Introduction

Since 2006, when our first Clean Up Fashion Report was produced, the world has changed. Then the consumer was king and the global economy was riding high. Now the credit crunch has taken the sparkle from the high street – and led to some household names disappearing from UK towns and cities (and this report).

Downlaod the 2009 update (54 pages, pdf 1Mb)

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Download the 2007 update (20 pages, pdf 750Kb) and profiles (48 pages, pdf 850 Kb)

Download the 2006 report  (84 pages, pdf 1.7Mb)

Workers and consumers in the UK have been feeling the pinch and turning to the low cost retailers to help cut their monthly budgets. But it's not just in the UK that workers are suffering: in countries from Cambodia to Turkey, Bangladesh to Honduras factories are closing and workers are losing even the paltry salaries afforded to them by the garment industry. Those that have managed to keep their jobs are facing an increasingly insecure future as a result of economic and environmental crises.

The scandalous truth is that the majority of workers in the global fashion industry rarely earn more than two dollars a day, in an industry worth over 36 billion a year in the UK alone. Many have to work excessive hours just to get this meagre amount and have no possibility to earn wages needed to properly feed, clothe, house and educate their families. In the last four years many of the biggest brands and retailers on the UK high street have publicly accepted that garment workers wages need to increase and claim to have started work to eliminate poverty wages from their supply chains. However, few of the projects and plans developed in corporate offices in Europe or North America have had a tangible impact on the wages and lives of the women producing our clothes. Why? Because most projects have ignored the fundamental issues of freedom of association, price and distribution of profit, and have focused instead on making factories or workers more 'productive.'

Wages aren't low simply because of inefficient factories, poorly trained workers and bad production systems. Wages are low because they are kept that way through a global competition that engages workers, factories and whole countries in a race to the bottom. A race where the winners are those that can produce as quickly, cheaply and flexibly as possible. Workers who organise to oppose this system face dismissal, unemployment, arrest and harassment from employers and governments keen not to lose the fickle investment that the garment industry provides.

On October 7th 2009 a new and exciting initiative, the Asian Floor Wage, will be launched. This is an Asia-wide campaign with global resonance, which rejects the idea that governments, unions and workers in different countries should be forced to choose between unemployment or exploitation. Instead, trade unions, NGOs and activists from six garment producing countries have come together to negotiate and agree a sum to calculate a figure for a “floor wage” – a minimum amount below which no worker, regardless of nationality, gender or workplace, should be paid.

For ten years brands have been promising both workers and consumers that living wages will be paid, despite evidence to the contrary. Workers have been told to wait while brands work out what a living wage is and how to make sure they don't have to pay the cost. Consumers have been told not to worry – brands care and are doing the best they can. The problem is their best isn't good enough and workers can't wait any longer. The Asian Floor wage combats the argument that there is no consensus on a living wage level. It places workers right back at the centre of the debate and It lays down the gauntlet to brands and retailers, governments and employers to make sure that the garment industry finally provides not just any work, but decent work to the millions of women and men producing the clothes we wear.

 Next Steps:
Building on the Four pillars of a good living wage initiative

In LCUF 2008 we laid out the four pillars that underlie a meaningful living wage initiative: using a collaborative approach by working with other companies, trade unions and labour rights groups; supporting worker organising and participation; examining commercial factors throughout the supply chain and creating a clear road map to implementing the living wage for all workers. It is clear from this year's responses that a number of brands and retailers have accepted this framework at least in terms of reporting on their work over the last year. However only a very small number of retailers (Next, Gap, Monsoon) appear to be conducting work that contributes to the strengthening of all four pillars, leading to inevitability uneven results.

1. A collaborative approach

A number of companies raised concerns that we were unfairly prejudiced against those companies who had chosen not to join the Ethical Trading Initiative. We acknowledge that ETI membership in and of itself does not guarantee the quality of, or even commitment to, work aimed at improving wages. Asda, a long standing member of the ETI submitted one of the most disappointing responses and, given its size and influence should be doing a lot more. Tesco and Sainsbury's seem to still be content to rely on a ETI living wage project that has still not got off the ground. Debenhams and River Island have nothing of interest to say.

However a review of general trends in the 2009 report confirms our assertion that membership of a multi-stakeholder initiative is the most effective means of pursuing a collaborative approach. As projects have developed over 2009 it becomes more apparent that those brands and retailers developing the most interesting projects are also those who have been engaged in the ETI.

Not all of these brands (GAP, M&S, Monsoon, New Look) are carrying out living wage projects through the ETI, but all appear to be using learning gained in that forum. Its clear that their understanding of the complexities involved is considerably more developed than those companies (Matalan, French Connection, Clarks) that have no multi-stakeholder experience.

Next and Arcadia report on projects in Bangladesh and Mauritius where collaborative work between their brands is being done, and as such would probably expect to receive similar profiles and grades. However it's clear that NEXT are developing a more systematic approach to the issue than Arcadia, whose work aside from that done with NEXT offers no long term strategy and is somewhat limited to training of their UK staff. That said, Arcadia should learn from the fact that their best work is coming out of a collaborative project and consider how much this could improve through more institutionalised collaboration with other brands, NGOs and trade unions.

Finally, where a retailer decides to step up its game, membership of a multi-stakeholder initiative can help it to develop more convincing programmes. For example, last year Primark submitted an unconvincing and disappointing submission to this report that reflected its lack of engagement with the living wage issue. This year we saw a significant improvement and, although they still have a long way to go, should be commended for raising the standard so quickly.

2. Worker organising

Freedom of Association and Collective Bargaining are enabling rights. If workers in the garment industry were properly organised, we might not need corporate responsibility projects or consumer campaigns – workers themselves would be involved in setting wage levels that not only covered their basic needs but that reflected the real value of their work.

In every Clean Up Fashion report so far we have emphasised the need for brands and retailers to be engaged in work to promote and support the right of freedom of association and collective bargaining within their supply chain. Last year we set out some examples of actions brands could take to support these rights. This year we set the grades in such a way that only those retailers properly engaging with freedom of association could move beyond a 3.5. No-one made the grade.

True, more responses this year did attempt to address this issue in their submission. A number of retailers stated their acceptance that freedom of association needed to be addressed and their preference for a negotiated living wage level. Some are even starting to talk to international trade union representatives as part of their projects (Gap, Next).

In most submissions worker involvement, if freedom of association work existed at all, it was limited to interviewing workers about wages (Tesco, Arcadia) and setting up focus groups or workers committees, (M&S, Aurora Fashions). For years we have been emphasising the difference between an independent trade union – an organisation that is set up by workers, with representatives elected by workers, mandated to bargain for demands defined by workers – and a workers' committee – established by and often including factory managers, which aims to provide a forum to 'consult' with workers rather than negotiate. Workers committees cannot and should not replace trade unions in the workplace. The presence of workers committees in a factory does not indicate freedom of association is being respected. In fact, the establishment of a worker committee can be used to deny freedom of association if it is used to replace trade unions in bargaining.

We recognise that freedom of association is a thorny issue. We know that employers are likely to resist the exercise of this right more than any other. We've seen the myriad ways in which this right can be denied to workers by employers and governments alike. We are aware of the challenges we face in removing the barriers of fear, misunderstanding and persecution that prevent the vast majority of workers from joining and participating in trade unions. But without it, improvements to wages and conditions will be at best patchy and difficult, if not impossible, to sustain.

3. Paying the cost

"How can you sell a T-shirt for ?2 and pay the rents and pay the rates and pay the buyer and pay the poor boy or girl who is making it a living wage? You can't. I don't care what anyone says about margin structure, about the efficiency of the business, or about a low-cost business.....” - Stuart Rose, Marks and Spencer

Wages represent only a small percentage of the retail price – normally 0.5 - 1.5 per cent. This very small price increase could easily be absorbed by global buyers paying higher prices to suppliers.} Not all retailers were adversely hit by the credit crunch in 2008/9. Some, Tesco and Primark to name just two, took advantage of the economic crisis to promote their particular model of high volume low price fashion. As the competition struggled to survive, these fast fashion retailers saw a steady increase in profit.

The increase in profit doesn't just come from a higher demand for cheap fashion here. The garment industry has been through a drastic restructure which has intensified the race to the bottom. Prices being paid to suppliers are decreasing fast. At the same time suppliers are faced with rising fixed costs, such as fabric, transport and energy, and are facing difficulties in obtaining the credit needed to bridge the gap between production and payment.

Brands and retailers themselves acknowledge the impossibility of producing and retailing cheap clothing in a way that is compatible with their commitments to pay a living wage, yet they continue to pressure suppliers to continuously cut prices. In Bangladesh for example, where production costs are among the cheapest in the world, suppliers reported that buyers were demanding drastic decreases in price. In April 2009, M&S, Tesco and H&M were reportedly among 50 other brands and retailers calling on Bangladesh exporters to reduce their prices if they wished to stay competitive. (Reuters, Dhaka, April 2009)

It is noticeable that this year we saw less brands willing to acknowledge the need to address pricing as part of a strategy to increase wages. In fact more than ever there seems to be a desire to promote the idea that wage increases can be funded through productivity improvements alone (see below). Monsoon were one of the only brands to acknowledge the role of fair pricing in ensuring living wages are paid, but then went on to add “increased costs provision will primarily have to be driven by productivity improvements.”

Of course its not just about price. Changes in productivity at the supplier end and other purchasing practices at the buyer end can all make a difference. But if brands and retailers are serious about improving workers rights they cannot continue to ignore the impact of price competition on wages and conditions.

4. Rolling it out: route-maps for sustaining a living wage

Last year we emphasised the importance of brands setting wage targets that corresponded to a living wage figure. Such targets could be developed through national or regional bargaining, factory-level bargaining or through research of a calculation of needs and would provide an end point against which success could be measured. A number of brands including Next, Monsoon, Gap and Arcadia did carry out wage surveys as part of their work. However, such surveys are taking too long and by the time workers see the benefits, any real gains have often disappeared with inflation.

For wage projects to be successful there needs to be a clear standard which everyone is working to, ideally based on negotiations with workers and one which updates regularly to take inflation and other factors into account. Even though everyone agrees on the definition of what a living wage should cover, the benchmarks used by brands and retailers vary drastically.

Take Bangladesh as an example. We suspect M&S are still working to a Bangladesh wage of 3000tk - which they say they are continuing to assess. New Look refer to a figure of 3,200tk - although its unclear if they take this to mean a living wage. Arcadia and Next decided to go with 5,333, a figure developed by War on Want for their Fashion Victims II report (2008). Trade unions broadly agree with this and are talking about figures of around 5500, although most admit that the need to call for a figure that seems 'realistic' plays a part in setting this amount. The Asian Floor Wage figure (see below), which constitutes a combination of negotiation and formula, is over 10,000tk, more than 5 times the value of a minimum wage and double anything the brands are working towards.

We also emphasised that a route map must look at ways of including the most marginalised workers, including home workers, in plans to increase wages. Living wages must be provided to ALL workers and must be earned over a standard working week. Most retailers seem to have accepted this point, although too many are still using benchmarks that include overtime hours albeit within legally acceptable levels.

A number of brands and retailers (Matalan, Monsoon, Primark) made mention of homeworkers in particular in their living wage work. We are encouraged to see that the inclusion of this particularly vulnerable group of workers is now a priority for so many brands. However it is clear that this work has a long way to go: even the most advanced work on improving homeworker wages has yet to achieve legal minimum wages for these women workers – a level nowhere near living wage levels.

Two companies, Arcadia and Next also mentioned work to increase wages for migrant workers, but again the focus was not on increasing wages as such but reducing illegal deductions for recruitment, levies or accommodation.

THE STATE OF PAY

No brand or retailer is paying its workers a living wage, or has yet put together a systematic programme of work that is likely to raise wages to acceptable levels in the near future. Some brands are racing ahead while others are lagging behind. A number of brands have started working on projects that fulfil many, if not all of our recommendations while others have done nothing beyond vague paper commitments. Here is how this years high street breaks down.

NOTHING TO SAY

Alexon, BHS, Ethel Austin, House of Fraser, Peacock Group

These companies didn't reply, and made no information on available on their websites.

NO WORK TO SPEAK OF

Asda/George, Clarks, Debenhams, French Connection, John Lewis, Laura Ashley, Levi Strauss & Co, Matalan, River Island, Sainsbury's

While some of these retailers accept the idea that workers should earn living wages and that they currently do not, none of them had concrete plans to do much about this. In most cases this reflects a more general failure to engage with more complex ethical trade issues. Levi Strauss is the exception, having made a policy decision not to support work on living wages. Asda appears to have done nothing at all to build on last year's work and, based on its 2009 submission has no plans to do so in the future.

ONE CHEER: Mention of work on living wages, but unconvincing so far

Arcadia Group, Aurora Fashions, Burberry, Tesco

These retailers have done some work and have plans for pilot projects, but do not give any substantial details. Both Burberry and Tesco have plans to start productivity trials but Tesco seem to be waiting, again, for the ETI living wage project to restart, and Burberry's project, without the partnership of learning from other brands, lacks collaboration. Arcadia is working on 2 wage projects with Next, but it offers nothing like the same depth of engagement, and Aurora Fashions have committed to a living wage project in Turkey, but gave no details. All of these brands have started work on certain projects, but none appear to have a coherent strategy for ensuring living wages.

TWO CHEERS: Work to increase wages, but not enough yet

Gap, M&S, Monsoon Accessorize, New Look, Next , Primark

Last year only Monsoon and Gap publicly committed to a project that contains all four of our pillars of a good project. This year we can add Next and New Look to that list, although all projects are still very much at the pilot stage. All of these companies put too much of a focus on productivity improvements, although each goes beyond that to meet some of our criteria for a good project. M&S continues to lose credibility through its lack of engagement with issues of freedom of association. In fact none of the companies are convincing enough on this point. All of the companies in this group seem to have a more systematic approach to wage improvements. Gap, Next, Primark and Monsoon in particular have made some effort to include home workers. Next, Gap and New Look all mentioned the need to address some of their purchasing practice. Only Monsoon made an, albeit qualified, mention of the need to pay a fair price.

UNDERSTANDING WHAT COMPANIES SAY

The profiles are based on information supplied by the companies themselves. The draft profiles were sent to each companies prior to publication and they were invited to send any corrections of comments. Where appropriate changes have been made to reflect this; although not always. Copies of the submissions and, where relevant, responses are available on our website or from the LBL office.

As in previous years, we have given companies a grade to help you follow how far along the route towards implementing a living wage they are. These grades are intended to make it easier to compare responses and see how responses they match up to our criteria. They are not intended as a ranking.

In 2009, we have used the same list of companies that were surveyed last year, although a few (Stylo and Mk One for example) have disappeared from the high street.

Most companies still haven't moved much beyond pilot projects, so the grades this year have continued to fall largely between two and three. For this reason we've continued to award half grades. The only change we made to grading was to state that we would consider explicit projects on freedom of association to count as 'living wage' projects.

Grade 0: Does not accept the principle of a living wage.

Companies whose codes of conduct and/or submissions do not refer to living wages, or which explicitly do not accept that they are responsible for ensuring that living wages are paid.

Grade 1: Accepts the principle of a living wage, but applies legal minimum/industry benchmark.

Companies that refer to the living wage, but which use this interchangeably with legal minimum/ industry benchmark wages, or which argue that minimum and/or prevailing wages constitute a living wage.

Grade 2: Acknowledges that minimum and industry benchmark wages are not sufficient standards, but no real efforts to apply living wage.

Companies that accept that progress is needed on wages, but are unable to offer any concrete examples of steps they have taken on this matter.

Grade 2.5: Can offer concrete examples of steps to increase wages in the supplier base, but pilot projects are limited in scope and have significant omissions.

Grade 3.0: Can offer concrete examples of steps to increase wages in the supplier base, but there are either significant omissions or there is no clear plan to move beyond pilot projects.

Grade 3.5: Can offer concrete examples of steps to develop and implement a living wage methodology in the supplier base, with clear plans to move beyond pilot projects.

Grades 2.5 - 3.5 refer to companies citing pilot projects that are designed specifically to address wages. Wages need not be the only issue addressed by the pilot project, but must be a concrete, demonstrable focus. We didn't consider pilot projects mentioned in any previous submissions unless there was clear evidence of progress made on wages in that project over the past year, or steps to implement the learning on wages from that project elsewhere.

Half grades were awarded to distinguish between the large number of retailers that have or are planning pilot projects. We have outstanding concerns with some – frequently because they commit only to raising wages, not to implementing living wages, they fail to include workers in the design planning and implementation of the project, or projects are interesting but the retailer does not appear committed to rolling the learning out across its supply base.

Grade 4: Sophisticated and serious engagement with a living wage, beginning to move beyond pilot programmes, but still not systematic across supplier base.

Companies that have made efforts to implement living wages beyond pilot projects, with a clear plan for how this will be accomplished for all workers and demonstrable progress towards that end. This year we added the need to be working systematically on freedom of association to this grade.

Grade 5: Sustained implementation of an effective living wage policy across entire supply base.

Companies that have a clear rationale and evidence that all workers in their supply chain earn a living wage.

HEALTH WARNING!

We believe that how a company performs on living wages is a good indicator of its current commitment to workers' rights more generally. That's why we've homed in on just this one issue. But it does mean you should bear in mind several things when reading the profiles.

Firstly this information is based on a survey carried out in summer 2009. So these profiles are accurate as of October 2009, but things can and do change over time.

Secondly, we saw last year that not enough companies were putting not putting enough effort into addressing problems around freedom of association. We believe this to be a fatal flaw in any effort to improve wages so this year we included this in our criteria. We recognise that we could be accused here of changing the goalposts – we have but hope that dong so will focus companies minds on this important area of work.

Finally, there are other things that make up the picture of how 'ethical' a company is, such as Fairtrade cotton, environmental sustainability, and animal rights. These are not included in this survey.

Our methodology is not perfect.

Our profiles are as much a measure of how much effort individuals within the companies put into their responses to us as they are of company policy and practice. This is not a bad thing: transparency and engagement with stakeholders are important aspects of the steps companies should be taking. Each profile is based on a limited (but, we think, sufficient) amount of opportunities for dialogue with the company over the last three years, rather than an exhaustive discussion. Further correspondence might have opened up new issues and answered some questions, but a cut-off point had to be drawn somewhere.