Lidl, Zara’s owner, H&M and Next ‘paid Bangladesh suppliers less than production cost’
Lidl, Zara’s owner Inditex, H&M and Next have been accused of paying garment suppliers in Bangladesh during the pandemic less than the cost of production, leaving factories struggling to pay the country’s legal minimum wage.
In a survey of 1,000 factories in the country producing clothes for UK retailers, 19% of Lidl’s suppliers made the claim, as did 11% of Inditex’s, 9% of H&M’s and 8% of Next’s.
A majority of suppliers of those four brands, and also of Tesco and Aldi, told researchers that almost two years after Covid-19 was declared a global pandemic they were still being paid at the same rate – despite soaring raw material and production costs in the interim.
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Almost half of Primark’s suppliers questioned said they did not see an increase in payment rates, with just over a third saying orders had been cancelled, according to the research by the University of Aberdeen and the UK-based fair trade campaign group Transform Trade, formerly known as Traidcraft Exchange.
Their report, which looked at the period from March 2020 to December 2021, found larger brands buying from 15 or more factories were more likely to be engaging in unethical practices, such as delaying payments or cancelling orders, than smaller ones. These bigger operators included members of the UK’s Ethical Trading Initiative, an alliance of companies, NGOs and unions set up to improve relations with suppliers.
Fiona Gooch, a senior policy adviser at Transform Trade, called for a fashion watchdog to regulate UK garment retailers in a similar way to the Grocery Supply Code of Practice, which oversees relations between suppliers and retailers selling more than £1bn of groceries a year.
“This research is a wake-up call,” she said. “We need a fashion watchdog to stop unacceptable purchasing practices of the clothing retailers benefiting from large consumer markets, along the same lines as existing protections for food suppliers.
“Only when suppliers are able to plan ahead, with confidence that they will earn as expected, can they deliver good working conditions for their workers.”
In a response published within the report, Lidl said it had “committed itself to ensuring minimum wages in its supply chain and to ensuring the sustainable pre-planning of the production of textile goods”.
It added: “Lidl takes its responsibility towards workers in Bangladesh, and other countries where our suppliers produce, very seriously and is committed to ensuring that core social standards are complied with throughout the supply chain.”
Next said it “completely refutes the suggestion that its suppliers are being paid the same (or less) than before the pandemic”. The company said it had gone on record about rising supplier costs and its profit margins had remained stable while prices for customers had gone up, indicating it had paid suppliers more.
Inditex said it had participated in global action to support the garment industry including factory workers. It said: “We guaranteed payment for all orders already placed and in process of production and worked with financial institutions to facilitate the provision of loans to suppliers on favourable terms.”
Primark admitted it had been forced to cancel some orders during the pandemic when nearly all its shops had to close for a period of time. However, it said it had tried to support workers: “In April 2020, we established a wages fund in excess of £22m with the aim of supporting suppliers’ ability to pay their workers, and from which Bangladeshi suppliers with garment orders due to be handed over to us within 30 days of the cancellation would have received payment.”
A Tesco spokesperson said: “We are committed to fair and transparent partnerships throughout our supply chain, and we worked closely with our clothing suppliers to support them through the challenges of the pandemic. To ensure that they could continue to pay their workers fairly, we did not cancel any orders, did not penalise late deliveries, and honoured our payment terms in full.”
Aldi said the report had not recognised that the brand was split into two entirely separate businesses – Aldi Nord and Aldi Sud, which includes the UK chain, and so the responses did not give a clear picture of the latter’s behaviour.
H&M declined to comment.