Pressure on retailers to act ethically

Investors are calling for greater transparency from public companies over the sourcing of clothing, footwear and textiles from Asia, warning that chasing cheaper labour to screw down costs can backfire and ultimately damage fashion brands.

Investors are calling for greater transparency from public companies over the sourcing of clothing, footwear and textiles from Asia, warning that chasing cheaper labour to screw down costs can backfire and ultimately damage fashion brands.

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.

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