Is supply chain accountability a myth?

This is an excerpt from DIRECT. Copyright 2022 by Kathryn Judge. Reprinted here by permission of Harper Business, an imprint of HarperCollins Publishers.

Sustainable jeans

Direct book cover - blue background with white and black lettering

Since I have no ambition to ever sit in a corner office, it is easy for me to criticize the lack of management responsibility. But there are times when I also take refuge in the ignorance that long supply chains can foster. For example, I know that cheap clothing is often a by-product of cotton farmers and garment workers who toil away for little pay in unsafe conditions, often causing environmental damage. Still, that only sometimes stops me from buying them.

In this regard, I am not alone. As we’ve learned, people today buy more clothes and shoes than they did even ten years ago, and far, far more than their grandparents. In addition to using smart data analytics to encourage people to buy more, the middleman economy facilitates this additional consumption by shielding buyers from seeing the effects of these purchasing decisions.

One of the factors that behavioral economists have identified as critical to real-world decision-making is salience. This helps explain why people eat cake even when they want to lose weight, and why people who care about the environment can still drive large, gas-guzzling vehicles and take long showers during water shortages. The immediate, tangible joy of the experience is more salient to them than the abstract, likely impact of their actions on their health or the environment. For better or worse, most of us overestimate what we see and experience and discount what we don’t.

A challenge with behavioral biases is that knowing about them does not free us from them. When I see a chocolate bar at the checkout, I’m often still tempted to buy it despite what I know about cocoa work. Similar problems arise when I buy new T-shirts and jeans for my family. At the moment, I instinctively still prioritize price, convenience, style and comfort. When that happens, I often compromise other values ​​that I would like to think are more important to me, such as respect for the dignity of all people and our planet. The problems start with the cotton that goes into those T-shirts.

Picking cotton has always been laborious, which is one of the reasons why the work is so often delegated to those who have the least control over their circumstances. According to the US Department of Labor, seven of the top 10 cotton-producing countries use forced or child labor in their cotton industries. The US, Australia and Mexico are the only top producers that do not; and with the use of prison labor in parts of the United States, some wonder if it should be on the list as well.

The cotton must then be sorted, made into thread and then textiles, dyed and transformed into T-shirts and other finished products. Questionable labor practices permeate each of these hubs. For example, numerous reports indicate that China has relied on the forced labor of 1.8 million Uighurs and other Muslim minorities in its cotton production and thread/yarn, textile and garment industries. Companies identified by US authorities as selling clothing tainted by Uyghur labor include H&M, Nike and Patagonia. These are brands that many people trust, in part because at the time of the report, each company already had policies in place purporting to address labor issues along their supply chains. At the time the US Department of Labor identified Nike as a seller of tainted goods, Nike had e.g. a policy that stated, “We have a responsibility to conduct our business in an ethical manner,” and “[w]I expect the same from our suppliers.” It also had a detailed “Code of Conduct” that was supposed to prevent its suppliers from using forced labor or engaging in other wrongful conduct. Nevertheless, these policies prevented money from flowing from buyers of Nike goods for Nike for suppliers who used forced labor.

Middlemen and long supply chains help blind consumers to the environmental impact of their purchases.

Even when garment workers supposedly enjoy the autonomy denied to Uyghurs in China, they still often face dangerous working conditions. This was vividly illustrated in 2013 when the collapse of the Rana Plaza building in Bangladesh killed more than 1,100 people and injured 2,500, mostly garment workers. That Bangladeshi garment workers faced unsafe working conditions was already well documented. More than 500 garment workers had died in factory fires in Bangladesh in the six years before the collapse. Yet local laws did little to protect them. Nor did it require workers to be compensated for the risks they faced. At the time, garment workers could be paid as little as $68 a month, a fraction of the $280 a month minimum wage that even China requires for most of its garment workers and an even smaller fraction of what those same people were paid. if they are legally employed to do the same work in the United States. These are the conditions that allow me to buy such cheap t-shirts for my girls, but I see no evidence of this when I read online or in the store.

Middlemen and long supply chains also help blind consumers to the environmental impact of their purchases. According to a report by the United Nations, the fashion industry is responsible for 8 to 10 percent of global carbon emissions and 20 percent of global wastewater. It takes 2,000 liters of water – about the amount of water a person uses over the course of seven years – to make just one pair of jeans. The production of cotton is also responsible for 24 percent of the insecticides and 11 percent of the pesticides used worldwide. And because so much of the apparel industry operates in parts of Asia that still rely on coal and natural gas, the industry is expected to account for as much as 50 percent of greenhouse gas emissions by 2030 if it stays on its current trajectory. As with labor, none of this comes through when I go shopping, and the middlemen probably increase more sales as a result.

One potential response to these challenges is to require companies to provide consumers with more information so that the impact of their choices is not so hidden. Precisely because so much policymaking has been informed by economics in recent decades, and disclosure requirements appear to give both consumers and businesses a great deal of autonomy to make decisions that suit their individual preferences, these types of interventions have become popular and widely adopted. If they worked as intended, such rules could reduce the need for structural reforms to tackle the problems revealed here. In practice, however, the evidence suggests that disclosure is rarely as useful as advocates claim when it comes to solving policy challenges, and the intermediary economy is no exception.


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