Fashion Has ‘Long Way to Go’ Identifying Forced Labor Risks

Jasmin Malik Chua
·7 min read

Fashion isn’t doing enough to address forced labor, a new benchmark study has observed. In fact, if the industry was being graded on its efforts, as KnowTheChain did, it would receive a failing mark with an average of 21 out of 100 possible points.

For years, KnowTheChain, a partnership between the nonprofits Humanity United, the Business & Human Rights Resource Centre and Verite and ESG analytics firm Morningstar Sustainalytics, has turned a gimlet eye to the world’s largest brands to suss out if their due diligence practices are resulting in meaningful change for workers.

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2023’s batch of 65 big-league names, which range from luxury stalwarts like Prada (9 points) and Kering (23 points) to fast-fashion purveyors such as H&M Group (49 points) and Zara owner Inditex (38 points), is nearly double that of the 35 companies that KnowTheChain analyzed in 2021. But they also fared worse than the latter group, which gleaned an average of 41 points. Critically, more than 20 percent of the 2024 cohort scored 5 points or less. Not only do brands remain “largely reactive” to human rights violations instead of embedding the due diligence practices meant to circumvent them, the report said, but they also “routinely” failed to provide or disclose remedy to victims of abuse—an “indictment,” it added, in a sector where such ethical breaches are “consistently uncovered.”

“The apparel and footwear sector is a sector with enormous potential for both positive and negative human rights impacts and unfortunately, what we’ve seen increasingly is a propensity for negative impacts,” said Áine Clarke, head of KnowTheChain and investor strategy at the Business & Human Rights Resource Centre.

Part of that is due to the nature of fashion supply chains, which are very manual, prone to precarious employment and contracts and replete with vulnerable or disenfranchised workers such as women and migrants, all of which can make conditions “hugely problematic,” she said. At the same time, Clarke added, it doesn’t have to be this way.

Take Lululemon, the highest-scoring company in the lot with 63 points, which the Canadian yoga-wear maker earned for divulging “markedly stronger” human rights due diligence to tackle modern slavery risks in its supply chains. Both it and Puma, the next highest performer with 58 points, also posted strong financial results to shareholders in 2022 and 2023 despite the strong economic headwinds, demonstrating that a robust and active commitment to human rights can be compatible with healthy profits.

But Clarke noted that Lululemon and Puma are outliers, not the norm amid a landscape marked by an increasing push for enhanced human rights on one end and a “counter wave” of regressive policies that are cracking down on—even criminalizing—workers’ rights on the other. It’s a global North (Canada, the European Union, the United States) versus the global South (Bangladesh, Myanmar, Sri Lanka) problem, she said, one that will complicate matters for brands with the looming twin specters of “strategic litigation” and targeted scrutiny.

“What we were looking for is companies’ preparedness for this legislation,” Clarke said of the criteria underpinning the benchmark. “Are they able to demonstrate that they understand where they’re sourcing their raw materials and what the demographic of their workforce is in order to mitigate those risks? How are they enacting human rights due diligence on a very practical level? Are they conducting a risk assessment? How was that risk assessment carried out? And are they providing remedy for workers in situations where their rights are violated?”

She wasn’t heartened by what she found, which was that brands have a “long way to go in terms of proactively identifying forced labor risks within their supply chains, and then taking steps to mitigate and remedy violations when they have occurred.”

Even low-hanging fruit is currently being overlooked. Almost half of benchmarked businesses, or 42 percent, for instance, didn’t disclose any relevant supplier or sourcing data, even if they employed high-risk raw materials, such as cotton, leather and rubber, in their apparel and footwear. And no single company revealed a full list of sourcing countries for three or more raw materials designated as high risk for forced labor.

Another blow for transparency: Just over half of companies (55 percent) disclosed how they carry out a human rights risk assessment on their supply chains. The number plummets to 8 percent for those that provide details on forced labor risks identified across different supply chain tiers.

“The majority—98 percent—of the companies that we tracked have products that are made from cotton and yet only a small quantity of companies can demonstrate that they understand where that cotton has come from, and the forced labor risks identified as a result of that tracing,” Clarke said. “And that’s concerning because of the wave of legislation that’s coming in that will require companies not only to understand that but also to publicly report that as a mechanism of accountability.”

Purchasing practices are likewise a blind spot for many brands. More than half—namely, 52 percent—of assessed firms did not disclose the adoption of responsible purchasing practices, including how they plan, forecast or ring-fence labor costs during price negotiations. On average, companies scored 12 out of a possible 100 points for this theme, making it the second-lowest scoring in the benchmark after divulging remedy outcomes for workers (7 points).

While some companies are showing the way, the “vast majority” are “still focused on compliance, risk management, an almost business-as-usual approach to human rights,” Clarke said. With climate change, geopolitical conflict and a “confluence” of other factors that are fueling exploitation, forced labor and human trafficking, she expected to see a “commensurate level of reaction or risk management” from brands. Yet the findings show that “this is not necessarily the case.” With litigation risk becoming more acute, that doesn’t make good business sense, she added.

One of the issues that concern her is the dearth of stakeholder engagement “across the board,” even when conducting risk assessments that concern workers, implementing grievance mechanisms or issuing reparations.

“We’re just generally seeing very low levels of stakeholder engagement. worker engagement and, in particular, union engagement,” Clarke said. “The better companies provide that level of detail showing how they’re working with civil society organizations, showing how they’re working with unions and promoting freedom of association and collective bargaining. They’ll have signed up to global framework agreements that provide the structure for dialogue between workers and companies. And very crucially, I think, in a sector in which forced labor issues are endemic, they are demonstrating that they are providing remedy to workers.”

Still, she hesitates to call “leading” brands “leaders.” Anta Sports, for example, demonstrated progress, moving up 7 points from the goose egg it received in 2021, yet the Chinese answer to Nike has also declared that it uses cotton from the Xinjiang Uyghur Autonomous Region, where the coerced labor of ethnic minorities is being used as an instrument of repression and control.

“Getting a higher benchmark score doesn’t preclude companies from having any of these issues within their supply chains,” Clarke said. “It just demonstrates that there are slightly better mechanisms and frameworks in place for that company to be able to make, identify, mitigate and address forced labor. It certainly doesn’t mean that any of these companies don’t have forced labor in their supply chains.”

What’s clear to her, however, is that luxury firms are laggards in this area, in part because most of the attention is on fast fashion companies. As a subset, they rake in the third-lowest numbers, trailing behind only textiles and department stores.

“It has been more immune from scandal and the implication of forced labor than other sectors,” she said. “But that has also meant that those companies have had to do less to demonstrate human rights due diligence. And so what we’re seeing and we’ve seen for quite a long time is a lack of disclosure around supplier lists and a lack of transparency on the risk assessment process.”

As Clarke sees it, with little to no incentive structures in place to rebalance or redistribute power, it’s up to legislation to level the playing field. There is a need to readjust the “calculus of risks,” she said.

“What we need is for brands to engage with these issues,” Clarke added. “Hopefully change can take place. But, yeah, it’s a long road.”