The 2019 Ethical Fashion Report grades 130 companies from A+ to F, based on the strength of their systems to mitigate against the risks of forced labour, child labour, and exploitation in their supply chains. Since last year, improvements have been made across the fashion industry in 79% of the areas assessed. Most noteworthy areas of improvement in 2019 are:

• Gender inequality – 61% of companies (an increase of 22%) have created policies addressing gender inequality in their supply chain, including the introduction of strategies addressing discrimination faced by women.
• Responsible purchasing practices –  45% of companies (an increase of 18%) have introduced policies addressing responsible purchasing practices, with an aim to improve working conditions.
• Child and forced labour – 35% of companies (an increase of 17%) have robust remediation plans to redress child or forced labour if it is found in their supply chain.
• Manufacturing Restrictive Substance List (MRSL) – 35% of companies (an increase of 14%) have a comprehensive MRSL that they test against to ensure workers are not exposed to hazardous chemicals with dire environmental impacts.

The area that showed the highest improvement in 2019 was Auditing and Supplier Relationships, followed by Environmental Management (which was assessed in 2018, but not included in the grading until 2019).

The report showed that there also remain serious concerns that need to be addressed.

• Traceability – While 69% of companies could demonstrate tracing all final stage suppliers, only 18% demonstrated having traced all inputs suppliers, and just 8% were shown to have traced all raw materials suppliers. Although the majority of companies have begun tracing suppliers at these deeper stages of their supply chain, it is evident that many still have no knowledge of where their inputs and raw materials are being sourced.
• Transparency – 37% of companies were found to have published a complete list of all final stage suppliers, increasing to 50% when including companies that had published information about at least some suppliers. Transparency is no longer an expectation only driven by consumers, this expectation has also been legislated in a number of countries. The US, France, UK, and, Australia (through the introduction of a Commonwealth Modern Slavery Act), all require companies to publish details of the systems they have in place to ensure that workers are not being enslaved.

1. While sustainable sourcing and the payment of living wages to workers in the supply chain may cost more at the outset, these initiatives create longer term value. They must be seen as investments rather than costs. Companies within the fashion industry that source sustainably have been shown to enjoy improved employee and customer loyalty. Environmental and social ethics matter deeply to consumers too. 86% of the general population think companies should be addressing social and environmental issues. When looking at Gen Z — the generation that will account for 40% of consumers by 2020 — this statistic jumps to 94%.
2. Sustainable sourcing leads to stronger supply chains by reducing inequality and spurring economic growth in supplier locations. It is a vital part of achieving goal one (No Poverty) of the Sustainable Development Goals (SDGs). This is core to the pursuit of an equitable and regenerative economy that can sustain societal and financial systems.
3. As increasing regulation results in the normalisation of public disclosure of suppliers, fashion companies that source ethically and pay living wages will stand out and become more appealing to their stakeholders. This means that profits and company value could increase. Similarly companies not adhering to best practice ethical codes may suffer a loss of profits, reputation and brand value.
4. Poor labour practices and poor health and safety practices in supply chains are recognised as material risks to long-term investment portfolio performance. As stakeholder pressure continues to mount, companies with business models that are founded upon poor supply chain labour practices are likely to face increasing unanticipated costs.
5. 61% of companies (an increase of 22% from the previous year) have created policies addressing gender inequality in their supply chain, including the introduction of strategies addressing discrimination faced by women. 35% of companies (an increase of 17% from the previous year) have robust remediation plans to redress child or forced labour if it is found in their supply chain.
6. Of the companies that were assessed by both the 2018 and 2019 Ethical Fashion Reports, 38% improved their overall grade. The area showing the highest improvement in 2019 is Auditing and Supplier Relationships, followed by Environmental Management. 45% of companies (an increase of 18% from the previous year) have introduced policies addressing responsible purchasing practices, with an aim to improve working conditions.
7. In 2019, 48% of companies assessed reported that they had started to develop a living wage methodology and 24% of companies had published a commitment to pay a living wage.
8. Water use is one of the most substantial issues of environmental concern within the textiles and apparel industry. The report found that just 12% of companies were collecting and bench-marking water use data from all of their water intensive facilities. When it comes to wastewater, only 12% of companies were found to be monitoring the wastewater from all wet-processing facilities to ensure it is not environmentally hazardous.
9. The New South Wales and Commonwealth Modern Slavery Acts are anticipated to be catalysts for change in the business community in Australia. Along with public pressure from consumers, groups within civil society, investors and boutique fund managers, it is expected that corporate practice will further improve, reducing the risk of modern slavery in business supply chains.
10. Environmental and social ethics matter deeply to consumers too. 86% of the general population think companies should be addressing social and environmental issues. When looking at Gen Z — the generation that will account for 40% of consumers by 2020 — this statistic jumps to 94%.