Pressure on retailers to act ethically
Mans Carlsson-Sweeny, senior environmental, social and governance research analyst at AMP Capital, said budget-conscious consumers had led retailers to heighten their focus on supply chain efficiencies, which means typically sourcing from countries with low pay rates, but that carried its own risks.
The pressure was on public companies to provide more information on sourcing, including details of which countries they were buying goods from, and audits to ensure no child or slave labour was used.
"You want to make sure you are investing in companies that manage these risks and public disclosure in this is quite poor across the board," Mr Carlsson-Sweeny said.
"Very few companies talk about this in their sustainability report or in their annual reports, which means you have to go on a fact-finding mission."
The collapse of a garment factory in Bangladesh in April that killed 1100 workers put the spotlight on the issue and forced retailers to disclose their exposure to one of the poorest countries in Asia and sign international labour agreements on sourcing and pay. But concerns over supply chain management have existed for years.
Decades ago footwear group Nike was exposed in a sweatshop scandal. That was followed by other scandals, including a string of suicides at an electronics factory in China and the discovery that footballs used in the AFL were made by children.
Last week it was alleged that Qantas had bought airline headphones from a Chinese jail where prisoners were regularly beaten and held in solitary confinement for missing production targets.
Jaana Quaintance-James, a consultant with Banarra, which advises many companies on these issues, said investors were seeking greater transparency and attention over the issue of ethical supply chain management.
A recent survey of investors who are signatories to the UN Principles for Responsible Investment highlighted supply chain labour standards as one of the three priority areas for engaging with companies, she said.
Frequently Asked Questions about this Article…
The article explains investors want clearer disclosure because sourcing from low‑pay countries to cut costs can create serious risks — including child or slave labour, factory safety failures and reputational damage. Greater transparency helps investors assess those risks and decide which public companies manage them well.
Unethical sourcing can backfire by damaging a brand’s reputation and exposing companies to legal, operational and financial risks. The article notes past scandals — such as Nike’s sweatshop exposure and the Bangladesh factory collapse that killed 1,100 workers — which forced retailers to disclose sourcing and sign labour agreements.
Investors want companies to reveal where they buy goods (which countries), provide audit results and demonstrate steps taken to prevent child or slave labour. The article says public disclosure on these details is currently quite poor across many companies.
The article says the April collapse that killed 1,100 workers put a spotlight on supply chains, prompting retailers to disclose exposure to Bangladesh and to sign international labour agreements on sourcing and pay. It intensified calls for better transparency and safer practices.
Yes. The article mentions allegations that Qantas bought airline headphones produced in a Chinese jail where prisoners faced abuse, and recalls earlier scandals such as Nike’s sweatshop exposure and child‑made footballs used in the AFL.
According to the article, very few companies discuss supply chain labour issues in their sustainability or annual reports, forcing investors to go on a fact‑finding mission. Investors are asking for better public disclosure and audits to verify responsible sourcing.
The article cites a survey of UN Principles for Responsible Investment signatories which identified supply chain labour standards as one of three priority areas for engagement. Investors want companies to address labour conditions and demonstrate effective management of these risks.
The article suggests investors should look for clear public disclosure on sourcing countries, audit results and commitments to international labour agreements. Finding companies that proactively manage supply chain risks — rather than hiding them — can help investors avoid brands with potential ethical and financial problems.
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