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Improving Traceability of Suppliers and Subcontractors to Improve Compliance

In May 2011, the Brazilian Ministry of Labour and Employment investigated workshops run by AHA Indústria e Comércio de Roupas Ltd (AHA), a supply chain partner of global fashion brand Zara. Inditex, Zara’s parent company, was subsequently charged with 52 infractions of labour rights, including substandard working conditions and forced labour. Labour inspectors found that workers were subject to restriction of movement, 16-hour shifts in windowless rooms and severely unsafe working conditions. 15 trafficked migrant workers from Bolivia and Peru were also found to be illegally employed in the workshops, working under conditions of debt bondage and earning well below the 2011 minimum wage of BRL545 (US$303).

Inditex denied knowledge of the employment of the 15 trafficked individuals but stated that AHA had failed to comply with the Inditex Code of Conduct for External Manufacturers and Workshops, to which it was contractually bound. AHA accepted responsibility for the violations, paid financial compensation to the workers and improved their working conditions.

In 2015, Zara again faced allegations of labour rights violations in their Brazilian supply chain following a report by SOMO, a Dutch NGO, and Reporter Brazil. Although the report acknowledged that efforts were undertaken by Zara to improve oversight, such as increased auditing and an improved hotline, it noted that the high incidence of outsourcing and subcontracting hindered the efficacy of these measures.

In 2019, Inditex updated its traceability methodology which allowed for more thorough detection of inaccuracies in traceability audits of suppliers and subcontractors. In its 2019 round of social audits of external manufacturers and workshops, Inditex found that 3% of its suppliers breached their Code of Conduct, which triggered the immediate implementation of a Corrective Action Plan. Inditex’s 2019 Annual Report found that supplier rankings have improved year upon year, with 97% of their textile and non-textile items purchased from A or B-ranked suppliers, which represents the highest degrees of compliance in terms of social sustainability.

Inditex has also collaborated with the ILO to spread best labour practices in the garment industry. One such joint initiative is Better Work, a platform that brings together various stakeholders, including Government, apparel brands and manufacturers, unions and workers, and the ILO itself, to enhance labour conditions in the garment industry and boost the apparel sector’s competitiveness.