Brands must honour contracts during pandemic

During the fallout from Covid 19, we have seen brands cancel orders, renegotiate price or payment terms or even refuse to pay for goods that have already been received. This is evidence of how global supply chains have been designed to limit big brands’ obligations to their suppliers. 

The current crisis is putting businesses of all sizes under huge financial strain, but it is unacceptable for global brands, who take the lions share of profits in the global garment industry, to push these costs on to suppliers and workers.

In global supply chains where big brands call the shots, suppliers are often forced to accept low prices for goods and operate on slim profit margins.  They have less capacity than brands to sustain the financial shock of Covid 19.  The cancellation of orders is pushing many factories into insolvency, and this is resulting in catastrophic job loss for garment workers.

We are calling on brands to honour their orders and publicly confirm that they will pay the originally agreed amounts according to the agreed schedule, for all orders completed or in production. Brands should also agree to suppliers’ requests for extended production timelines. No delay sanctions should be applied to orders not fulfilled in time.

Brands are cancelling orders that they have already placed. In many cases the suppliers will have paid for raw materials, production and labour. We are calling on brands to step up and honour their contracts. You ordered it – you must pay for it!

In the spotlight:

UK brands including Primark and Matalan have reportedly cancelled £1.4bn and suspended an additional £1bn of orders in   a ‘catastrophic’ move for Bangladesh.  After extensive criticism, Primark announced it will start a fund to help pay one month of wages for garment workers in their supply chain. However, they have not given any details of how they will get this money to workers – or specified which workers will be eligible. Given they are still not paying suppliers for materials or costs, this does not support suppliers in keeping afloat and can only lead to suppliers closing – forcing garment workers out of jobs. There is little consolation for workers in receiving one month’s wages as opposed to a job.  In addition, Primark have stated that wage compensation will be adjusted according to government support packages – effectively further reducing their payments.

It is reported that Asos is also refusing shipments for orders from third-party brands and suppliers. As brands only pay on shipment, this means that Asos is attempting to push the losses on to their suppliers. This is despite the fact that ASOS is still selling its clothes online and managed to raise a reported £247m through a share placement to help it survive the crisis.  New Look has halted all current and future production in its supply chain and has stated that they do not intend to pay suppliers for any costs incurred, including fabric or raw materials. The Oasis and Warehouse Group and Arcadia (which owns Topshop) have also informed suppliers that payments will be delayed in order to protect the business.