عربي English Türkçe اردو فارسى
Logo
Latest News
Fashion

Italian Prosecutors Probe Supply Chain of Around a Dozen Fashion Brands

This photograph shows Milan's skyline with the Unicredit Tower (CL) next to "Bosco Verticale" (Vertical Forest) residential tower (C), Unipol Tower (2R) at Porta Nuova district, Milan, on June 6, 2024. (Photo by GABRIEL BOUYS / AFP)
This photograph shows Milan's skyline with the Unicredit Tower (CL) next to "Bosco Verticale" (Vertical Forest) residential tower (C), Unipol Tower (2R) at Porta Nuova district, Milan, on June 6, 2024. (Photo by GABRIEL BOUYS / AFP)
TT
TT

Italian Prosecutors Probe Supply Chain of Around a Dozen Fashion Brands

This photograph shows Milan's skyline with the Unicredit Tower (CL) next to "Bosco Verticale" (Vertical Forest) residential tower (C), Unipol Tower (2R) at Porta Nuova district, Milan, on June 6, 2024. (Photo by GABRIEL BOUYS / AFP)
This photograph shows Milan's skyline with the Unicredit Tower (CL) next to "Bosco Verticale" (Vertical Forest) residential tower (C), Unipol Tower (2R) at Porta Nuova district, Milan, on June 6, 2024. (Photo by GABRIEL BOUYS / AFP)

Prosecutors in Milan are investigating the supply chain of around a dozen more fashion brands, a person with knowledge of the matter said, after a unit of France's LVMH in Italy was placed under court administration in a worker exploitation probe.
On Monday, a Milan court appointed a commissioner to run an LVMH-owned maker of Dior-branded handbags after an investigation into four of its suppliers based in the surroundings of Italy's fashion capital uncovered illegal working conditions for staff.
On-site inspections and checks on electricity usage data led prosecutors to allege workers were employed for extended hours, working often into the night and during holidays. Some of the staff slept where they worked, had no regular contracts, with two having illegally immigrated into Italy.
This is the third such decision this year by the Milan court in charge of pre-emptive measures, which in April took similar steps in relation to a company owned by Giorgio Armani due to accusations the fashion group was "culpably failing" to properly oversee its suppliers. Armani Group said at the time it had always sought to "minimize abuses in the supply chain".
LVMH on Monday declined to comment on the court's decision.
Milan prosecutors and Italian police are investigating further small manufacturers that supply around a dozen other brands, the person told Reuters, declining to provide additional details because the information is confidential.
The appointment of a special commissioner is intended to give the fashion brands' subsidiaries time to fix problems in their supply chain while continuing to operate.
Neither LVMH nor Armani are under investigation, while the suppliers targeted by the probe face accusations of worker exploitation, copies of the court decisions seen by Reuters showed.
'MADE IN ITALY'
Milan prosecutors have been investigating for the past decade recruitment firms that allegedly illegally employed workers, evading taxes, as well as welfare and pension contributions, to slash the cost of the services they supplied.
The probes traditionally targeted sectors such as logistics, transportation and cleaning services, where workers were supplied by firms that sprung up and were wound down every couple of years.
The focus then shifted onto the fashion sector, where probes have highlighted similar problems this year.
Italy accounts for 50% to 55% of the global luxury goods production, consultancy Bain calculated, with thousands of small manufacturers supplying big brands and allowing them to sport the prized 'Made in Italy' label on their goods.
The latest Milan investigation has shown a small manufacturer was able to charge Dior as little as 53 euros ($57) to make a handbag, which the fashion house then sold in shops at 2,600 euros.
Under Italian law, brands outsourcing production are responsible for carrying out adequate checks on suppliers.
In the past, the measures taken by Italian magistrates in relation to worker exploitation probes concerned only the suppliers who mistreated workers.
However, Milan prosecutors have been able to make use of a provision in the law that was originally designed to deal with companies infiltrated by the Mob.
These companies would be placed under court, or judicial, administration through the appointment of special commissioners to run them.

Most Viewed

 
 
Fashion

Fashion Suppliers Want Brands to Help With EU Green Regulations

An employee arranges bobbins at a textile plant in Haian county, Jiangsu province, China. REUTERS
An employee arranges bobbins at a textile plant in Haian county, Jiangsu province, China. REUTERS
TT
TT

Fashion Suppliers Want Brands to Help With EU Green Regulations

An employee arranges bobbins at a textile plant in Haian county, Jiangsu province, China. REUTERS
An employee arranges bobbins at a textile plant in Haian county, Jiangsu province, China. REUTERS

As the global fashion industry braces for new green supply-chain regulations, clothing makers in low-income countries like Bangladesh expect major international brands to share the burden. The European Union’s Corporate Sustainability Due Diligence Directive (CSDDD), adopted in July, requires corporations to make their global value chains more sustainable.
The new rules on workers’ rights and emissions could transform the way clothing is made and sold, most significantly in the garment factories and textile mills across Asia that account for much of the sector’s pollution. Bangladesh, the world’s second-biggest clothing exporter after China, in particular needs assistance from major brands as it undergoes a political transition following mass protests sparked by a jobs crisis that ousted the previous government.
"While in Bangladesh we have prepared our mindset and ecosystem for the change, we will need support from our global buyers, as well as our government, to reach the green transition goals," said Abdullah Hil Rakib, managing director at Team Group, a clothing supplier in Bangladesh that employs about 23,000 people. The CSDDD seeks to bring corporate practices in line with the Paris Agreement on climate goals. Major European brands must ensure their suppliers are conducting due diligence to protect workers and communities from the adverse effects of their operations or pay compensation for damages.
For the fashion industry, the onus will mostly fall on factories in places like Bangladesh, Pakistan and Cambodia to find and fill the gaps in safeguarding labor, human rights and the environment, experts said.
International brands must collaborate with these suppliers to adhere to the new rules, according to a study by clothing makers in Asia that was supported by the Transformers Foundation, which represents the denim industry, and GIZ FABRIC, a project from German development agency GIZ to support sustainable textile production in the region.
GROWING COMPLEXITY
The new regulations may provide a chance for suppliers to push for ethical commercial practices and more favorable contracts from international brands, representatives from companies behind the study told the Thomson Reuters Foundation in a joint interview.
But manufacturers are still coming to grips with what measures they must take and how they will finance their portion of the estimated $1 trillion investment required for the fashion industry to transition to net-zero emissions in the coming decades.
Rakib estimated that suppliers will have to make additional investments of 20% to 30% to turn their factories green.
Industry experts warned that the CSDDD will require a raft of legal changes in countries where the products are manufactured.
National legislatures will have to pass laws that line up with the EU directive. Brands must devise their approach to implementing such laws, and courts will need precedents in order to enforce them, said Matin Saad Abdullah, a professor of computer science and engineering at BRAC University in Dhaka who maps garment factories’ compliance on labor rights and environmental standards.
"The path forward is long and complex," he said.
Brands and suppliers have widely differing capacities and plans for meeting what the EU calls “just transition,” said Zahangir Alam, a fashion industry consultant who has worked for three decades with top global brands on labor issues and sustainability.
For example, Sweden’s H&M Group aims to cut carbon emissions by 56% by 2030, while US retailer Walmart’s Project Gigaton seeks to avoid 1 billion metric tons of emissions in its global value chain by 2030.
Smaller producers in particular will struggle to determine which actions they need to take to meet a brand’s particular benchmarks, Alam said.
‘SHARED RESPONSIBILITY’
Industry associations and government agencies can encourage a common approach by companies in the transition to cleaner and fairer practices, said Rakib.
Bangladesh's garment makers' association, called BGMEA, has set up the Responsible Business Hub to provide information to suppliers about the changing regulatory landscape. The group is also creating a platform to facilitate data collection and sharing. But suppliers said they need brands at their side too and that meeting the CSDDD’s requirements is a “shared responsibility,” as the directive mandates.
Brands are often accused of passing the buck to their suppliers when it comes to ensuring a living wage or investing in decarbonization.
To achieve net-zero emission by 2050, the fashion industry will have to invest more than $600 billion to implement solutions that already exist and about $400 billion to develop innovations, according to a report by the Apparel Impact Institute (Aii), a non-profit promoting sustainable investments.
Aii has formed the Fashion Climate Fund, which pools resources from brands and philanthropies, and is working with more than 1,000 suppliers to help them achieve energy and water efficiency, said Lewis Perkins, President of Aii.
Aii acts as a "clearing house" to identify programs and technology for decarbonization and encourage local suppliers to adopt them.
"We have identified 1,500 suppliers with high energy usage and aim to support locally grown decarbonization solutions, when they meet our criteria, prioritized by the suppliers themselves, with buy-in from multiple stakeholders, so that all actors are on the same page," Perkins said.
WORKERS’ VOICES
The EU directive is also aimed at improving labor conditions, requiring businesses to verify workplace safety and allow workers and unions to file complaints about human rights violations with authorities.
Union leaders said they are waiting to see how the changes are put in place to protect workers.
"When the laws kick in, we need clear and simple channels to seek remedy when anything goes wrong - and the Global North should have a roadmap for supporting the upskilling of workers," said Kalpona Akter, executive director of the Bangladesh Center for Workers Solidarity (BCWS).
"Moreover, for all the lawmakers' focus on transitioning to net zero, there should be a comparable commitment on helping workers deal with climate impacts like flooding and heat," said Akter.
Garment-producing countries like Bangladesh could lose $66 billion in export revenues by 2030 due to flooding and heat waves, said reports by the Global Labor Institute at Cornell University in the United States and investment manager Schroders published last year.
Team Group’s Rakib said Bangladesh’s experience making changes to improve conditions for workers and the environment make it well-positioned to tackle the new rules – and ensure it retains its position as a leading producer of the world’s clothing.
"With the strides that suppliers in Bangladesh have made in ensuring workers are safe from fire and electrical risks - and more than 200 green factories making extra savings on energy and water - we will remain a key sourcing choice," Rakib said.