Despite the growing outcry about exploitative commercial practices in the garment industry, compliance with 11 key recommendations has more misses than hits, Better Buying Institute’s first annual commercial compliance tracker has found.
Just over 46 percent of the 238 suppliers it surveyed across 38 countries, for instance, reported that their buyers are covering the full cost of production while leaving a reasonable profit margin “all of the time.” A little over one-third (36.4 percent) said that their buyers always update their forecasts at least monthly. And fewer than 22 percent of them said that their buyers always allow prices to be tweaked when external costs fluctuate by 5 percent in either direction.
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In terms of wins, nearly 89 percent of those polled said that their buyers paid the full prices as agreed upon in the purchase order “all of the time.” Only 13.8 percent said that their buyers extended their payment terms without approval. Plus, almost 72 percent of respondents could rely on their buyers’ orders to always specify when ownership and responsibilities are transferred from the supplier to the buyer.
Most companies fell somewhere in the middle. A little over half of suppliers said their payment terms were 60 days or less “all of the time.” Ditto with the 52.1 percent who said that their buyers always ensured that nominated suppliers’ payment and delivery terms were aligned with those of their own. And nearly 54 percent of respondents said that their buyers always confirmed their available capacity for a specific time period in advance.
Overall, the commercial compliance score for this year’s rating cycle was 29.4 out of a possible range of -100 to 100.
The purchasing practices platform developed the tracker as part of its participation in the Sustainable Terms of Trade Initiative (STTI), a group that includes the International Apparel Federation and the Platform on Sustainable Textiles of the Asian Region, or STAR Network. In 2021, the STTI published a white paper outlining the “core principles” of commercial compliance that buyers must adhere to if they don’t want to contribute to a race to the bottom.
Commercial compliance practices are frequently chain-linked, Better Buying discovered in its reporting. If buyers complied with one key recommendation, such as providing forecasts at least 60 days in advance, then they were also updating these monthly and confirming capacity before submitting orders.
“Compliance with paying in full, allowing changes to be made in prices when costs fluctuated, paying prices that cover all costs and confirming capacity were all positively and significantly correlated with compliance to every other key recommendation,” the report said.
Better Buying also asked suppliers about their experience with certain buyer policies. Here, the results were even more mixed, with just over one-quarter (26.5 percent) of respondents reporting that their buyers fairly allocated costs “all of the time.” Of the two-thirds of suppliers who had experience with buyer policies for handling payment for unused capacity, nearly 53 percent said that they were never paid for the surplus. More than 57 percent of suppliers had no experience with the payment of compensatory interest or fees when payments are deferred, but of those who did, the largest percentage (18.7 percent) said that the buyer never compensated them.
Better Buying said that it’ll be using this year’s score as a benchmark to compare future scores, which it expects to decline over the first few years as more suppliers participate and submit data about a broader swath of their buyers.
“Significant improvements are needed by buyers to be in compliance with the key recommendations issued by STTI,” the report said. “Especially high impact areas to work on include compliance with paying in full, allowing changes to prices to be made when costs fluctuate, paying prices that cover all costs, and confirming capacity, which are all significantly correlated to compliance with every other key recommendation.”
