Collaboration Is Key
The Higg Index developed by the Sustainable Apparel Coalition (SAC) is a suite of tools that enables brands, retailers, and facilities of all sizes-at every stage in their sustainability journey-to accurately measure and score a company or product's sustainability performance. A just-released four-year study into the Higg Index by researchers at the University of California, Berkeley has found that without real action from apparel brands around transparency and incentives, the potential for the fashion industry's sustainability tools to transform the industry is limited. This study focused on the Facility Environmental Module (FEM), part of the Higg Index suite of tools, which is widely regarded as the most technologically advanced information-based strategy in the apparel sector. UC Berkeley's Professor of Environmental and Labour Policy Dara O'Rourke, who led the research, in a conversation with Subir Ghosh talks about the in-depth study and the way forward.
Subir Ghosh (SG): Your report has quite a lengthy introduction. One thing that intrigued me was that you haven't mentioned anywhere about how did it (the project) get started in the first place? Was there a trigger factor for you to think that I need to do this kind of a study?
Dara O'Rourke (DOR): I have been studying the global apparel industry for more than 20 years. I have been looking at these different systems that have been working to audit, monitor or verify the environmental and social impacts of the global apparel industry. As we saw the growth of the Sustainable Apparel Coalition (SAC)-this was the one that has gone the furthest. It has grown the biggest, it has the most members. I think it has built the most sophisticated measurement and monitoring system. The question that really came up in conversation with a number of companies and with the SAC is what impact it is really having? How is it moving from measurement and from this kind of rating system to actually driving impact in factories? We know as we just look around factories all around the world-we see evidence that factories all around the world continue to have environmental and labour problems. I was very impressed with the system of the Higg Index. I wanted to see what impact did it really have-can we dig into the data to see the impact it is having at the factory level, on actual improvements in conditions. So, it started with questions for a number of companies and then with leadership of the SAC to dig into this question. Then, we approached the Laudes Foundation to support the research and I found a graduate student to do much of the in-country work.
SG: You mentioned an interesting thing: about working together. The one keyword that keeps cropping throughout your report is the question of collaboration. So, how do you see this? Aren't there far too many organisations working on sustainability, rights and labour-not only at a national level but also at an international one. Do you think they are working at cross-purposes or in some kind of conflict?
DOR: It's great that you focused in on it. We do think that collaboration is going to be the key. No one brand can solve this on its own and these totally different initiatives on labour rights are all talking past each other. I totally agree. There are too many labour initiatives, there are too many environmental initiatives, and there are too many single brand-to-a-of-couple-factories kinds of initiatives.
Let me step back a second. One of the positive things about the SAC is that it was one of the first initiatives in which the factory managers had a voice. Almost all these other initiatives started in the US or Europe were driven by either the brands or the retailers. The vast majority of these big international codes and monitoring initiatives are run by the US or European brands/retailers. It was very encouraging to see SAC say that we want to make sure that the factory base has the voice at the table. We think we also need the workers' voice on the table and extend that. But the first step I think was a positive one in getting the factories voices into the conversation. I don't know if that one actually went forward, but I really like this idea-if the factories are going to be rated through the FEM, then the buyers need to be rated as well. We need to be able to evaluate who gives good buying terms, who delays the payments, who cheats you on this or that? Let's rate the brands/retailers/ buyers as much as we rate the factories. It's very sensitive obviously. No one wants to say that their customer is a bad customer (laughs).
This to me is critical-that we figure out a way to get the parties that are most impacted to be interacting on an equal plane where they can collaborate in an honest way. Again, transparency is a key to that. I think brands do need to do a better job of collaborating on sending coherent signals down the supply chain for what they really think needs to be done. And, too much of the codes of monitoring have just been public relations as opposed to driving real change.
SG: I will quote you from the press release: "its effectiveness in driving real action has been limited by slow progress on transparency and a lack of incentives between buyers and factories." How would you elaborate on that? What kind of transparency/incentives do you recommend or envisage?
DOR: Right now, the very first one we look at is the payment terms which are very problematic for many factories, right? This kind of (payment terms) 90/120 days-some even longer or delaying in accepting orders once they reach the ports-there are all sorts of bad actions that are going on right now in the global apparel industry. There's even been an international campaign on this.
There are a number of key things-the environmental and social codes and auditing have primarily been an additional cost on factories, with no compensation for those added costs. It's been like we are still going to make you meet our price, quality, delivery requirements and now you also have to add environmental, worker safety and social issues on top (of that). But we are not going to pay you a penny more, and we are not going to give you longer-term or higher-margin contracts, we are not going to help you invest in the technologies to do a better job with those contracts. So, it has felt like a one-way street where there hasn't been any fair and open dialogue. These things cost money. It costs money to invest in a new boiler or new energy efficiency technology for example. They pay off.
So, we will give you an order that allows you to make the investment that will pay back and in future you will be able to run a better margin. We rarely see this across all industries; the kind of fair and open conversations of what is going to cost to make these environmental and social improvements and then we can build them into the contract where you say: "Look, if you are going to upscale or upgrade your factory or if you are willing to join this programme and do these things that we want you to do, then we are going to give you a longer or better or higher profit contract and (then) pay you on those terms." It is shocking to me that we have not seen that (so far) in the industry.
SG: It took you four years to start. Was it too long a process? After all, the Higg Index itself is 11 years old. You probably started working on it after the 7th or 8th year.
DOR: Yes. This was a very difficult study to do. It was hard for us to get access to factories. The SAC was very good in giving us access to their raw data-the FEM data. First, we had to do surveys of factories which took a long time, and then we had to go and visit the factories. We had good luck in Bangladesh; the factory managers were very open, and we had good access. In China, it was very difficult. We had many factories reject our offer to visit and evaluate their conditions. We had to spend a lot of time going back (to them). Almost all the studies I do that involve studying the insides of real-life factories, take much longer time than a normal academic bench study like analysing data, etc. The hardest part of my job is getting factories to let me in and to view what's going on.
SG: So, you were provided the dataset by the SAC. Was there any difference from what you saw-from what you understood from the data and what you got to see at the ground level in factories?
DOR: Absolutely. This is one of the great things about being able to look at the data-you always find surprises. I think the SAC was also surprised with some of the data and then there are some things which confirm your hypothesis. When we started the study, we did so with an open and constructive view. There was an article in some web page (after the release of the report) that we had lambasted the SAC or even destroyed it-some internet kind of phrase (chuckles). No, we didn't set out to lambast; we set out to analyse, understand the data, and test it. We got access to millions of pieces data from the thousands of factories. Then, each factory had hundreds of questions and then you go deeper into the data. We were surprised by the number of trends across countries and what seemed to really matter in terms of which factories got better over time. So, we were surprised to see how much brand connections mattered in driving factory-level improvements, in addition to this kind of data system. We thought that the Higg Index would be a standardised system-that it would be applied, and people would measure, and then they will see how things can improve and whether to take them or not. It turns out that it is true, but then you also need a brand to come in and offer either capacity building or incentivised action or put the factory in touch with people who can help them improve. So, a back-and-forth was required on top of the data system that was much more labour-intensive than we expected.
SG: Both the SAC and Higg Index are industry-driven. Do you see such initiatives as self-regulation, or do you think some external regulation is also needed even though those would be difficult to implement given that no two countries can ever agree on the same thing? There are also some things to be kept in mind-for instance, there are regulations/laws in the European Union which are binding in a way on suppliers. If you need to conform to certain standards, you need to follow certain laws/regulations in other countries. This is an extremely tricky subject, and touchy as well. How do you react to that?
DOR: It is a great question; it is also a difficult question. Ultimately these non-governmental regulatory or governance systems have to interact and integrate with the government systems. We have to have government regulations of environmental, labour issues. On the ground, each country has to have its own set of laws and standards. But the challenge of course as you are alluding to is that global firms have been able to avoid any kind of global governance and there has been this emergence of corporate schemes as a response to the fact that they are getting criticised publicly and the fact that there is a kind of continual exposure of problems in these factories in both labour and environmental conditions.
This is about complementary (processes) where we think about building these systems that try to solve these immediate problems and over time they have to connect to building local stake and capacity and build in the ability of local governments to do their job, set their own standards and regulations, and bring them in locally and contextually. It is one of the big problems that the global economy has pointed out. I don't believe these individual corporate programmes are solutions to these challenges.
I think there is a real key challenge of bringing in workers' voices into this and thinking about how we make these programmes more effective long term. There are some interesting experiments in that area also, that we are seeing all around the world in terms of new attempts at binding contracts, new attempts at workers' participation in the auditing. That's early work and also very challenging work.
SG: It's been one thing to talk about upgrading or improving the Higg Index. The other thing is of scaling it up in terms of geographical spread. Right now it is mostly confined to big brands and companies. But the global fashion industry is far too huge. How do you think-though it is probably more apt for the SAC to answer-this can be done to be accessible to small companies?
DOR: It is another really tough grade question. We have started from the big brands and retailers. You are absolutely right-that we have to figure out how to move to cover complexity of the global supply chains, complexity of local-for-local production, complexity of very small or medium enterprises which make up the majority of the production of apparel around the world. These schemes have not gone to them in general. This is a great question for the SAC. But they know that also-about how they are thinking on expanding down the supply chains and out to factories that are not connected to the biggest brands. Look, it's been very hard even to move the biggest, most reputational and sensitive brands of the world. That has been very challenging. But we have seen some movements among some of these leading brands, but that's the tip of the iceberg. There are many, many more factories around the world employing many, many more workers that are not in these schemes.
SG: This one is from the recommendations. I counted under the different heads that the steps for Higg Co to consider a company come under 23 recommendation. Do you think that's a lot for the SAC to handle right now? How many do you think are feasible for them to implement?
DOR: I think all of them are feasible. I may have to go one by one. But my interaction with the SAC has been very positive since the release of the report. Our goal is for a constructive dialogue. There's some sensitivity (involved) obviously. They are a membership organisation; they have to bring their whole membership along. But I believe that they are in a position that they can make many of these changes and that it would benefit the industry and their impact. Their response has been that they want to move forward on transparency, incentives, etc. The incentives one is probably the hardest actually; collaboration for capability building, some of the very technical things that they can do to improve the system-all of them are doable. That's why we have to get the consumers; there has to be a feedback loop in this to create real incentives for brands and retailers to make these changes. That to me seems to be a linchpin of this, or it will be very hard for these groups to choose on their own to do it.
SG: Was there any particular reason why you chose the FEM module to work with?
DOR: Yes, that was the most advanced module at that time and the most widely rolled out. I think there were still draft forms of the materials module and wasn't fully out it yet. And then the brands module which was also not fully out yet. So we started with the module that had gone the furthest.
SG: So, you started work on it in 2015?
DOR: Yes, that's right.
SG: And since then the SAC has released the FEM version 3.0. Are the changes that have been effected in sync with your findings and recommendations?
DOR: We started looking at FEM 1.0 and then they moved to 2.0-there was a huge improvement from 1.0 to 2.0. We fed some of our early reports- we presented them at conferences and they (the SAC) took up some of those concerns that we saw as problems in FEM 2.0. So, FEM 3.0 is an improvement and has incorporated some of the findings-the ones we pointed out in the report. There is still need for a number of things e.g. it still needs simplification, there are too many attributes being tested, there is need for transparency, getting the information out further than just between the factory and the brand. There is a huge need to build incentives into the system that they still don't have. I think SAC came up with a statement that they are working on (these things). They have made progress on a number of these issues, and they are working towards further progress on transparency and incentive side.
SG: You mentioned the reaction to your report. It came out on August 17 and on August 19 the SAC issued an official statement. What has been the reaction to your report, what have you seen so far?
DOR: It's been really interesting. As I alluded to earlier, the internet is not a very nuanced place for reactions as you know (chuckles). I think as with many things in the world now, people probably took the headline of the report and used it to confirm their existing position. We saw a lot of that early on-people said look this proves that either it is problematic, or it is a hard thing to change. I think it is very hard to be nuanced or subtle obviously in this kind of atmosphere. We really were trying to be constructive in our criticism. We do think that the SAC has built this foundation layer of measurement that is very important, and FEM 3.0 is the right step to that foundation layer measurement.
Our belief is that we are not seeing the types of improvements that is fast enough that the world needs, that the workers or communities need. Now we all can benefit from a little bit of debate, heat and argument about how we move this faster and further. I don't mind people yelling at each other a little bit. But I really hope that we do go through this. Ok, what can we learn about how we can move this whole Higg Index process faster and further, what do we need to add, what is it that brands need to do. At this moment the thought is about how do the brands come out from the covid-19 crisis by investing in the right processes to move their factories in the right direction. A lot of factories are going under right now, there is a lot of potential for people cutting the amount that they pay factories and lowering their standards, and forgetting about sustainability right now because they just need to survive this economic crisis. We want the conversation to move towards: what do we learn from this that we invest in so that we make sure that the factories come out of this better. And we are investing in creating incentives for them to make sure that they are continuously improving the safety, health and environmental performance of their factories. This has to involve incentives from brands and consumers. In the long term we have to have feedback from them. They can't just demand that factories get better and not invest in them. They have to invest capital and in capability building, and better and longer-term contracts- the things that we have listed in other places. This is a tough moment for the apparel industry as you know-we are going to see lot of factories go under, a lot of brands/retailers are gonna be bankrupt by the end of this year. This is really a moment where we have to think. We can't just keep doing things the way we were doing them; so, how would we do this better?
