Apparel Project Summary
The first stage involved education on the scale of illegal behaviour and types of precarious practice which exist in the workforce. We sought input from independent experts to enable investors to understand and frame the issues through a series of workshops for investors. We heard from the:
- Gangmasters & Labour Abuse Authority (GLAA)
- Institute of Human Rights in Business to get the facts on modern slavery in the UK
- Association of Labour Providers
- Staffline Group plc to understand the roles and responsibilities of labour supply agencies
- Founder of the Fast Forward and Stronger Together industry initiatives to hear what the industry can do in the UK to practically address the problems of labour exploitation.
The Forum arranged for investors to undertake a series of meetings with seven companies to investigate current standards and practices, taking the form of store visits, presentations, and warehouse tours. Members were able to meet with a wide variety of people from senior management through supply chain and logistics managers, warehouse managers to shop floor employees. The objective was to establish “what good looks like” across luxury, online fast fashion, mid-range and the traditional retail offering, and identify areas for future engagement.
The majority of companies that we contacted welcomed the opportunity to demonstrate their commitment to their employees, were keen to discuss the challenges they face in ensuring their complex supply chain met the agreed standards, and solicited feedback from investors on areas for improvement. It was clear from “kicking the tyres” that a number of companies had taken significant steps in the last 18 months to improve pay levels, transparency over working hours and to provide opportunities for workers to transition from agency roles to employee status. We had many frank conversations on the steps taken by companies to protect their reputation, and were able to question senior management on their oversight of these issues.
Fourteen investment firms joined us for a behind-the-scenes tour of distribution centres in the North West of England, on occasions being the first investors to visit such facilities and ask questions of the logistics managers and Directors. We came away with some key insights into capital expenditure on automation, and the threats and opportunities this creates, as well as an increased understanding of employee working conditions.
Investors clearly cannot visit every shop floor, check every payslip, walk with the pickers in the warehouses or sit with seamstresses in the outsourced manufacturing bases to check up on practice first hand. But there are clues that can be noted, metrics of concern that can be tracked, and conversations with the appointed representatives on the boards of listed companies that can help identify and manage human capital risks within companies. We proposed a toolkit to help investors evaluate the non-financial information companies disclose, diligence the practices employed, and identify potential risks to reputation and brand value.
We researched the plethora of industry initiatives that companies in the sector can join, to help investors find evidence of action to support the words of intent. In consultation with participants, we also compiled investor views on best practice in Modern Slavery Statement content, and sent this to the companies we had met who had not yet published a statement, to assist them in their considerations. We aimed to complement and build on the work done by others in this area, such as the Fashion Transparency Index, the ShareAction Workforce Disclosure Initiative, and the work of the Taylor Review into the modern workforce, bringing these important insights to the investment community.
We shared the findings of the project with the British Retail Consortium, as they were interested in what questions investors might ask their members in future. We hosted a roundtable to enable investors’ voices to be heard in Sir David Metcalf’s consultation on his Labour Market Enforcement Strategy. The Forum has also been invited to join the “Let’s Make it Work” advisory group on transparency in supply chain reporting, chaired by Baroness Young of Hornsey, to bring an investment community perspective to its work on corporate reporting.
Government action to level the playing field for responsible, compliant businesses by holding all companies in the UK to high standards of labour practice is welcomed by investors.
The Forum’s project gave our Members another tangible example to demonstrate to their clients, and wider society, that they use their stewardship role as a force for economic and social good, and incorporate non-financial factors into their investment decisions. Each investor had an opportunity to take the insights they gained through this project and apply them to the wider market, or engage specifically with the companies they own to drive further change. A number of Members have referenced this project in stewardship reporting to their own clients.
We believe that the majority of listed companies in the apparel sector are aware of the risks facing their franchise value, and understand how their working practices can impact this – either positively through enhanced productivity by being an employer of choice, or negatively through damage to their reputation when poor standards are revealed.
However, there will inevitably be outliers. Supply chains are long and complex, and those companies that manage these well should attract an increased premium from investors, as the consequences of not doing so become better understood.
We will continue to assist Members of the Investor Forum in exercising their stewardship responsibilities, and encourage purposeful dialogue with companies on these issues. In 2018, we will extend this process to review at least one other sector with a significant low-skilled workforce in the UK, and their supply chain.
We approached the Investor Forum to help coordinate a collaborative engagement project on working practices. Engaging with companies as a large group of UK investors highlighted the importance of these issues to corporate senior management. The benefits were evident.
Head of Responsible Investment,
Standard Aberdeen Investments