In an increasingly globalised world, the competitive advantage, largely measured by labour and overall production costs, increasingly shifts in favour of developing countries and away from developed countries where the industrial revolution initially started. The garment sector is one of the most obvious examples of this shift.[1] While the steam of industrialisation has been blowing to the developing countries in recent decades, major apparel companies from higher income countries retain their market domination. Purchasing orders by those major apparel companies undeniably brought employment opportunities to millions of people in developing countries and, consequentially, those millions’ livelihoods mostly or solely depend on those companies.

The domino effect: What happens in Australia does not stay in Australia

Mosaic Brands Limited, an Australia-based fashion retail company operating hundreds of stores in Australia is currently facing a financial meltdown and it has axed most of its brands and hundreds of staff.[2] While Mosaic has yet to declare bankruptcy, many of the group’s global suppliers in Bangladesh, China, and India are also hit by the financial fallout as Mosaic is pushing them to renegotiate multimillion dollars of payment debts as those debts have become due.[3] In Bangladesh alone, it is reported that the Australian company owes as much as 15 million US dollars and some of its suppliers’ workers are on the verge of suicide after failing to receive their wages on time.[4] This is the case despite the fact that the company publicises numerous human rights commitments, including respecting labour rights, among others.[5]

Buyer-driven garment value chain

The global garment value chain is considered to be a “buyer-driven” one as the chain typically starts when an established fashion brand or buyer in an importing country releases designs of products.[6] Those released designs are then sent to developing countries where minimum wages are typically low and therefore providing very competitive pricing.[7] This “buyer-driven” global value chain results in an imbalanced power structure where buyers command leverage over their suppliers. On a more granular level, there is also an unfavourable power structure between suppliers and their workers, too.[8] In such an imbalanced power structure, those working for upstream suppliers bear the most brunt from any adverse impact the supply chain suffers, even when it happens downstream.

Toward mandating responsible purchasing practices

Responsible purchasing practices are a feature of the recent human rights due diligence, regulations. The upcoming European Union Corporate Sustainability Due Diligence (EU CSDDD), for example, makes it mandatory for businesses to adapt purchasing practices that contribute to living incomes for their suppliers and that do not encourage potential adverse impacts on human rights.[9] With EU CSDDD, it is reasonable to expect that many EU businesses will be required to be more mindful of their purchasing practices wherever they source their products from.

Getting back to Mosaic, Australia, the country where the company is based and operates, has yet to introduce a law having a similar effect with that of EU CSDDD. However, seeing what happened in Bangladesh with some of Mosaic’s suppliers’ workers on the verge of suicide, it would be right for Australia to consider mandating businesses to adopt responsible purchasing practices, either as part of the existing Modern Slavery Act, which already serves as the first stepping stone to hold Australian businesses accountable for their business relationships abroad, or as a new, standalone law.

Sources:

[1] https://www.ilo.org/resource/news/globalization-changes-face-textile-clothing-and-footwear-industries

[2] https://www.smh.com.au/business/companies/very-distressing-mosaic-escalates-dispute-with-supplier-as-staff-stores-axed-20241001-p5kevy.html

[3] Ibid.

[4] Ibid.

[5] https://www.mosaicbrandslimited.com.au/corporate-responsibility/

[6] https://sites.duke.edu/sociol342d_01d_s2017_team-7/2-global-value-chain/

[7] Ibid.

[8] https://www.ilo.org/media/424096/download

[9] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L_202401760