Lessons from Patagonia: Tackling ESG Supply Chain Risks- “Modern Slavery”
“Every time we’ve had a problem in the company, it’s because we’ve had a problem with a supplier. And every time we’ve had a problem with a supplier, it’s because we didn’t know enough about what they were doing.” — Patagonia’s founder and former CEO, Yvon Chouinard
Patagonia detected the presence of “modern slavery” in its supply chain!
In 2011, Patagonia team discovered that some of their Tier 2 suppliers (suppliers that provide materials to Patagonia’s suppliers) in Taiwan were involved in illegal hiring practices. The issue was detected through the program “Raw materials supplier social responsibility Programme” , which was initiated to monitor and train suppliers on social issues.
Although recruiting migrant workers is legal in Taiwan, the government has set legal limits on the fees that recruitment brokers can charge -the maximum is US$750. Yet, Patagonia’s auditing Programme found that some brokers were charging fees as high as US$7000. Workers were forced to repay these fees over several years, which sometimes extended beyond the length of their employment contract.
Debt bondage/bonded labour. The world’s most widespread form of slavery. People trapped in poverty borrow money and are forced to work to pay off the debt.
In other words, these migrant workers were exploited by brokers and agencies. In reality, migrant workers typically work for a period of 3 to 5 years to only pay off the hiring fees charged by agencies.
The audit showed that these illegal practices were common in the Taiwanese manufacturing industry.
How did Patagonia approach this problem?
Patagonia’s goal was to ensure that its suppliers are hiring migrant workers with “No fees”. To achieve this goal, it implemented five key initiatives:
- A dedicated Team: a team was set up by Patagonia to work directly with suppliers hiring migrant workers, They hired a corporate and social responsibility manager based in Taiwan and a CSR expert at their US headquarters.
- A partnership with Verité( Labour rights NGO): Patagonia partnered with Verité specializing in supply chain risk assessments to conduct in-depth migrant worker assessment on Taiwanese suppliers. The assessment revealed that these illegal practices were widespread among Patagonia’s suppliers.
- Supporting Suppliers: Patagonia did not ask suppliers to change their practices immediately, it encouraged them to adopt the new standard through a step-by-step approach, enforcing suppliers to repay any recruitment fees that were above the legal limits and to cover the cost of any future recruitment fees.
“Imposing changes on suppliers without their buy-in is unhelpful, rather companies should bring them along on the journey, ensure clear lines of communication and provide the support needed for sustainable remediation.” — Wendy Savage, Director of Social Responsibility and Traceability at Patagonia.
- Engaging with public actors: Patagonia engaged with public stakeholders, such as Taiwan’s Workforce Development agency to address forced labor issues and collaborate to improve the system for all companies procuring from Taiwan.
- Collaboration with other brands: Patagonia made its “ Migrant worker Employment standard” publicly accessible to other corporations in the textiles and apparel sector to implement across their supply chain.
The journey takes more than 10 years:
- From 2011 to 2014:
- From 2015 to 2017:
- From 2017 to 2022:
Patagonia’s success in addressing the problem of forced labor in their supply chain shows that it is possible to change the unfair labor practices. What should companies do? They should acknowledge the issue and take responsibility for their role in it, rather than hiding behind excuses (Lack of data, weak regulations).
