Opinion: Tim O’Callaghan on ethical regulations

Tim O’Callaghan is a partner in Druces LLP, specialising in advice to fashion and luxury goods businesses. In this month’s column, he looks at the law of ethical fashion.

Have you ever been asked the following question at a tradeshow: “Is your collection made from sustainable sources and ethically produced?”

If you haven’t already been asked this by a potential buyer (or perhaps, more likely, a keen-looking potential intern with a clipboard) the chances are that you will be at some point in the future.

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The words ‘ethical’ and ‘sustainable’ are, at least superficially, becoming almost as important to buyers as the price of garments.

When asked this question, it would be gratifying to reply in the affirmative with something along the lines of: “Yes, my corsets are made by well-paid mastercraftsmen and their apprentices using only organic bamboo and banana skins sourced exclusively from sustainable plantations in UN secure zones.”

But, would that really be the truth? A more usual answer would be: “My cotton is sourced from a reliable merchant and my factory in China has shown me certificates confirming they operate a ethically fair workplace.”

Do you really know where your fabrics come from? Cotton, for example, is heavily-reliant on chemical pesticides and uses vast amounts of water.

It is also surprising to note that at a time when customers are more attuned to the watchwords of the age, ‘ethical’ and ‘sustainable’ sales of organic cotton have actually decreased.

Do you know who sews the lining of your brassieres and in what conditions they work?

The catastrophic collapse of the Rana Plaza building in Bangladesh earlier this year has, at least for now, focused the Western media’s attention on the plight of those working in the garment industry in India and the orient.

As most people would agree, the words ‘ethical’ and ‘sustainable’ are good objectives for business, even if the motivation of the biggest producers to take positive action might stem more from a commercial response to customer demand than from reasons of pure altruism. But what, if anything, is the law doing in this area?

The answer, is ‘lots’ but in a fairly scatter-gun approach. The problem being that the words ‘ethical’ and ‘sustainable’ have no recognised objective legal meaning.

What is meant by ethical and sustainable to the woman buying your lingerie on South Molton Street can be a very different thing to what the manager of a factory in Bangalore understands by those words.

The law does not really help with this difference of interpretation, the result is a muddle of regulation and ‘best practice standards’ with which those in the industry are meant to comply.

The confusion of regulation is compounded by the complexity of the industry’s global supply chains. Your silk may come from Sri Lanka, your elastic from Huddersfield, your buttons from France and the lingerie may be sewn together in Turkey. Which legal regulations do you have to comply with?

Depending on where your company operates, regulatory compliance may include:

The Bribery Act 2010 (UK)

Have you ever been asked by your Chinese factory to raise two invoices; one to the factory and one to the person that you dealt with? Whilst culturally acceptable, and even perhaps expected in China, this is likely to be in breach of the Bribery Act, which brings in penalties to all commercial companies with links to the UK for active bribery, passive bribery, the bribery of foreign public officials, as well as the failure to prevent bribery by staff or contractors.

Grenelle II regulation (France)

These regulations require any garments sold in France to have a label setting out a detailed ‘carbon footprint’.

REACH regulation (EU)

This makes you responsible for assessing and managing the risks posed by chemicals and providing appropriate safety information to their users. In the intimate apparel industry this translates into dyes, finishes and potentially even into pesticides and herbicides used in growing the natural fibres that you use in producing your garments.

Transparency in Supply Chain Act (California, US)

If you have any kind of trade in California, even if you sell into one boutique, this law requires you to disclose your efforts to ensure that your supply chains are free from slavery and human trafficking which, unless you control the supply chain from start to finish, will mean you have to rely on warranties given by those who supply fabric to you and manufacture on your behalf.

This is just an example of some of the legally binding regulations that you are, in law, bound to comply with, but on top of them is a further layer of ‘best practice regulation’. These ‘regulations’ don’t have the force of law, but are intent on encouraging you to act in an ‘ethical way’.

Having looked at the statutory and regulatory framework, we can turn to the other way that the law can affect you in this area. That is, the law of contracts.

I’m sure most readers are familiar with the provisions in the purchase terms and conditions of the large high street buyers which require you, the supplier, to guarantee that the garments you are supplying have not been produced using slave or child labour.

In the event that a department store was to investigate your factory and discover these horrific practices taking place, you would be in breach of contract and the buyer could cancel the order.

Many high street names go one step further and require you to provide inspection certificates in respect of the factories that you are using which certify to their ethical workforce policies.

The law is slowly catching up with customer expectation in the area of ethical and sustainable fashion and whether producers are forced to comply because of customer demand, or because of the tangled web of legislation, the result can only be good for the industry.

 

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