"Fast Fashion Purchasing Practices in the EU", April 2023

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European garment production profits from...proximity to brands’ headquarters and retail markets in geographical terms...At the same time, brands equally profit from cheap labour within Europe. In this report, we concentrate on two very important clusters of garment production within the EU: the Italian fast fashion system and the outward processing in Central-East, East, and South-East Europe.

The volatility and flexibility of orders placed in countries like Bulgaria, Romania, Croatia, or Czechia are facilitated by an EU production and trade scheme introduced in the seventies: the Outward Processing Trade (OPT). This means that mostly pre-cut fabrics are delivered to nearby low-wage countries, where the labour-intensive sewing and finishing are carried out, to be re-imported free of customs duties. Apparel supply chains within an OPT arrangement are characterised by particularly imbalanced relations of power and influence – with meagre perspectives to escape this role and upgrade. OPT thus creates regional clusters of poverty, covering-up, fear, and informality.

In Bulgaria, Romania, Croatia, Czechia, Italy, and Germany, we interviewed 11 managers or owners of 1st tier manufacturers, 7 buyers or former buyers of brands, 3 heads of garment manufacturer associations, 5 consultants or social auditors, 4 experts, 3 representatives of Multistakeholder Initiatives and 3 leaders of unions active in the garment industry...With smaller volumes and still low prices per piece, the economic pressure exerted by brands and retailers upon European manufacturers is arguably higher compared to other key garmentproducing regions. Therefore, manufacturers are desperate for orders, despite lower margins. Indeed, manufacturers see any negotiation with brands as a “lost cause” on all fronts, but particularly on price negotiations...In contrast, brands and retailers buying from such firms seem to make most of their leverage, and demand changes in prices and times to their favour. This results in a general trend for lower prices, shortened lead times, more order changes, extended payment deadlines, and the increased transfer of “hidden” costs to manufacturers...

Widespread small and fast orders characterise the European garment manufacturing sector with already dramatic business-to-business power imbalances, giving buyers even more influence in defining terms and conditions than elsewhere. The report concludes with several concrete recommendations for fairer contract terms, for example on the maximum delay of payments, level of prices, lead times, conditions for the use of clauses such as ‘force majeure’, and penalties. However, while brands and retailers can take immediate action by committing to adopt fair practices in their buying policies, legislative action at EU level is needed to set a level playing field. In this regard, the report suggests adoption of an EU directive that bans the most harmful purchasing practices in textile and garment supply chains, accompanied by a strong enforcement strategy; and recommends that purchasing practices are integrated in the due diligence process that companies will be required to undertake following implementation of the upcoming Corporate Sustainability Due Diligence Directive.