Unsafe working conditions, not paying workers properly, polluting rivers, dumping waste. How do brands get away with it?

It's actually a simple and boring answer.  The brands we recognise and buy our stuff from are usually legally separate entities from the ones that make their stuff. The clothing brands whose names we recognise design their clothes, but then sub-contract the manufacture to other companies who own the factories.  The entire manufacturing supply chain from the cotton farmers to the button factories, will all be owned by legally separate entities.  

This separation means that brands aren’t legally responsible for what the suppliers do, in the same way that we aren't held responsible for how the stuff we buy is made. 

The difference between the brand-supplier relationship compared to the brand-customer relationship, is power.  Brands have many customers and the actions of a few make little difference to them. But their suppliers have far fewer and sometimes only one customer.   If the brands refused to work with factories that did bad things the factories would have to change in order to survive. But, in fact what is happening is brands’ are indirectly encouraging bad behaviour by pressuring the suppliers for ever lower prices. Ever lower prices require cost cutting, and this ends up being cuts in wages, safety and responsible waste disposal. 

Not to defend these companies, but this is all a result of the system within which they operate. 

The big brands are almost all (if not all) publicly owned. This means that their shares can be bought and sold by anyone on a secondary market. This has led to a huge disconnect between the owners of companies (shareholders) and what actually happens in the companies themselves.  

The secondary share market, I don’t need to tell you, is practically an economy of its own.  People as individual investors and on behalf of institutions buy shares directly in companies.  They also buy shares in funds of shares (in order to outsource the work of deciding what’s worth investing in). All of this has led to the commodification of shares.  Everyone, including very well meaning people who are horrified about climate change and exploitation of workers, can’t help but see share prices as abstract numbers on a screen that you want to go up.  This means that we live in a world where a huge number of owners (shareholders) of the biggest companies in the world barely know what’s going on in the companies they own.  

The people who run these public companies (CEO’s CFO’s etc.) have a legal obligation to work in the interests of shareholders - and what do shareholders want in this abstract and distant world?  For the share price to go up. This focus on share price above all else, plays no small part in the cost cutting pressures that brands put on their suppliers. If a company cuts its costs it improves profitability and share price tends to respond well to increased profitability - so what do competitors need to do to compete? Cut costs just as aggressively. This is the ‘the race to the bottom’. 

Can anything be done?

Regulation. We can pass laws that force brands to take responsibility for what happens in their supply chain. It raises the ‘bottom’ to which they can race. This is exactly what the Fashion Act is aiming to do.  It’s an ambitious piece of legislation that is being brought in New York that would have a global impact, if passed. I have explained more about it here. If passed it could change the game unlike any of the voluntary pacts and schemes that have come before.  Add your name to show your support here.

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