with Liana Foxvog, Crisis Response Coordinator, Worker Rights Consortium
What has happened in the garment industry during COVID-19?
Store closings amidst the lockdowns caused a sharp decline in spending on apparel. In the span of a month, consumer purchases of clothes plunged 89%. Brands and retailers rushed to cancel their orders – on product that suppliers had already produced or were in the process of completing – leaving the suppliers high and dry. All told, these retroactive order cancellations amounted to an estimated $40 billion in refused payments owed to factories.
Corporate purchasers make factories front the cost of cloth, labor, and all operating expenses, and only pay the factories weeks or months after the goods have shipped. During COVID-19, many brands with shorter payment schedules pushed those back to what they are calling “the new industry norm” of waiting until 90 days after their clothing leaves the port to pay the factories. This change has added to the massive financial crisis factory owners are facing, some hit with millions of dollars in order cancellations after buying fabric and incurring labor costs.
What is the situation like for garment workers at the factories with cancelled orders?
When brands refuse to pay for goods already made, this immediately places the typical factory in a state of insolvency. Factories respond by cutting wages or firing workers. The impact of order cancellations, combined with temporary factory shutdowns driven by the pandemic, has left millions of workers without jobs and wages – in countries with minimal social safety nets. Many workers are not even able to feed their families adequately.
How is it possible for brands to cancel these orders?
Order cancellations are a function of the grossly inequitable payment terms that brands have imposed on suppliers, where brands don’t pay for goods until well after the suppliers have produced them and the suppliers have to pay all of the upfront costs. This allowed brands and retailers to renege on their financial obligations to suppliers in order to shore up their own finances and minimize inventory. This was, in some cases, a violation of contractual terms, but few suppliers are going to enforce contracts against customers whose business they need to keep.
It’s like ordering a delivery pizza but then calling 15 minutes later, after the pizza has come out of the oven, and canceling the order. But, unlike cancelling on a single pizza, these cancellations of massive clothing orders have had very real consequences that make the difference between whether millions of workers have adequate food for their families – or not.
It has been several months since COVID-19 started impacting apparel supply chains. Are things getting better or worse for workers?
Some brands have reinstated their cancelled orders, as shown on our tracker, as a result of strong pressure from worker organizations in the exporting countries and advocacy groups in North America and Europe. This is important progress involving billions of dollars of payments. Where the restoration of orders has translated into garment workers finally receiving the wages they were owed, this means less of an economic struggle for them than three months ago. However, other brands have only partially reversed their cancellations, and some are refusing to budge at all.
Additionally, millions of workers did not receive a regular income during the temporary factory closures, incurring debt and having to significantly reduce their family’s food budget. With the decline in orders for the fall season, there has been a spike in layoffs across the industry and, due to discrimination, union members and pregnant women are disproportionately affected.
There are also cases of COVID-19 spread in garment factories and, in a number of cases, fears over whether workers were sent back to work too soon and whether new social distancing and sanitizing measures are being implemented properly.
Has the effort had any successes so far?
When the Center for Global Workers’ Rights at Penn State University first launched its findings on brands’ order cancellations in Bangladesh at the end of March, only six apparel companies had committed to pay in full for all orders in production or completed. Now, after widespread media attention and consumer engagement, 13 more have made the same commitment, recouping an estimated $22 billion in orders that had originally been cancelled.
Take Action with Green America
You can support garment workers by signing Green America’s petition to JC Penney, Kohl’s, Ross Stores, Sears, The Children’s Place, TJ Maxx, Urban Outfitters, and Walmart, and speaking out on social media to let the companies know this is an issue that you care about as a consumer.