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Promoting Sustainable Fashion in Brazil's Garment PROMOTING SUSTAINABLE FASHION IN BRAZIL’S GARMENT SUPPLY CHAIN Final Report Aizhan Kamidola Claudia Baethgen th June 30 , 2020 Daria Shitrit Diana Rincón Eleanor Katz Jiayu (Jade) Song Faculty Advisor: Professor Scott B. Martin 1 Table of Contents 1. Executive Summary 8 2. Introduction 9 3. ABVTEX in the Brazilian Context 10 3.1. The ABVTEX Program 10 3.2. Path to Creating the ABVTEX Program 11 3.3. Remaining and Emerging Challenges in the Sector 16 3.4. Overview of the Garment Sector in Brazil 17 4. Brazilian Association of Textile Retail: ABVTEX & The Program 20 4.1. ABVTEX’s Main Pillars of Operation 20 4.2. Audit Bodies That are Accredited By ABVTEX 22 4.3. Governance Structure of The ABVTEX Program 22 5. Objectives 24 6. Literature Review 25 6.1. Governance and Implementation: Increasing Workers’ Participation in 28 Social Compliance Programs 6.2. Transparency 29 6.3. Traditional Compliance Approach vs. Capacity Building Approach 33 6.4. Audit Fatigue 35 2 7. Methodology 36 7.1. Limitations & Critical Review 36 7.2. Research Design: Benchmarking 38 7.3. Interviews 44 7.4. Surveys 46 8. Findings 48 8.1. Criteria and Requirements for Compliance 49 8.2. Operations & Procedures 67 8.3. Stakeholder Engagement 77 8.4. Influence and Impact in the Apparel Industry 79 9. Recommendations 82 9.1. Criteria and Requirements for Compliance 83 9.2. Operations & Procedures 92 9.3. Stakeholder Engagement 95 9.4. Influence and Impact in the Apparel Industry 97 10. Conclusion 101 11. Bibliography 102 12. Legal Framework References 111 3 13. Appendices 114 Appendix 1: Key Terms 114 Appendix 2: Supplier Survey 116 Appendix 3: Retailer Survey 139 Appendix 4: Auditor Survey 158 Appendix 5: Interview Guide—ABVTEX Management Team 175 Appendix 6: Interview Guide—ABVTEX Member Retailers 179 Appendix 7: Interview Guide—ABVTEX Program Auditing Firms 182 Appendix 8: Interview Guide—International Certification Mechanisms 184 Appendix 9: Interview Guide—International and Brazilian scholars & Analysts 186 Appendix 10: Interview Guide—Civil Society Organizations 189 Appendix 11: Interview Guide—Suppliers of ABVTEX member retailers 191 Appendix 12: Interview Guide—Subcontractors of ABVTEX member retailers & 194 suppliers Appendix 13: Interview Guide—Public Sector Institutions 197 Appendix 14: Interview Guide—Labor Unions 200 Appendix 15: Benchmarking Analysis & Stakeholder Analysis 205‐ Attached 4 List of Tables Table 1. ABVTEX Retailer Members According to the Certified Supply Chain 10 Table 2. ILO Fundamental Conventions and Date of their Ratification by Brazil 12 Table 3. ILO Technical Conventions Ratified by Brazil 12 Table 4. Original Brazilian Legal Provisions Relevant to International Labor Standards 13 Table 5. Categories of Criteria Covered by the ABVTEX Program 21 Table 6. ABVTEX Members with a Fully Certified Supply Chain that Discloses Supplier 31 Information Table 7. International Certification, Accreditation and/or Assessment Mechanisms 41 Table 8. Criteria Analyzed in Benchmarking 43 Table 9. Three Main Categories of Interviewees 44 Table 10. List of Interviewees 45 5 List of Figures Figure 1: Number of Workers Found in Conditions of Forced Labor 16 Figure 2. Distribution of Companies by Sizes in 2016 19 Figure 3. Brazilian Garment Industry Supply Chain Map 19 Figure 4. ABVTEX Program Objectives 20 Figure 5. Four Pillars of the ABVTEX Program 21 Figure 6. Survey Findings: As an independent auditor/manager what type of training 75 on issues such as sexual harassment and gender discrimination have you received? Figure 7. ABVTEX Visão 2022 100 6 List of Definitions Definition 1. Corporate Social Responsibility (CSR) 14 Definition 2. Multi‐Stakeholder Initiative (MSI) 26 Definition 3. Worker Driven Social Responsibility (WSR): Defining Features 28 Definition 4. Management System 33 Definition 5. Social Audit 39 Case Study: Lesotho Accord 29 7 1. Executive Summary From December 2019 until May 2020, a team of six graduate students from the Columbia University School of International and Public Affairs (SIPA) assisted the Brazilian Association of Textile Retail (ABVTEX) in providing technical recommendations to improve the quality and effectiveness of its auditing standards and procedures while converging with international best practices. Despite ABVTEX’s constant efforts to improve the quality of its auditing approach, key challenges regarding transparency and capacity‐building in the apparel sector remain present. The SIPA team worked with ABVTEX to carefully assess its program, audit standards, and audit procedures in order to conduct a benchmarking analysis against international audit mechanisms, in particular, SA8000, Sedex, Social Labor and Convergence Program (SLCP), Worldwide Responsible Accredited Production (WRAP), and the Fair Labor Association (FLA). The SIPA team first conducted a literature review of issues related to sustainability in the supply chain, with specific focus on identifying key issues in social and labor standards as well as audit procedures. Because of the sudden onset of the COVID‐19 outbreak the planned field trip to São Paulo was cancelled, and thus the team focused intensively on (1) conducting remote interviews with scholars, representatives of international certification schemes, ABVTEX audit bodies and its members; (2) designing three types of surveys for suppliers, retailers and auditing firms; and (3) conducting benchmarking analysis against international audit mechanisms. Results from this study show that the majority of suppliers look favorably upon the ABVTEX Program, and indicate the Program is having a positive impact on their business. Nevertheless, the team identified several areas of opportunity with regards to (1) compliance criteria; (2) operations and procedures; (3) stakeholder engagement; and (4) industry impact and influence. Some key recommendations include a shift towards a multi‐stakeholder capacity‐building approach and a greater inclusion of the voices of workers through improved grievance mechanisms and participation in audit facilitation. More details can be found in the following sections. 8 2. Introduction As the world’s fourth‐largest apparel producer, Brazil has a prominent textile and garment industry that is the second‐largest source of manufacturing employment in the country.12 Understandably, the great scope of Brazil’s garment industry has led to concerns about the sector’s labor standards and practices. These concerns are exacerbated by the industry’s challenges concerning unauthorized subcontracting, and difficulties in supply chain management, which increases the risk for labor abuses.3 Informal and undocumented workers are especially vulnerable to issues such as forced labor, undignified treatment, discrimination, and poor work conditions including long working hours, exploitative contracts, and low pay. Through their response to these challenges, ABVTEX has emerged as a leader in the promotion of sustainability, accountability, and transparency in the supply chains of the apparel industry in Brazil. In 2010, ABVTEX launched the Programa ABVTEX (hereafter, ABVTEX Program, or “the Program”), a comprehensive compliance mechanism to foster the adoption and implementation of best business practices on labor and social standards throughout the value chains of its retail members. Although the Association has received widespread recognition for its efforts in engaging member retailers, as well as their suppliers and subcontractors to comply with labor standards, several opportunities remain that would enhance the Program’s effectiveness in monitoring practices and reducing labor and social risks in the industry’s supply chains. With the purpose of identifying and addressing the Program’s specific challenges, Columbia SIPA Workshop Team partnered with ABVTEX to assess its Audit Manual (the Manual), operations, and procedures of the ABVTEX Program and provide technical recommendations for the improvement of its quality and effectiveness. Throughout the past four months, the SIPA team analyzed the extent to which the Program converges on good practices established in international certification and assessment mechanisms regarding the protection of social and labor standards, and the structure and operations that this kind of program could have. A pair of professors from the University of São Paulo (USP), who had previously conducted research on the Program and are familiar with the client, supported the Columbia SIPA team through outreach to key stakeholders in Brazil, data‐collection instrument design, fieldwork planning, and translation. Due to the inability to conduct in‐person fieldwork in Brazil due to the COVID‐19 pandemic, the Columbia SIPA team relied heavily on quantitative and qualitative data‐gathering instruments to remotely collect information and insights from scholars, retailers, suppliers, auditing firms and international certification mechanisms, among other stakeholders of the garment industry. Based on the analysis of the information collected, the Columbia SIPA team is pleased to provide a set of recommendations around four key areas: 1) Compliance criteria included in the Manual; 2) Operations and procedures of the Program; 3) Stakeholder engagement; and 4) Impact and influence the Program has and can have in the apparel industry. We hope our team’s review and recommendations will be important inputs in ABVTEX’s strategic planning process for the period of 2020‐2025. 1 The garment industry is the economic sector/activity focused on the production of apparel/clothing
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