online retailers were not paying the minimum wage. At our first hearing she told us:
The going rate for a garment worker in lots of places in Leicester is £3.50, £4 an hour. I was told that £5 was like a really top rate. You would walk out of a factory with your head held high if you were on £5 an hour. That shows that you are skilled. You have a lot of experience. […] The strangest thing about all of this is that it is a totally open secret. Central government knows about it; local government knows about it. All of the retailers know about it.’ […] ‘Enforcing the minimum wage is HMRC’s responsibility. I have some figures. HMRC in the five years to 2016–17 identified 232,000 people who had been underpaid the minimum wage. Of those, only 83 were textile workers so, even though this is endemic in the textile sector, they are not looking there.
35.We heard that the buying practices of some online fashion retailers may be putting UK clothing manufacturers in the position where they can only afford to pay garment workers illegally low wages. Sarah O’Connor described how ‘buyers’ for the retailer play suppliers off against each other to drive down costs:
Boohoo holds weekly meetings at its Manchester head office, where suppliers bring samples to the product teams in a single room with 10 to 12 large tables. ‘It’s like a cattle market,’ says one person from a supplier who did not want to be named. ‘Say I’m the buyer, and [you’ve] just given me the price of this [dress] for £5. I will literally hold it up to the next table and say, ‘How much for that?’ and he’ll tell you £4. It’s ruthless.’
36.We wrote to the Chief Executives of Amazon, Boohoo, Missguided, and ASOS following Sarah O’Connor’s testimony at our first hearing in October. We also invited Chief Executives from ASOS, Boohoo and Misguided to parliament to discuss the situation in Leicester and concerns about the low quality of some ‘fast fashion’ garments and the excessive waste that this business model is generating. Responding to allegations raised at our first hearing, Boohoo Group’s co-founder and joint Chief Executive Carol Kane admitted that negotiations were carried out in front of other suppliers, but denied that manufacturers were played off against each other. She told us:
The comments made on the cattle market in Manchester, we have a building that is currently going through renovation in the last two years. We have private meeting rooms upstairs as well, so suppliers who are not comfortable in a negotiation process next to other suppliers we do house in other parts of the building. That space is currently our trading floor. I do not know of any instances and I do not accept there are any instances where suppliers are played off against each other. I used to be very much a part of that supply chain for many years before I became a founder of Boohoo.com, so I do understand the sensitivity of costing from one supplier to another. I took that allegation on board. I have asked if that does happen. I have sat in meetings and I have not witnessed that ever happening on our buying floor.
37.Boohoo denied that its buying practices and discount prices were to blame for illegally low wages in Leicester garment factories. The online retailer said that it lawfully produces affordable garments. It says that its £5 dresses are merely a ‘marketing tool to attract customers to visit our website and these loss leading garments make up only 80 out of over 6,700 dress styles on the Boohoo website.’ It said that ‘the suppliers receive the full cost of making these garments and we take the loss of any margin in relation to these promotions,’ that it does not allow its buyers ‘to order garments from suppliers at any price’; and that it gives them training on the costing of a garment.
38.Missguided said that since signing up to the Ethical Trading Initiative (ETI) it had ‘consolidated’ the number of factories producing its goods in Leicester from 80 to 11. The budget retailer’s Head of Product Quality & Supply, Paul Smith, said that two members of the Missguided team had been threatened and physically assaulted by factory owners in Leicester in the past 18 months. We asked why they had been assaulted:
Because they did not want us to enter their premises. These I must add were people that we were not currently manufacturing with but were scoping out, and they did not like the questions that we were asking. On one occasion a former director of Missguided was chased out of the building and one of my employees was gripped by the throat and pushed out the door.
39.When asked what he thought they were hiding, he said:
Underpayments of workers is usual.
The Ethical Trading Initiative (ETI) is an alliance of companies, trade unions and NGOs that promotes respect for workers’ rights around the globe. All corporate members of ETI agree to adopt the ETI Base Code of labour practice, which is based on the standards of the International Labour Organisation (ILO). ETI works out the most effective steps companies can take to implement the Base Code in their supply chains. ETI’s website says that member companies report annually on their efforts and the results they are achieving at factory level. ETI says that it expects companies to improve their ethical trade performance over time, and that it has ‘a robust disciplinary procedure for companies that fail to make sufficient progress or to honour their membership obligations.’ ETI has established a collaborative company-led programme to improve legal and ethical labour standards in suppliers’ factories called Fast Forward, which combines auditing techniques and a worker helpline.
40.Missguided said it recognised the importance of the issues raised by our inquiry and told us it had ‘made the commitment to join, and be an active member, of the Ethical Trading Initiative (ETI) in 2017’. It said it was disappointed that many of its ‘direct competitors’ had not signed up ‘because we know some of the challenges you outline need co-ordinated action from all retailers to be impactful.’ Carol Kane said that Boohoo Group was still considering joining the ETI, but:
… we have been struggling to see where the benefits would be to some of our suppliers. We are not closed to the idea. We are still considering it at the moment. There are a few areas where I would say within Leicester for sure we probably use the most factories and we probably use the most CMT [cut, make and trim] units, all of which we have in the last couple of years successfully managed to get through our audit process without being a member of the ETI.
41.When we pressed Carol Kane on why Boohoo Group would not sign up to the ETI, Ms Kane replied:
… we are using all of the same standards. We are not doing anything differently from the ETI. All our audits and all our standards are based upon their code and their conduct, so we are utilising all of that. The only difference today is one of a commercial decision. Being members we will be required to publish our whole supply chain, which is currently our engine room.
42.The ETI wrote to us following the hearing to contest Boohoo’s evidence. ETI said that Carol Kane’s claim that ‘we are not doing anything differently from the ETI’ appears to be ‘based on a limited understanding of what ETI does and what we expect from our members.’ ETI said that adoption of its labour standards (the ETI Basecode) is just one of the basic requirements for company membership. ‘We also expect our members to show active engagement around the core principles of ethical trade and to demonstrate continuous improvement in their supply chain practices.’ ETI said it expects its members ‘to take a proactive approach to identifying and resolving issues, and to demonstrate clear improvement over time. As well as adopting the Base Code, they sign up to a set of principles outlining our approach to ethical trade. These require companies to:
43.We also asked Ms Kane whether Boohoo recognised trade unions. She told us that Boohoo would recognise a union ‘if the workers would like it’ but that ‘there does not currently appear to be a demand for our workers in our Burnley warehouse to require a union.’ Following the evidence session this was contradicted by written evidence from the union of Shop, Distributive and Allied Workers (Usdaw), contesting Boohoo’s statements. This included evidence of 23 recruitment and awareness activities, dating back to January 2017, for Boohoo’s Burnley staff and written communications from Usdaw to Carol Kane and Boohoo’s HR Director asking to secure union recognition for Boohoo workers:
Overall, it is clear that despite Carol Kane’s assertion to the committee that Boohoo is open to recognising a trade union to represent their workers, the company has, over a prolonged period of time refused even the most basic level of engagement with Usdaw and appears hostile to the very idea of recognising a trade union.
44.Unite the Union provided further evidence to us on the situation in Leicester. It said ‘it is not enough to simply blame unethical factory owners. Retailers purchasing practices create a race to the bottom culture in the industry through their demand for cheap prices, rapid deliveries and a punitive financial culture which imposes huge fines on producers [for late production].’ This creates an environment for precarious employment shifting the trend from permanent workers to temporary workers through the ‘availability’ of a transient, disposable mainly migrant workforce. Unite says that:
Whenever competition has pushed down garment prices, labour costs have always been the first to be put under pressure. The very nature of the garment industry requires higher labour productivity due to the limitations to technology-led productivity in an industry which requires manual labour. Accordingly, manufacturer’s wages are the highest single cost, thus in ‘high-wage countries’ clothing producers continually attempt to drive down wages for profit.
45.The British Retail Consortium argued that there should be more proactive labour law enforcement from Government agencies in the UK garment manufacturing sector in order to give retailers the confidence to source more products from UK factories. It suggested that licensing could be used to tackle poor working conditions in UK factories.
46.In May 2018, the Director of Labour Market Enforcement, Sir David Metcalf, published his office’s first annual strategy on labour market enforcement calling for a shift to more proactive enforcement methods. The report recommended a ‘significant increase’ in fines for non-compliance and greater use of prosecution. He argued that the current level of fines for non-payment of the minimum wage do not provide a strong enough incentive to comply - especially given the low probability of inspection and detection. For example, the report noted that HMRC’s National Minimum Wage team completed nearly 2,700 investigations in 2016/17. It said that with 1.3 million employers in the UK this suggests that the average employer can expect an inspection around once every 500 years. The report points out that for non-compliance with NMW employers only face a penalty of up to 200 per cent of the wage arrears–in addition to repayment of the arrears. In 2016/17, the average wage arrears were £110 per worker, implying a fine of only £220. Written evidence we received from HMRC shows that UK-based garment factory owners have been forced to pay out almost £90,000 to employees for non-payment of minimum wage. Since 2012 an average of £900 has been paid out to 126 factory workers, far exceeding the national average.
47.Sir David Metcalf suggested that there may be a case for using fines linked to turnover. His report argued that there has been insufficient use of prosecutions with only 14 minimum wage prosecutions since 1999. He also noted that more can be done to ensure compliance with labour rights throughout supply chains. He recommended that joint responsibility measures, where retailers take on a share of responsibility for any non-compliance with labour rights in their supply chains, should be introduced. This would allow for enforcement agencies to work with major retailers if non-compliance was identified in their supply chain, harnessing the leverage of retailers to ensure labour rights are upheld. In December 2018 the Government published its response to Sir David’s report. It accepted his recommendation that state enforcement should shift to more proactive enforcement methods, but it rejected his call for increased penalties for non-compliance. The Government said that:
… where non-compliance is identified in a supply chain, the Government envisages an approach whereby the enforcement body could privately notify both the supplier and the head of the chain. This could enable the head of the chain to work with the supplier to take corrective action. The Government will consult on this and how to address non-compliance in supply chains, working with business, trade unions and the enforcement bodies before responding to this recommendation.
48.At our hearing with Ministers, it was revealed that a ‘week of action’ had taken place in September 2018 where the Gangmasters and Labour Abuse Authority (GLAA), alongside Leicester Police, HMRC and the Health and Safety Executive, visited 28 textile factories in Leicester. Kelly Tolhurst, Parliamentary Under Secretary of State at the Department for Business, Energy and Industrial Strategy, refused to give the details of the enforcement action that had been taken. However, Janet Alexander from HMRC confirmed that 14 premises are under further investigation and that it is taking forward some national minimum wage cases. Two cases have been referred to the GLAA.
50.‘Made in the UK’ should mean workers are paid at least the minimum wage in a safe workspace. It is unacceptable that some workers in the UK making clothes for fast fashion retailers are not paid the minimum wage and are suffering serious breaches of health and safety law in their workplaces. We support calls from the Director of Labour Market Enforcement for a more proactive approach to the enforcement of the national minimum wage. HMRC’s National Minimum Wage team needs greater resourcing in order to increase their inspection and detection work. We also recommend that Boohoo engage with Usdaw as a priority and recognise unions for its workers. We recommend that textile retailers operating internationally follow the example of Asos, H&M, Esprit and Inditex in signing up to Global Framework Agreements. These put in place the highest standards of trade union rights, health, safety and environmental practices, across the retailers’ global operations, regardless of local country standards.
51.We heard disturbing evidence that forced labour is still present in fashion supply chains. In a practice dating from Soviet times, the repressive governments of Uzbekistan and Turkmenistan continue to force their own citizens to pick cotton under harsh conditions each harvest season. Both Turkmenistan and Uzbekistan are in the top ten cotton producers in the world. There are reports that prison labour in China has been used to produce garments for well-known Western brands.
52.Anti-Slavery International campaigner Kate Elsayed-Ali also highlighted the Sumangali system practiced in India to illustrate the often ‘gendered’ nature of forced and child labour in fashion supply chains:
What I see globally is that women and girls really do comprise the majority of people in forced labour and slavery situations. There are particular vulnerabilities. There are also gendered forms of forced labour and child labour. If I take the example of India, a massive cotton yarn producer after China, there is a very specific form of forced labour within the cotton mills that only affects women and girls. It is called the sumangali system. It is pretty widespread in Tamil Nadu where most of those spinning mills operate. Girls are bonded to a particular mill for a period of up to three years. Their parents take an advance payment. The intention behind that is that at the end of the three-year period that would be used to arrange their marriage, essentially, but the girls go to the mills with an agent, will have signed contracts that they don’t have a copy of and, in most cases, they will not have been able to read. We are talking about quite young, 13 to 18 year-olds working 12-hour days. They will be living in camps associated with that mill. They will not be able to go home and visit their parents, in the hope that at the end of those three years they will have this advance payment. It very much is bonded child labour.
53.In written evidence Burberry said that it refuses to source from countries if it considers labour and environmental rights to fall below Burberry’s standards, particularly if there are concerns around modern slavery. These countries include: Bangladesh, Pakistan, Cambodia and Myanmar. Burberry stated that the list is reviewed in collaboration with its supply chain team.
54.Most brands source materials and products from long, disjointed supply chains in the global south. The fashion industry depends on unequal power relationships and the ‘invisibilisation’ of mostly female manual workers. We do not see the faces of the people who make our clothes. According to lecturer in Sustainability, Retail & Fashion at the University of Leeds, Dr Mark Sumner, ‘these brands and suppliers have little awareness of or understanding of each other.’ This has led to concerns that retailers can simply pass the responsibility for labour exploitation down the supply chain, with no accountability. Eco Age described this low cost, high volume, zero consequence production method. They said that:
Because the major brands do not employ the workers directly, or own the factories they produce in, they are able to profit hugely, all while remaining free of responsibility for the effects of poverty wages, factory disasters, and the ongoing violent treatment of workers.
55.Dr Sumner argued that legislation requiring greater transparency would have a major impact in driving positive change. He says:
A very simple requirement for brands to declare the source of raw material used in their garments would lead to a paradigm shift in attitudes. This type approach would be ground breaking for the industry, setting an aspirational, but achievable standard that would be the envy of the rest of the developed world.
56.In 2014 the Home Office introduced the Modern Slavery Strategy to tackle slavery, servitude, forced labour and human trafficking, and in 2015 Parliament passed the Modern Slavery Act. The Transparency in Supply Chains clause in the Act requires companies with a turnover of more than £36 million to produce a statement on slavery and human trafficking each year setting out the steps the organisation has taken to ensure that modern slavery is not taking place in their business or supply chain, including if the organisation has taken no steps.
57.The Government says that the Act has increased transparency in supply chains. However, concerns have been raised by the Public Accounts Committee (PAC) that the Government does not monitor whether statements made under the Modern Slavery Act comply with the legislation and has never used its powers to penalise companies that do not comply. PAC reported that as of October 2017, the Modern Slavery Registry (produced by the Business and Human Rights Resource Centre) held around 3,000 statements out of an estimated 9,000–11,000 businesses that the Department estimates the legislation applies to.
58.The Home Office Minister Victoria Atkins MP was unable to tell us how many of the UK’s major fashion retailers have already completed modern slavery statements:
In terms of companies that have reported: we know that around 60% of businesses that we believe to be within scope have put up statements; 60% of companies in total. I do not have the breakdown for fashion companies because one of the difficulties, and not just in this exercise—it applies to the exercise that required companies to issue their gender pay gap—is that people assume that there is some giant Government database of companies that fall within these scopes and there isn’t. There has been a great deal of work in the modern slavery sphere, but also in the gender pay gap sphere, to try to find the companies that are in scope for this legislation and from there make it clear that they should comply.
We were concerned that only 60%—although it is more than half; frankly, it should be 100%—have complied with their requirements under section 54. Last month my Department wrote to around 17,000 businesses to ask them, first, to confirm that they are in scope under section 54 and secondly, if they have not already put up statements that they should do so by 31 March next year, and then also inviting them to sign up to a database whereby we can share information and guidance as to good practice. I am pleased to say, around 2,500 businesses that we have written to have signed up to that database.
The Companies Act 2006 requires that a statement be made on human rights issues in a company’s Annual Report only ‘where necessary for an understanding of the development, performance or position of the company’s business.’ The Companies Act 2006 does not mention supply chains or modern slavery. This means it is the choice of the business what policies are relevant and what detail necessary when reporting on human rights issues within its operations. This system lacks accountability and places too much reliance on companies to self-disclose.
59.Ongoing research at Leeds University by Dr Mark Sumner has identified 24 leading retailers, including Foot Locker and Valentino, who are non-compliant with the Modern Slavery Act by not making available their modern slavery statements as of December 2018 (see Appendix 1). Such wide non-compliance with the de minimis reporting requirements shows that many household names have failed utterly to engage with this legislation.
60.We heard a number of calls for the Modern Slavery Act to be strengthened to introduce mandatory due diligence for companies. Anti-Slavery International campaigner Kate Elsayed-Ali told us that the Modern Slavery Act was an ‘important step forwards’ but that it had limitations that needed to be addressed. She said that:
Businesses are required to publish a statement saying what they are doing to address slavery in their supply chains, but technically a business could publish a slavery statement saying, “We are not doing anything” and they would still be compliant with the transparency in supply chains clause of that Act. I think we need to look beyond compliance. What my organisation is calling for is mandatory supply chains transparency but also mandatory due diligence. That is businesses looking proactively at the entirety of their supply chains to establish what are their forced labour risks, what are their child labour risks, how can we address those?
61.In the absence of supply chain traceability standards, concerns have been raised by Fashion Revolution and the London Textile Forum that brands can simply pass the responsibility down the supply chain, with no accountability. A Behind the Barcode report in 2015 found that of 219 retailers surveyed, 91% did not have full knowledge of where their cotton comes from, 75% did not know the source of all their fabrics, and only half could trace where their products are cut and sewn. Fashion Revolution also called for the Government to pass mandatory ‘due diligence’ laws, and pointed to recent regulatory examples in France and Switzerland. It said that introducing such a law would require companies to identify, prevent, mitigate and account for how they address their actual and potential adverse social and environmental impacts. Fashion Revolution recommended that the Modern Slavery Act be strengthened with further transparency requirements:
The French Corporate Duty of Vigilance Law passed in 2017 requires all French companies that have more than 5,000 employees domestically, or employ 10,000 employees or more worldwide, to implement an effective ‘vigilance’ plan to address environmental, health and safety and human rights both in their own operations and at their suppliers and sub-contractors. This is stronger than the UK’s Modern Slavery Act and California’s Transparency in Supply Chains Act, which only require firms to report on any efforts they have taken to identify human rights’ risks.
62.In August the Government announced a review of the operation and effectiveness the Modern Slavery Act 2015 to identify potential improvements. The review will consider how to ensure compliance and drive up the quality of statements produced by eligible companies. The review aims to report to the Home Secretary before the end of March 2019.
63.There must be more transparency in supply chains and there is a strong case for the Modern Slavery Act to be strengthened. The current requirement to produce a statement does not ensure that action is taken by big retailers and even this is not adequately monitored. The Government should publish a publicly accessible list of all those retailers required to release a modern slavery statement. This should be supported by an appropriate penalty for those companies who fail to report and comply with the Modern Slavery Act. This will increase transparency and require the establishment of formal monitoring of whether statements comply with legislation.
64.The Companies Act 2006 requires that a statement be made on human rights issues in a company’s Annual Report only ‘where necessary’. This system lacks accountability and places too much reliance on companies to self-disclose. We recommend that the Companies Act 2006 be updated to include explicit reference to ‘modern slavery’ and ‘supply chains’. Statements on a business’ approach to human rights in its supply chain should be mandatory as part of the Annual Report. The Financial Reporting Council’s (FRC) Corporate Governance Code and UK Stewardship Code, and the Financial Conduct Authority’s (FCA) listing rules should likewise be amended to require modern slavery disclosures on a comply or explain basis by 2022. If this is not possible then a Corporate Duty of Vigilance Law, as in France, should be considered. Fashion retailers must not be allowed to turn a blind eye to labour and environmental abuses in their supply chains. Retailers should be investing in technology that allows them - and their customers - to track where their materials and products are sourced and made. We recommend that the Government strengthen the Modern Slavery Act to require large companies to perform due diligence checks across their supply chains to ensure their materials and products are being produced without forced or child labour. We also recommend that Government procurement should be covered by the Modern Slavery Act.
65.We recommend that the Government works with industry to trace the source of raw material in garments to tackle social and environmental abuses in their supply chains. Digital technology is widely used in other supply chains. We do not understand why a modern high-tech industry like fashion does not have these systems already in place. Some companies told us they can trace their materials down to Tier 4 suppliers. This begs the question - if one can do it, why can’t all? This first step is essential if fashion is to tackle its waste, water, chemical and carbon footprint. This also reduces the opportunities for sub-contractors to take their cut along the supply chain.
48 Sandy Black (editor) Sustainable Fashion Handbook (2013)
49 Sarah O’Connor, Financial Times, (17 May 2018)
50 Edwina Ehrman (ed), Fashioned from Nature (2018)
51 WRAP, (July 2017)
53 Sandy Black (editor) Sustainable Fashion Handbook (2013)
56 Hult Research and Ethical Trading Initiative (2016), , p. 8.
57 Fashion Revolution (SFI0056)
58 Apparel Insider,
59 Mic, (October 2015)
61 WRAP, (July 2017)
62 IndustriALL (SFI0073)
63 (21 Dec 2018)
64 Environmental Audit Committee, (January 2019)
65 Fashion Revolution ()
66 Accord on Fire and Building Safety in Bangladesh, (October 2018), p. 9.
67 Al Jazeera, (January 2019)
68 ECO AGE LTD ()
69 ECO AGE LTD ()
70 Olivia Windham Stewart (SFI0092)
71 Sunday Mirror (2018), .
72 IndustriALL (SFI0073)
73 IndustriALL (SFI0073)
74 IndustriALL (SFI0073)
75 IndustriALL (SFI0073)
77 (21 Dec 2018)
78 Unite (SFI0084)
79 Unite the Union ()
80 University of Leicester, (2015)
81 Communication received by a committee member from a whistle-blower, December 2018
82 Director of Labour Market Enforcement, (May 2018)
84 Sarah O’Connor, Financial Times, (17 May 2018)
86 Boohoo response (SFI0082)
87 Boohoo response (SFI0082)
88 Boohoo response (SFI0082)
89 Missguided (SFI0076)
95 Anti-Slavery and Ethical Trading Initiative,
96 Missguided (SFI0076)
97 Missguided (SFI0076)
100 Ethical Trading Initiative (SFI0089)
101 Ethical Trading Initiative (SFI0089)
102 Ethical Trading Initiative (SFI0089)
104 USDAW (SFI0096)
105 Unite the Union ()
106 Unite (SFI0084)
107 Unite (SFI0084)
108 Unite (SFI0084)
109 British Retail Consortium (SFI0019)
110 Director of Labour Market Enforcement, (May 2018)
111 (14 January 2019)
112 Director of Labour Market Enforcement, (May 2018)
113 Director of Labour Market Enforcement, (May 2018)
114 BEIS & Home Office, (December 2018)
115 BEIS & Home Office, (December 2018)
118 The Daily Records, (January 2019)
119 Financial Times, (Feb 2018)
121 Burberry (SFI0083)
123 Dr Mark Sumner, University of Leeds (SFI0026)
124 London Textile Forum (); Fashion Revolution (); ECO AGE LTD ()
125 ECO AGE LTD ()
126 Dr Mark Sumner, University of Leeds (SFI0026)
127 Public Accounts Committee, (May 2018)
128 Public Accounts Committee, (May 2018)
130 (2017), p.25.
131 Anti-Slavery International (); Fashion Revolution (); Labour Behind the Label ()
133 London Textile Forum (SFI0044)
134 Baptist World Aid Australia (2015), .
135 Fashion Revolution (SFI0056)
136 Fashion Revolution (SFI0056)
137 Fashion Revolution (SFI0056)
138 Corporate Social Responsibility and the law, (August 2017)
139 Home Office, (August 2018)
Published: 19 February 2019