Post by account_disabled on Mar 4, 2024 0:13:35 GMT -10
In a bid to strengthen its work ethic credentials as well as meet the growing requirements of millennial consumers, textile company Levi Strauss & Co is offering a new financial incentive for suppliers as far away as Bangladesh and China, in order for them to increase their environmental, labor and safety standards. The San Francisco-based jeans maker said Tuesday it would begin providing working capital (resources to operate) at a lower cost to its 550 jeans suppliers who efficiently comply with those measures. The financing, which is being arranged with the World Bank's private sector arm, the International Finance Corporation (IFC), will operate on a sliding scale. As suppliers improve conditions for their employees and their environmental performance they will be rewarded with lower interest rates on working capital supplied through a special IFC mechanism. The project arose from conversations that began at the IFC after the 2013 collapse of the Rana Plaza factory in Bangladesh, which left more than 1,100 dead and sparked new scrutiny for the supply chains of major international fashion brands.
After the disaster, IFC began offering low-interest Phone Number List loans to improve safety conditions in factories in Bangladesh, the world's second largest supplier to the textile and apparel industry after China. The latest initiative aims to provide even greater incentives to improve conditions by offering top-performing contractors the opportunity to reduce their cost of capital. Through the IFC, Levi Strauss suppliers will have access to cheaper capital than they would otherwise have in their countries. But Olaf Schmidt, who heads IFC's global retail practice, said suppliers that made improvements to their labor, safety and environmental standards would get an additional discount of up to 0.50% (50 basis points) on interest charges. The action reflects two important trends in globalization. With consumers and particularly millennials becoming increasingly concerned about the conditions in which their clothes are made, fashion brands face greater pressure to ensure their suppliers in places like Bangladesh, Cambodia and Vietnam meet the highest standards. . In some cases, along with rising wages and costs in China and other production centers, brands have had to reshoring production to locations closer to home.
But the combination of these pressures and the way global supply chains are becoming more intricate are also leading multinational companies to establish stronger ties with suppliers and use new tools to manage them. The Levi Strauss scheme will be partially managed through GT Nexus, a cloud-based supply chain management system, which allows companies to organize everything from working capital for suppliers to product shipments from distant factories. Michael Kobori, vice president of sustainability at Levi Strauss, said the company now relied on fewer, more capable vendors, and had a relationship history averaging 10 years with its prime contractors. The company told contractors about the scheme last week and has already received expressions of interest, they said. If the pilot program with the IFC worked, Kobori said, Levi Strauss would be committed to helping expand it to the rest of the textile and apparel industry as part of a "global race for the best" in standards. Rachel Wilshaw, Oxfam's ethical trading manager, said offering incentives to suppliers to improve practices was a good idea. But whether it works depends on how Levi Strauss and the IFC monitor suppliers. "The problems will be in the process rather than the incentive," he said.
After the disaster, IFC began offering low-interest Phone Number List loans to improve safety conditions in factories in Bangladesh, the world's second largest supplier to the textile and apparel industry after China. The latest initiative aims to provide even greater incentives to improve conditions by offering top-performing contractors the opportunity to reduce their cost of capital. Through the IFC, Levi Strauss suppliers will have access to cheaper capital than they would otherwise have in their countries. But Olaf Schmidt, who heads IFC's global retail practice, said suppliers that made improvements to their labor, safety and environmental standards would get an additional discount of up to 0.50% (50 basis points) on interest charges. The action reflects two important trends in globalization. With consumers and particularly millennials becoming increasingly concerned about the conditions in which their clothes are made, fashion brands face greater pressure to ensure their suppliers in places like Bangladesh, Cambodia and Vietnam meet the highest standards. . In some cases, along with rising wages and costs in China and other production centers, brands have had to reshoring production to locations closer to home.
But the combination of these pressures and the way global supply chains are becoming more intricate are also leading multinational companies to establish stronger ties with suppliers and use new tools to manage them. The Levi Strauss scheme will be partially managed through GT Nexus, a cloud-based supply chain management system, which allows companies to organize everything from working capital for suppliers to product shipments from distant factories. Michael Kobori, vice president of sustainability at Levi Strauss, said the company now relied on fewer, more capable vendors, and had a relationship history averaging 10 years with its prime contractors. The company told contractors about the scheme last week and has already received expressions of interest, they said. If the pilot program with the IFC worked, Kobori said, Levi Strauss would be committed to helping expand it to the rest of the textile and apparel industry as part of a "global race for the best" in standards. Rachel Wilshaw, Oxfam's ethical trading manager, said offering incentives to suppliers to improve practices was a good idea. But whether it works depends on how Levi Strauss and the IFC monitor suppliers. "The problems will be in the process rather than the incentive," he said.