Times are tough as textile and apparel companies across the world are being forced to swim against the tide. As a recent blog co-published by the Business & Human Rights Resource Centre and the Harvard Kennedy School- Corporate Responsibility Initiative, notes the onset of COVID-19 is forcing companies to walk on a sword’s edge. Neither can they let go of their business interests nor can they declare moral bankruptcy by triggering force majeure clauses to halt payments to suppliers with vulnerable workers, including for orders already processed.
The post-pandemic world is likely to judge companies by how humanely they handle this crisis. This will include how they treat their direct employees besides what steps they take to mitigate the impact on the most vulnerable workers in their value chain.
Ensuring a safety net for suppliers
To tide over these testing times, companies should consider the ability of their suppliers to survive a force majeure provision being triggered. They should assess the vulnerability of their supply chain workers and ensure adequate social safety net for them. They should also force their governments to strengthen this safety net. Companies should also avoid taking decisions like not paying suppliers to protect their cash flow.
A survey of 195 US investors representing over $4.7 trillion in assets under management revealed, companies should maintain timely, or prompt, payments to suppliers. Their respective governments can choose to limit financial support to companies that do not behave responsibly.
Government to tighten the noose
Governments can also use recent laws to sue companies that do not behave responsibly. A distinction can be made between companies that reduce future orders to weather the storm, together in discussions with suppliers, and those that used force majeure to pull the plug on past payments due.
After the pandemic, a company will not be able to ignore human rights harm to supply chain workers on the pretext of maintaining positive cash flow. They will not be able to enforce majeure clause to cancel supplier payments for past orders as this may put its social license to operate at stake.
Brands to abide by commitments
Similarly, brands that have changed course and agreed to pay their suppliers, will have to abide by their commitments. For instance, few companies aim to remain committed to their deep relationships with workers, and improve their livelihoods in the best ways it can in these unprecedented times.