Apparel Sourcing Intelligence - Worldwide

Are we seeing the industry’s first social accountability tipping point?

In the decade or so I’ve been sharing my views in my monthly FlanaRant, one paradox has particularly puzzled me:

  • Big apparel buyers have consistently laid down tight specifications for their yarn and fabric. But China, despite dominating yarn and fabric production, has become horrendously polluted making and dyeing it – and much of India’s textile industry is even filthier.

China and India are part of the explanation. In 2005, the EU proposed a system for registering, evaluating, authorising and restricting chemicals (REACH) used in products sold in Europe, whether imported or home-made.

The rest of the world screamed. India and China insisted the rules were designed to deprive them of their right to decide how dangerous their manufacturing should be, while the US complained about all that bureaucracy.

Nonetheless, the system began coming in to force in 2007, and it’s fair to say that since then:

  • European government progress in determining chemical restrictions has been driven more by what harms European users than by what harms people in or near developing-world factories.
  • Garment industry buyers probably paid more attention implementing REACH and coping with a new, often cumbersome, mandatory system than wondering whether more restrictions might be nice. Their main yarn and fabric preoccupations, of course, were how they looked and whether they’d sell.
  • Developing-world government concerns about textiles and garments were mainly about getting and keeping the jobs revealed by Western buyers offshoring. As the Western recession hit in 2008, worries those jobs might disappear worsened, with China, for example, temporarily suspending its minimum wage increases.

Activists in China started drawing attention to the country’s growing pollution problem around 2010, followed by both Western activists and China’s rulers. By 2013, as China’s newly-appointed President and Premier were insisting polluting factories had to be closed, Greenpeace had signed up major brands like H&M and Inditex to pledge they would lead the industry towards zero discharge of hazardous chemicals (ZDHC).

During October 2014, Greenpeace turned its attention to getting Germany’s supermarket chains to sign up, nabbing Tchibo within hours. Meanwhile, comments from government and party sources after an apparently vague China National Textile and Apparel Council social responsibility report recommending manufacturers “should end their use of 68 textile dyes and related finishing chemicals” revealed this was just a polite way of saying “get rid of them almost right now.”

While Greenpeace was corralling mostly European buyers into its timetable for eliminating toxic discharges, Gap was signing up to the ZDHC consortium’s timetable for elimination by 2020, and VF was launching its own timetable for more or less the same objective. Buying companies committed to eliminating hazardous discharge now account for about the same retail clothing sales as Germany, the UK and California combined. And it’s safe to assume that Greenpeace’s brand of highly visible public shaming will bring more in.

Major turnaround
So, in six years the bigger buyers have moved from avoiding commitment on toxic discharge to likely toxic-free production by the end of the decade.

And China – with 35% by value of world textile exports in 2013, up from 33% in 2012 – has moved from ferociously opposing legislation on hazardous chemicals to introducing possibly the world’s most aggressive legally-enforced programme for eliminating them.

Why have major buyers changed so quickly, and where does this leave everyone else?

It’s unrealistic to think buyers – or their customers – have become fully-fledged eco-warriors. I certainly think pressure from lots of sources – not least the cost of dealing with irate activists – has made it easier for retail managers’ inner tree-hugger to come out. But there’s a more mundane reason too.

In a way, brands don’t really pay for discharge-removal programmes. They pass the demand onto the mills and hope competitive pressure will prevent cost hikes. It helps that yarn prices are currently in freefall – but most people think China’s growing savagery about old, polluting mills means a lot more upgraded capacity, meaning greater productivity, meaning lower prices.

It also means fewer jobs, but in China that doesn’t create political difficulties. The Chinese government is delighted workers can move to higher value-added industries – and there aren’t any independent unions to raise objections anyway.

Until recently, many thought it meant moving mills out of China. That may be too simple: Texhong, for instance, has just pulled out of a planned new mill in Turkey, and cancelled plans for a mill in Uruguay earlier in the year.

Shandong Ruyi’s just cancelled a $62m purchase of a Pakistani spinner – though a raft of agreements signed on 8 November between China’s Premier and Pakistan’s Prime Minister seem to indicate Ruyi’s still committed to financing a $2bn Pakistani textile and garment park with far bigger spinning capacity.

I think getting clean air and rivers matters enough to the Chinese government that money will turn up for non-polluting mills whatever the state of China’s banks.

Where next for polluting mills?
The question non-Chinese spinners and weavers have to ask is: will there be a significant market for polluting mills in five or ten years’ time, or will their only customers be those selling to undemanding markets like India or Russia?

It’s the same question for brands that aren’t planning to remove hazardous discharges: will there be any polluting mills in a decade making fabric that customers want to buy – or will their only source be clapped out mills in, say, Egypt or Uzbekistan?

I suspect a combination including the Chinese government together with Gap, Inditex, H&M,Nike, Adidas, VF, M&S, Primark and C&A means the toxic discharge issue has hit a tipping point.

One where other governments and buyers will move to more or less the Greenpeace-China standard sooner or later – with that standard enforced in the EU and US by a transatlantic REACH2.0.

Is this bizarre unspoken alliance between Western activists and an unaccountable Communist dictatorship a model for sorting out the industry’s human rights problems as well?

Tougher – and a topic we’ll explore here soon.