'CSO letter on action needed to address unfair purchasing practices', 15 July 2021

"Subject: Complementary action needed to address unfair purchasing practices and achieve goals of the upcoming Sustainable Corporate Governance directive.

Brussels, 15 July 2021

Dear Commissioners Reynders and Breton,

We – a group of human rights, labour rights and development organizations – welcome the European Commission’s commitment to ensure that the economic recovery will be fairer and more sustainable as we come out of this unprecedented health crisis. In this letter, we wish to highlight the need to ensure responsible purchasing practices by businesses to ensure decent work conditions for workers in producing countries and a sustainable post-crisis economic recovery.

The COVID-19 crisis has evidenced the volatility and vulnerability of global supply chains. It has demonstrated how companies currently externalise risks and costs towards weaker supply chain partners. These business models and purchasing practices then, in turn, cause or contribute to adverse human rights impacts on workers, smallholders, communities and the environment, both in the EU and in third countries. We welcome the upcoming Sustainable Corporate Governance (SCG) initiative, in particular the pillar focusing upon a corporate duty for human rights and environmental due diligence. However, for the corporate duty to respect human rights and the environment to work effectively in globalized supply chains, it must address the issue of unfair purchasing practices.

In addition, complementary measures on purchasing practices should be taken to guarantee the effectiveness of the SCG initiative. Extensive research by the International Labour Organisation has demonstrated the power imbalances and the effect of lead firms’ purchasing decisions. The ILO’s research evidenced that lead firms’ current processes to place and pay for orders constrain other supply chain partners’ ability to respect labour rights and to minimise the environmental impacts of their activity. The power imbalance also results in weaker supply chain partners being afraid to challenge these customers, even in the case of illegal actions (such as breaches of contract) for fear of jeopardising their relationship with their customers and future business. The ILO study demonstrates how unfair purchasing practices cuts across several sectors but concludes that these power imbalances and resulting purchasing practices are particularly problematic in the garment sector.

Studies by Human Rights Watch and the Center for Global Workers Rights have further evidenced how unfair purchasing practices are a problem in this sector. Indeed, unfair purchasing practices by (e)retailers and brands severely inhibit the ability of their suppliers to respect and fulfil the rights of their workers, communities, and the environment. When lead companies fail to honour commitments made at an earlier stage in the purchasing process or practice abusive purchasing practices such as the very late confirmation of final order numbers, this can directly result in workers being forced to work overtime, sometimes in unsafe conditions. Last-minute urgent orders (or changes to orders) also often lead suppliers to subcontract to unidentified/unauthorised suppliers where working conditions might be even more appalling.

Unfair purchasing practices are therefore linked to a host of risks and impacts ranging from low wages and unsafe working environments to modern slavery and gender-based violence. Given the endemic scale of this problem and the size of the garment sector, the consequences are immense. It is estimated that up to 60-75 million people worldwide are employed in the sector. Further, being the second clothing market in the world, the European apparel import market was valued at €177.3 billion in 2019. These practices also undermine other efforts of (sometimes the same) brands and retailers to improve labour rights within their value chain as part of responsible business conduct.

It is therefore no surprise that the OECD Due Diligence Guidance on the Garment & Footwear sector highlights the necessity for businesses to evaluate and amend purchasing practices to align with the expectations on responsible business conduct. Indeed, sustainable purchasing practices are essential to finance increasing expectations in terms of compliance for addressing human and environmental impacts..."