Ahead of 2024, A Snapshot of Fashion’s Supply Chain Woes, Mounting Legislation

Fashion industry entities, including those in the fast fashion and mass-market segments, in particular, have faced scrutiny this year stemming from their supply chains, thanks, in part, to the issue of forced labor in Xinjiang, China. One need not look further that mounting efforts by lawmakers to probe Shein both ahead – and in the immediate wake – of the Chinese-founded, Singapore-based fast fashion company confidentially filing to go public in the U.S. If all goes as planned, Shein is expected to begin trading in the U.S. in 2024. However, the path for the fashion giant will likely not be a smooth one, as it is facing a steady stream of pushback in connection with allegations that its supply chain is rife with forced labor. (A spokesperson for Shein has previously said that the company has a zero-tolerance policy for forced labor.) Reuters reported last month that “critics,” including U.S. lawmakers, are “concerned that Shein may use contract manufacturers in China’s Xinjiang region, where advocates and governments have accused China of interning Uyghurs and other largely Muslim minority groups.”

Not the only company that is being plagued by supply chain-specific issues, fast fashion retailer Boohoo has faced recurring problems over labor conditions in its supply chain, namely, in factors in the United Kingdom, while Canada’s corporate ethics watchdog has probed the national arms of companies, including Nike, Ralph Lauren, and Dynasty Gold, over concerns that their products are potentially tied to supply chains or operations in China that “are using or benefiting from the use of Uyghur forced labor.”

Against this background and in light of enduring labor issues that will inevitably arise in 2024, risk management platform EthixBase360 reflected on “some of the key controversies” of the year in fashion (and apparel, footwear, and accessories manufacturing more broadly) and highlighted the following …

To address the labor (and broader ESG) issues plaguing the fashion industry, EthixBase encourages companies to “commit to compliance with [ESG] standards,” which it says will consist of “a multifaceted approach that considers every aspect of the supply chain and business operations.” Moreover, it states that companies “must also utilize robust risk management and due diligence strategies to identify, mitigate, and prevent potential sustainability-related risks, ensuring a more responsible and sustainable future for the industry.”

As for what should be top of mind for companies going into the new year, the risk management consultancy points to: (1) Sustainable Materials, stating that “a reduction in reliance on resource-intensive fabrics and decreasing the overall environmental footprint of their products should be a priority;” (2) Responsible Production and the implementation of “green production methods and the minimization waste through lean practices, [which] can significantly reduce [a fashion company’s] ecological impact;” (3) Supply Chain Transparency, including providing “detailed supply chain information – from sourcing materials to manufacturing and distribution – to consumers;” (4) Marketing and Communication, namely, an emphasis on refraining from greenwashing; and (5) Compliance Audits, with the group saying that “regular compliance audits by independent third parties can help companies identify areas where they need to improve their sustainability efforts,” including by providing “an objective assessment of a company’s practices to help them stay on track.”

In addition to the need for companies to get a handle on their supply chains in order to avoid things like negative publicity and loss of consumer trust, there is also the rising risk of legal ramifications, as lawmakers across the globe have looked – and continue to look – to enact legislation to require companies to assess (and in some cases, report on) their suppliers’ environmental and human rights practices. The U.S. Uyghur Forced Labor Prevention Act comes to mind here, as does Canada’s Fighting Against Forced Labor and Child Labor in Supply Chains Act (effective in 2024), the German Supply Chain Due Diligence Act (the scope of which broadens on Jan. 1, 2024 to companies with greater than 1,000 employees in Germany), and the Corporate Sustainability Due Diligence Directive, which was approved by the European Union Parliament in June.

Stateside Legislation to Watch

Amid an increasing number of legislative efforts to regulate companies from a supply chain standpoint, there are a few key pieces of fashion-specific legislation in the U.S. that are worth noting as we head into 2024. Among them are …

– Fashion Sustainability and Social Accountability (“Fashion”) Act: The Fashion Sustainability and Social Accountability Act or “Fashion Act” (A4333/S4746) would require “fashion sellers to be accountable to standardized environmental and social due diligence policies; establishes a fashion remediation fund for the purpose of implementing one or more environmental benefit projects or labor remediation projects that directly and verifiably benefit the workers and communities directly impacted, to the extent practicable, at the location the injury has occurred.”

– New York Extended Producer Responsibility for Textiles Bill: This New York state bill (A8078/S6654) would “establish extended producer responsibility for textiles.”

– Washington State Environmental Due Diligence Bill: This Washington state bill (SB 5607), which largely mirrors the Fashion Act, would require “fashion retail sellers and manufacturers to disclose environmental due diligence policies.”

– Massachusetts Sustainability and Social Accountability Bill: This bill (H. 420) would “establish fashion sustainability and social accountability” in the commonwealth of Massachusetts.

– Responsible Textile Recovery Act of 2023: This California state bill (SB 707) would establish an Extended Producer Responsibility scheme for the  collection and recycling of “covered products,” which include any apparel, textile, or textile article that is unsuitable for reuse by a consumer in its current state or condition.

– Fashioning Accountability and Building Real Institutional Change (“FABRIC”) Act: Reintroduced in 2023, the FABRIC Act (S. 4213) would establish “a nationwide garment industry registry through the Department of Labor to promote transparency, hold bad actors accountable, and level the playing field,” enact “new requirements to hold fashion brands and retailers alongside manufacturing partners jointly accountable for workplace wage violations to incentivize responsible production, starting at the top,” and set “hourly pay in the garment industry and eliminating piece rate pay until the minimum wage is met to ensure jobs with dignity.”

For more on these bills and others, you can find our running tracker of Fashion/Retail Legislation right here