Legislation is Already Making Its Mark on Luxury
If there’s one thing Fashion Revolution’s latest Fashion Transparency Index shows, said Liv Simpliciano, the advocacy group’s policy and research manager, it’s that legislation—or even the looming threat thereof—works.
Case in point: the notoriously secretive luxury goods sector. For the first time since the rating debuted in 2016, a high-end purveyor—that would be Gucci—cracked a score of 80 percent or more for its public disclosure of human rights and environmental policies, practices and impacts, emerging second only to returning champion OVS out of 250 of the world’s biggest brands and retailers.
More from Sourcing Journal
In fact, the five biggest movers were all rarified names. Kering-owned Gucci was the most improved, climbing 21 percentage points from last year’s 59 percent. Armani ticked up 19 percentage points to 38 percent. Jil Sander, which struck out with 0 percent in 2022, bounced back with 18 percent. Both Prada and its subsidiary Miu Miu nabbed 16 extra percentage points apiece to land matching scores of 34 percent.
Instead of keeping their cards close to their chest, as has been their wont, more luxury companies than ever are revealing their first-tier factory lists, Simpliciano said. And despite previously swearing up and down that they would never do so, some are even going so far as to name their raw material suppliers.
“That really dispels the myth that disclosing information, being transparent, is a commercially sensitive or potentially business damaging act,” she said. “I think in general that luxury wants to be seen as a leader. I think the real luxury is being able to know how the fibers were grown, who farmed them, who processed the fibers into fabric who sell the clothes. That whole traceability throughout the supply chain is [a] luxury in and of itself, especially in an environment where the majority of the fashion industry is untransparent.”
Still, it’s no coincidence that all five of the luxury headliners are based in Europe. Transparency is a central pillar of the European Union’s upcoming corporate sustainability due diligence directive. Other impending legislations in the bloc will tackle everything from deforestation to waste management to forced labor. Coupled with the Uyghur Forced Labor Prevention Act in the United States, the Supply Chain Due Diligence Act in Germany, mandatory climate labels for clothing in France and the growing legal consequences of greenwashing, there’s an urgent sense that fashion’s regulatory landscape has fundamentally shifted, which is reflected in this year’s scores.
It’s not just the high rollers that are changing their tack, either. In 2022, only 48 percent of the 250 brands and retailers Fashion Revolution assessed copped to their cut-and-sew partners. This year, the number hit a milestone of 52 percent. Additional gains include the 68 percent of companies that now disclose their approach to conducting human rights due diligence, up from 61 percent in 2022, and the 49 percent that do the same for environmental due diligence, an increase from 39 percent. More businesses—37 percent, an improvement from 26 percent the year before—are also disclosing how they consult affected stakeholders.
Fewer brands and retailers scored goose eggs this year, too: 18 compared to last year’s 31. Some of this edition’s zeros went to Anta, Fashion Nova, Savage x Fenty, Tom Ford and Max Mara. Companies that inched up from last year’s lowest possible score included DKNY (1 percent), Tory Burch (1 percent), Romwe (3 percent), Shein (7 percent) and L.L. Bean (8 percent)—nothing dramatic but a start nonetheless.
“I think they’re responding to these proposed legislations, which really proves the point that voluntary mechanisms are not strong enough to protect the people who make our clothes and the environment,” Simpliciano said. “So I think our findings this year really show why legislation is so sorely needed.”
That’s not to say that the road ahead isn’t long and steep. Even among the companies that divulge their due diligence efforts, there remains a lack of transparency about the actual outcomes, which Simplicano said is “the main thing.” Legislation’s reach also only goes so far. The EU’s supply chain due diligence mandate, for instance, plans to target only companies with turnovers of more than 40 million euros ($44.9 million), which exempts a broad swath of small and medium-sized companies. Its burden of proof also needs to be “reversed,” so that people seeking justice for corporate harms aren’t unduly hampered from doing so.
Less positive numbers likewise abound, particularly when it comes to buyer-supplier relations. Just 1 percent of brands and retailers disclose the number of workers in their supply chains who are paid a living wage. Only 12 percent of them publish a responsible purchasing code of conduct. A mite 4 percent share the number of orders they impose retrospective changes to their previously agreed payment terms. And a very modest 11 percent reveal a policy to compensate manufacturers within 60 days.
“Purchasing practices, as we know, are a key enabler and driver of either good or bad working conditions [in] supplier facilities,” Simpliciano said. “Sixty days is a long time—it’s not uncommon for consumers to be wearing the clothes before suppliers are paid for them. And order changes can have really volatile and unexpected outcomes further down the supply chain. It can drive excessive overtime for workers to meet the production demands.”
That’s where legislation can come in again. For nearly a year, Fashion Revolution has been touting “Good Clothes, Fair Pay,” a European Citizens’ Initiative urging the introduction of legislation that would, among other things, ban unfair purchasing practices. Simpliciano said it needs to be acknowledged that poor commercial practices are the foundational cause of workers not receiving a living wage, as well as one of the key drivers of child labor, something that has markedly increased since the start of the Covid-19 pandemic, when many suppliers said they felt abandoned by their customers.
Fossil fuels are another sticking point. Despite the mounting climate emergency, only 6 percent of brands and retailers open up about the type of fuel they use across their different geographies, an indication of the industry’s reliance on—and failure to quit—coal.
One thing Simpliciano would like to look at next year is how companies are advocating for high-quality renewable energy procurement in the regions where they source clothing, particularly where infrastructure is lacking.
“If a brand has decarbonization targets, and it’s, say, 100 percent renewable energy in their supply chain by 2025, and, you know, 95 percent of their clothes are sourced for a region where there isn’t that renewable energy infrastructure, it really just begs the question, is this a realistic target to have?” she said, adding that only 9 percent of companies disclose how they are financing the green transition. “As I mentioned earlier, it’s really important that brands use their power, influence and resources to help support suppliers.”
Simpliciano said that overproduction is still the elephant in the room. The vast majority of brands and retailers—88 percent—still do not disclose their annual production volumes, a “disappointing increase” from last year’s 85 percent. She said that brands “absolutely” know how much they are producing since businesses cannot survive without this information.
“We can’t have a discussion on decarbonization without addressing overproduction,” she said. “These issues are talked about separately, but they are intersecting, and interrelated. Overproduction has to be addressed at the root in order to really achieve decarbonization targets.”
There are figures that continue to take Simpliciano by surprise, like the fact that only 23 percent of companies disclose their methodologies for water-related risk assessments and a measly 7 percent reveal their wastewater test results. Another stumper: Just 18 percent of the 250 brands and retailers divulge the percentage of executive bonuses or pay tied to sustainability goals. Businesses responding to the EU’s forthcoming deforestation regulation might also want to hustle. As it stands, a fraction—12 percent, a 3 percentage-point drop from 2022—publish time-bound measurable commitments to zero deforestation this year. And just 7 percent demonstrate measurable progress toward those goals.
Overall, Simpliciano said that this year’s index tells two stories, one of leaders and of laggards. For companies that refuse to disclose anything, she wants to ask, “Well, what are you hiding?” It’s one of the reasons why the likes of H&M (71 percent) and Zara (50 percent) make more headlines over 0 percenters—you can’t criticize what you don’t know.
“I think a microscope needs to be placed on the brands that persistently score 0 percent or very little, not only in the traceability section but in the report as a whole,” she said. Transparent isn’t the same as sustainable or ethical, but it’s a “first critical step” toward accountability and, ultimately, systemic change.
Once more, it’s time for legislation to shake things up.
“Brands have promised to do the right thing time and time again, and they haven’t delivered on that,” Simpliciano said. “And I think legislation is a critical tool to push them to disclose. It’s unfortunate that a majority of the fashion industry is probably going to wait until they’re legally held accountable to be transparent. But it’s absolutely something that we need.”
