Background and Programme

PRICING IN THE GLOBAL GARMENT INDUSTRY

An international seminar organized by International Restructuring Education Network Europe (IRENE) and Clean Clothes Campaign, in cooperation with EED, Germany.

Dates: 20 and 21 February, 2003
Venue: Evangelic Academy Mülheim an der Ruhr, Uhlenhorstweg 29, D-45479 Mülheim an der Ruhr (near Düsseldorf), Germany. Tel. + 49.208.599.060; (in Germany: tel. 0208.599.060).

Background

Over the past decade a substantive number of global retailers and brands have taken up responsibility for the working conditions in the supply chains where their products are being made. Some companies are making a serious effort to implement their corporate codes of conduct. A small number have joined multistakeholder initiatives and are cooperating with NGOs and trade unions in developing systems to ensure that these standards are complied with in reality.

One of the challenges that retailers/brands and suppliers face in the implementation of codes of conduct face is, not surprisingly, who pays for the improvements. But what exactly are the costs of improving working conditions, how can these costs be covered and whose responsibility is it to cover the costs of improvements within the global supply chain?

There is evidence to show that the unit price paid to suppliers for many garments is going down not up; so it begs the question of how suppliers and subcontractors can cover the costs of improving labour standards especially the living wage provision. Some people, including some within the industry, are calling for brands and retailers to buy ethically - ie paying a "fair price" - as well as source ethically.

If suppliers cannot deliver full implementation of the code in the costing arrangement then who pays for the implementation? How do you as a brands/retailers ensure that funds given for improvements, especially a living wage, reaches the workers? If one way is to pay a "fair price" - what would this constitute? How else can these improvements be covered?

On average the labour costs of the production of the garment make up between 1,5% and 5% of the consumerprice. From this perspective, doubling the labour costs would not make much of a difference, or would it?. But then is doubling enough? And what exactly makes up the remaining 95% of the costs, and how is this costing organized? These are a few of the many questions surrounding the whole issue of costings and pricing we hope to address in this seminar.

This seminar on Pricing in the Global Garment Industry will start this debate and discussion and hopefully develop some answers.

Programme DAY ONE: Thursday 20 February 2003

Objectives

Develop a better understanding of the pricing structure in the garment and footwear industry to ensure that the costs of improving working conditions in garment factories can be met.

Outline of the programme

chairpersons of the day: Maggie Burns and Lynda Yanz

session 1:

9.00 - 9.45h: Introduction to the programme and short round of introduction of each participant

9.45 - 10.15h: Introduction to the current macro-economic context; by Michiel Scheffer, Noéton Knowledge Management BV;
addressing a.o. topics:

• the MFA phase out;
• China's role in the global economy esp. after accession in the WTO

10.15 - 10.45h: Can't or won't - the business model as a barrier to change? by Simon Zadek, AccountAbility
addressing a.o. topics:

• how far can business models deliver improved labour standards;
• are the key solutions at the bottom or at the top of the value-chain?

10.45 - 11.00h: Questions for clarification

11.00 - 11.15h: Break

11.15 - 12.30h: Plenary Session; Debating the Issues

12.30 - 13.30h: lunch

13.30 - 14.00h: Understanding the different cost factors that make up the garment price and what the costs of labour would be if ethical standards are met; by Sebastian Siegele, Systain Consulting GmbH

• How is the price set and what are the relevant cost factors at the different stages in the supply chain (manufacturing level, transport, taxes, retailer level etc.)
• Who makes profits in which parts of the garment production chain how is profit distributed
• Examples about the relation between social standards and economic benefits e.g. productivity; the contradiction between theory and practice in the day to day work.

14.00 - 14.30h: Questions for clarification

14.30 - 15.30h: Panel to react, followed by plenary debate
Speakers in the Panel:

• Gloria Kok, JURK BV,
• Ineke Zeldenrust, CCC
• Monina Wong, Hong Kong Christian Industrial Committee

15.30. - 16.00h: break

16.00 - 16.30h: small working groups to define the key challenges and questions

16.30 - 18.00h: Plenary session: Looking Towards The Future

• feed back from the working groups
• what are the space and barriers to meet labour standards - future focus

Closure of day one: 18.00h

Dinner: 18.00h

optional:
19.30 - 20.30h: Evening session: the Gradient work - the role of company-rating in labour standards in driving behaviour and outcomes; by Simon Zadek

Programme DAY TWO: Friday 21 February

Objective

Discuss how the outcomes of Day One translate into our campaigning work (for example regarding living wages) and how to integrate it in our work around code monitoring/verification systems (for example regarding 'fair prices' for suppliers).

• What kind of demands can we make to retailers/brands/large suppliers concerning their buying practices/labour practices ('ethical buying' and paying a 'fair price' or the 'true cost')
• What does it mean for work around living wages especially if we look at the minute/hour pricing system currently common in the industry
• How do we integrate this into our work around code monitoring/verification - can we develop corrective action programmes based on modern cost accounting or even develop 'no-selling below cost' codes and programs?