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…
Investors want more supply chain transparency because sourcing clothing, footwear and textiles from low-pay countries can create ethical and operational risks. The article says investors worry that chasing cheaper labour can backfire, damage brands and expose companies to scandals or tragedies — so they are asking public companies to disclose where they buy goods and how they manage labour risks.
Investors are asking public companies to detail which countries they source goods from and to publish audits that show no child or slave labour is used. The piece notes calls for clearer information on sourcing, audit results and evidence of supply chain labour standards.
The article cites the collapse of a garment factory in Bangladesh that killed 1,100 workers as a major event that put a spotlight on sourcing from poor countries. It also references past scandals — such as Nike’s sweatshop exposure and other incidents like child-made footballs and suicides at an electronics factory — to show the long-standing nature of these risks.
According to the article, public disclosure is generally poor: very few companies discuss detailed supply chain labour issues in their sustainability reports or annual reports. AMP Capital’s analyst said investors often have to go on a ‘fact-finding mission’ to learn more.
The article explains investors want audits to ensure no child or slave labour is used, and it says the Bangladesh factory collapse forced some retailers to disclose exposure and sign international labour agreements on sourcing and pay. Audits and agreements are presented as tools for improving accountability and worker protections.
The article mentions footwear group Nike being exposed in a historic sweatshop scandal, an electronics factory in China linked to worker suicides, footballs used in the AFL found to be made by children, and an allegation that Qantas bought headphones from a Chinese jail using prison labour. These examples show controversies across apparel, footwear, electronics and airline procurement.
The calls are coming from investors, ESG analysts (such as AMP Capital’s Mans Carlsson-Sweeny) and consultants (like Jaana Quaintance-James of Banarra). Everyday investors should care because poor supply chain practices can damage brand value, create legal and reputational risks, and ultimately affect company performance and shareholder returns.
The article notes a survey of investors who are signatories to the UN Principles for Responsible Investment found supply chain labour standards are one of the top three priority areas for engagement — highlighting that investor stewardship is focusing increasingly on ethical sourcing and worker protections.
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