Recently, The Wall Street Journal provided direct visibility to Amazon.com and it practices for selling clothing from recognized sub-standard factories. The report once again brought to light the sometimes-fuzzy notions of ethical supply chains, and what constitutes direct membership and accountability. There are cases where retailer branded products represent the reputation and social responsibility standards of the specific retailer. Increasingly, there are cases where third-parties or direct manufacturers themselves offer their products for sale on online platforms. The open question is- which party has a social or ethical supply chain responsibility? 
Background
In a prior Supply Chain Matters commentary, we explored ongoing business initiatives in Corporate Social Responsibility (CSR) along with the increased importance of both process and technology-enabled efforts being directed at what is being increasingly referred to as Ethical Supply Chains.
To establish context, the notions of what can be termed as either socially responsible, sustainable or green supply chains have obvious prior history among multiple industry supply chains or networks. On this blog, we have highlighted multi-industry supply chain efforts within these areas dating back to our inception in 2008.
Some have stemmed from prior negative history with customer, governmental and watchdog groups providing visibility to unacceptable practices. They unfortunately came about from a quest to seek out lowest cost global sources of raw materials, components and end products. Lowest cost sourcing or manufacturing sometimes did not equate to socially or environmentally responsible practices.
Among the various specific industry examples was the apparel industry. The notions of sourcing products in the country of Bangladesh where factory facilities were deemed by auditors to be marginal at-best, and where labor was often exploited.
Then came the tragic Rena Plaza factory building collapse in 2013 resulting in the sad loss of 1100 lives. Groupings of European and U.S. high-profile clothing and apparel retailers subsequently formed associations to specifically address factory and working conditions across the country. Larger retailers who did not join in the effort were identified by labor and social groups, equating to a shaming.
The subsequent lessons learned after multiple investigations were completed pointed to an industry with very low product margins not affording the ability for factories to be able to invest in basic safety improvements. Another consistent finding was the existence of a vast network of multi-tiered apparel sub-contractors which continued to source apparel production in sub-par factories, hiding the identity of the end retailer that would sell these goods. While the retailer’s brand might have been affixed to the clothing, the actual production paperwork and legal responsibility was with the sub-contractor.
Amazon in the Looking Glass
Two weeks ago, The Wall Street Journal published an investigative report with the title: Amazon Sells Clothes From Factories Other Retailers Blacklist. (Paid subscription required)
The title alone is direct and shaming.
The opening paragraph in this investigative report begins:
“According to a Wall Street Journal investigation, the site (Amazon) today offers a steady stream of apparel from dozens of Bangladeshi factories that most leading retailers have said are too dangerous to allow into their supply chains.”
While other retailers, formed in an association, have agreed to honor bans imposed by labor and social responsibility watchdog associations, clothes from these banned factories ends-up being offered for sale on the Amazon platform. The report indicates that more than two-thirds of clothing items offered by the online retailer are sold by third-party sellers. By some accounts, third-party sellers, many being smaller businesses represents upwards of 60 percent of Amazon’s online store sales volume. Little wonder that Amazon is recognized as a major apparel retailer and now believed to have overtaken Walmart in the apparel category.
While Amazon’s own branded clothing is not implicated as being produced in such factories, an Amazon spokesperson noted to the WSJ that the online retailer indeed inspects factories where such clothing is sourced and produced. However, the spokesperson acknowledged to reporters that inspections are not conducted on clothing provided by third-party sellers and clothing wholesalers. Instead, the online retailer expects such sellers to adhere to the same safety standards.
The reality observation expressed in this report states:
“Ethical lines aren’t clear-cut in the global garment-supply chain, which remains a murky network in which clothes pass from factories through traders around the world. Even signatories to one of the safety groups have offered items that come from unsafe factories.”
Such statements are all too familiar in lower-cost apparel product demand and supply networks.
The Journal report provides even further detail on specific clothing categories and their likely factory origins. Noted is that many of the most popular listings for clothes are marketed under little-known brand names, and that Amazon has been expanding efforts to encourage listings directly from supplier in Bangladesh, eliminating middleman, the notion being that Amazon is just an online marketplace. What remains fuzzy is what social or ethical responsibilities are assumed by such actions, or is the supposition that sellers hold full responsibility.
The Amazon Side
To be balanced Supply Chain Matters both visited Amazon’s corporate web site and reached out directly for additional comments.
The retailer’s Social Responsibility statement clearly states:
“Amazon is strongly committed to conducting our business in a lawful and ethical manner, including engaging with suppliers who respect human rights, provide safe and inclusive workplaces, and promote a sustainable future.”
We downloaded both Amazon Supply Chain Standards and Supplier Manual documents and they both outline quite extensive standards in areas of Labor Rights and Health and Safety. The Supplier Manual has rather detailed explanations of expected conduct and audit procedures for suppliers of Amazon branded products. The term ‘suppliers’ is supposed to encompass Amazon’s private brand manufacturers, vendors and sellers, but that could be subject to interpretation without such specific wording.
The Supplier Manual additionally outlines specific approval for sourcing in specific countries. For the country of Bangladesh, a noted requirement is that a factory must be certified by the Sustainable Apparel Coalition, one of the industry watchdog groups consisting of major branded retailers.
Regarding workplace standards related to third party sellers offering products on the platform, an Amazon spokesperson gave the following lengthy statement to Supply Chain Matters:
“None of the factories identified manufacture products for Amazon private brands. Amazon is committed to sourcing our private brands from socially responsible suppliers and working with brand owners, vendors, and manufacturers that share this commitment. Amazon’s Supply Chain Standards outline our requirements and commitments, including that our suppliers provide workers with a safe and healthy work environment. Since 2018, we have conducted over 150 independent third-party assessments using globally accepted protocols (e.g., SEDEX, amfori) or our own audits at factories in Bangladesh. We supplement our audits with safety assessments of our private brand suppliers in Bangladesh (including visits with technical fire/electrical/safety experts) to ensure that our suppliers are continuing to make progress under the Accord’s requirements.
We also expect that the tens of millions of fashion products in our store that are not Amazon private brands are manufactured according to our Supply Chain Standards. The standards require selling partners to consistently monitor and enforce those standards in their own operations and supply chain, and where necessary, make improvements to meet or exceed our expectations and those of our customers. If we become aware that a product is from a factory that may not meet our supply chain standards, we will remove the product from our store until we have evidence that it is produced with the same high standards we apply in our own supply chain. Although we know production of some products identified by the Journal is being moved to safer factories, and many of these products are available from other retailers, we have taken the step of removing all products from these parties from our store until we have verification they are no longer being sourced from ineligible factories under the Accord.”
Closing Thoughts
There are very grey areas that remain in the context of apparel supply networks and in the notions of what constitutes Ethical Supply Chains.
Beyond stated commitments and industry watch groups, there are the realities of consumer needs for lowest cost clothing or finding an online bargain, each playing to a specific low-cost country’s supply network that has far too many intermediaries and undocumented movements. The question is really whether consumers shop for products with context to where the product originated and what are the seller’s commitments and track record related to socially responsible or Ethical Supply Chains, the latter taking on a broader perspective in omni-channel or hosted third party customer fulfillment. While retailers have indeed stepped up efforts to try to insure that their branded clothing is manufactured in responsible factories, and that factories have some assistance in investing in mandated safety, the explosion of private or unfamiliar brands provides another opportunity for ambiguity.
Our takeaway for readers involved in multiple industry supply chains is that it is important that a broader perspective for insuring Ethical Supply Chains across multiple channels of customer fulfillment is continually addressed, especially for clothing and apparel supply and customer fulfillment networks.
Bob Ferrari
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