Is NGO Scrutiny Reducing Supply Chain Transparency?

November 16, 2016

By: Laura Tyson

NGOs play a vital role in regulating and holding brands and retailers to account, especially when it comes to the transparency of their supply chains – but are their radars locked onto the wrong targets?

In the past decade the apparel and footwear sector has matured, accepting that it has a duty to maintain greater oversight of its supply chain as well as uphold ethical integrity. As a result consumers now have access to the supplier lists for some of the world’s biggest brands – Timberland, M&S, Patagonia, H&M, Nike, Adidas, and recently Gap Inc. and Cotton On to name a few.

M&S’s Plan A even provides an interactive map where you can even drill down into the male/female ratio of each factory.

NGOs have undoubtedly led the charge in calling companies to account, buoyed by enlightened leadership from leading brands, ethically-minded new entrants, activist shareholders and consumers demanding greater insight into how their clothing is made.

In developing markets where legislation struggles to keep apace of new developments, NGOs play a crucial role in holding companies – and in turn their suppliers – to account, be it for the treatment of workers, protection of the environment or safety of the items produced.

I wonder, however, if the pendulum has swung too far, not because standards are sufficiently high – they are not – but because the NGO’s radars are locked onto the wrong targets.

H&M has been publishing its list of suppliers since 2013. The retailer has done more than most to be transparent with regards to its supply chain, working to improve standards and forge closer relations with, and oversight of, its suppliers. It still has a lot to do, but accepts its leadership role in the sector and hopes others will follow.

And yet instead of being lauded for its efforts, thereby encouraging others to follow suit, NGOs single the company out for greater scrutiny. In the last year Clean Clothes Campaign has issued three reports/press releases calling out H&M for poor standards amongst its suppliers (who are no doubt used by multiple other brands) and yet Zara and Mango, fast fashion brands that do not reveal the names of their suppliers, have not been under the NGO’s spotlight.

Clearly it is vital for NGOs to hold companies to account on their promises and stand up for those workers whose voices are not heard, but the net result is that the incentives for making positive change simply don’t stack up. Costs inevitably go up, but what is the return on investment (ROI)?

Brands have to be very brave to make a noise about efforts to improve transparency of their supply chain. Talking too boldly gets you front and centre of the NGO’s radar. Put yourself out there and you’re firmly in the sights of a plethora of NGOs vying to catch you out. Cotton On, which recently published its supplier list, should be bracing itself for the added scrutiny that will now follow. The old adage, ‘the higher you climb the greater the fall’ comes to mind.

The net result is many companies feel that with increased transparency comes increased risk – doing nothing may be a safer option. NGO scrutiny may in effect be reducing the pace of the very change they seek.

It’s time for NGOs to offer rewards and pat some people on the back. Greenpeace does this fairly effectively with its detox campaign, giving credit where credit is due and holding slackers to account. By supporting the big brands making steps in the right direction, NGOs will encourage higher standards across the sector.

Importantly, incentives in the form of endorsements give the brands greater ability and confidence to educate their own consumers on the important steps they are taking and the potential cost implications. According to recent data published by Verdict Retail, 31.1% of consumers cited price as the reason they had not bought any sustainable or eco-friendly fashion in the last few years. Consumer education is the key to securing faster and lasting change. These brands are highly skilled marketeers, tapped into the tastes and views of their customers. They have far greater insight into, and influence over, consumers than NGOs ever will. NGOs should work with companies who, albeit without perfect supply chains, are trying to improve standards and generate an environment where improvers are celebrated, encouraged, aided and rewarded.

This is the role these very same brands are playing with their own suppliers with much success. The brands audit suppliers and work with those who are raising standards, thereby rewarding best practice. VF, which owns multiple brands including Timberland, for example, is making investments into Third Way factories to raise standards.

NGOs play a vital role in regulating and holding companies to account. That should not be compromised. They do though have both carrots and sticks. Offer some carrots and maybe more brands will be brave enough to get on the transparency radar.

This article was originally published on (web) – Oct. 11, 2016