The fashion companies promising to pay their suppliers
Aug 6, 2020
After the outbreak of Covid-19, fashion companies cancelled orders worth billions with their suppliers, shifting their problems onto those who were most vulnerable: factory owners and workers. After much criticism, more than a dozen companies such as H&M and Levi Strauss made U-turns on their decisions, while others such as Bestseller and Primark continue to be targeted by NGOs despite their public pledges.
In the face of massive sale slumps during the pandemic, many clothing companies reacted by reducing and cancelling orders. However, others have made a public commitment to at least accept the orders in progress. In most cases, though, it remains unclear when exactly they will be paid and what will happen to the orders that have not yet gone into production. According to the PayUp initiative of US non-governmental organisation Remake, 19 fashion companies have currently promised to pay suppliers for all orders that have been cancelled or paused due to the coronavirus.
To make it into the ‘paid’ category of Remake’s list, these companies must also commit to paying suppliers for cancelled and in-production orders in full and on time, without asking for discounts. Those who refuse to do so remain listed under the category "not paid" on the NGO's petition list, which has now gathered more than 260,000 signatures.
Among the fashion groups that have not yet paid are, as of 22 July, C&A, Forever 21, and URBN Group - the US owner of brands Anthropologie, Urban Outfitters and Free People.
18 billion US-Dollar in wages still outstanding
"We are asking for brands to simply honor the original payment terms - that's what timely means to us," said Remake founder Ayesha Barenblat in an email to FashionUnited. "Many are asking for discounts and pushing payment terms out, resulting in factories being unable to make payroll and leaving workers starving on the streets."
Denim maker Levi Strauss & Co is one of the businesses that the NGO lists among the paying companies. "We are taking full responsibility – and paying in full – for all finished, ready-to-ship orders and in-progress orders ," Levi's announced on its website in early July. However, the US heritage brand has extended payment terms within "industry standards". It has not asked for discounts. Levi’s additionally wants to make sure yarns and fabrics that have already been ordered won’t be discarded. "We also plan to use raw materials already received by suppliers for product orders in later seasons," the company said.
In total, Remake estimates that 22 billion US dollars were provided by fashion companies worldwide as a result of its pay-up campaign. To put it in perspective, that's about half of the 40 billion US dollars in wages owed to workers in the garment industry at the start of the Covid-19 pandemic. The 19 companies that have publicly pledged to pay their suppliers and have made it onto Remakes list are currently Adidas, Asos, Gap, H&M, Inditex, Kiabi, Levi Strauss & Co, LPP, Lululemon, Marks & Spencer, Next, Nike, PVH, Ralph Lauren, Target, Tesco, Under Armour, Uniqlo, VF Corporation. "However, there is still more work to be done," Remake said on its petition website.
Picture: Screenshot of the list on the website of Remake
Primark has placed orders worth a billion again
Many fashion companies have had to deal with massive revenue declines since the outbreak of the novel coronavirus and some had to lay off their own employees worldwide. In light of store closures and reduced consumer demand, many are experiencing payment difficulties. But Remake fails to understand how certain fashion brands continue to pay out dividends to shareholders while leaving workers unpaid.
Irish fast-fashion giant Primark made headlines in April with its pledge to pay 370 million British pounds (424 million euros) to its suppliers. With this, Primark paid for all items that were in production at the time and were to be handed over by April 17. After its stores gradually reopened, the retailer was again able to place orders of more than 1 billion British pounds (1.1 billion euros) for the upcoming autumn-winter season, a spokesperson said last week. "We hope that by resuming orders we can start to rebuild together from the impact that Covid-19 has had on our entire industry.” However, Remake continues to list the textile discounter among the companies that have "not paid" yet.
Paid up or not quite?
"Primark has also been a lot better at PR than #Pay(ing)Up," said Remake founder Ayesha Barenblat when asked on July 28 why Primark remains on her list despite its public statement. The NGO complains that Primark did not disclose which percentage of its total unpaid commitments the promised amount of 370 million British pounds accounts for. According to the NGO Worker's Rights Consortium, talks with suppliers have revealed that hundreds of millions of dollars are still outstanding for which Primark has not made any commitment to pay. In addition, delaying payment of orders is putting many factories in a tight spot.
Primark announced on Friday that it has placed some 1.2 billion British pounds of orders for coming seasons. The retailer also pledged to pay garment suppliers in full for all outstanding finished garments and to utilise or pay for any finished fabric liabilities. It remains to be seen whether Remake will take Primark off its list, which was last updated on July 22.
Remake is similarly critical of the public statement by Bestseller. The Danish company behind brands such as Vero Moda, Jack & Jones and Only announced in early July that it would release payments for current orders immediately and make early payments until October to ensure that suppliers have enough funds to continue operations. Despite its efforts, the company still appears on Remake’s list under "unpaid". When asked, a spokesperson said that Bestseller is trying to minimise its impact on global supply chains and referred to its announcement in early July for more information. “Any changes in terms and volumes have been necessary due to the massive disruption and have been agreed with our suppliers through individual agreements. The focus is on bringing our partners through the crisis,” he added.
In the unequal balance of power between fashion companies and suppliers, individual talks often end up with discounts and retroactive cancellations, which cause suppliers liquidity problems and lead to employees not being paid in full and on time, according to Remake. Bestseller also insists, according to information from the Worker's Rights Consortium, that orders are only considered cancelled if the respective supplier agrees.
Who controls whether fashion companies really pay?
How can Remake control whether fashion companies keep their promises in the light of complex supply chains and thousands of suppliers? "We talk to suppliers regularly as do other organisations and our sources include the Worker’s Rights Consortium, the Business and Human Rights Tracker, and our own direct correspondence with the brands on the #PayUp list," explains Barenblat. To keep the brands accountable, Remake requires them to publish their statements online so that suppliers have a chance to confirm whether the brands are paying or not.
According to the list of the NGO, the following companies have not yet publicly committed to pay up: Arcadia, Bestseller, C&A, Edinburgh Woolen Mill, Fashion Nova, Forever 21, JCPenney, Kohl's, Li & Fung/Global Brands Group, Mothercare, Primark, Ross Stores, Sears, The Children's Place, TJX, URBN, Walmart/Asda.
Picture: Courtesy of Clean Clothes Campaign