New briefing highlights red flags, recommendations for ensuring responsible working practices in apparel companies

To help investors combat poor working practices in their investee companies’ apparel supply chains, the PRI has released An investor briefing on the apparel industry: moving the needle on responsible labour practices.

The report, informed by PRI engagements and interviews with investors and subject experts, highlights eleven red flags that investors should look out for which may indicate negative human rights practices in investee apparel companies. It also gives eight recommendations for effective investor-company engagement, including providing concrete questions investors can ask in engagement dialogues and encouraging companies to build solid and less ‘transactional’ relationships with suppliers.

Investors increasingly appreciate the need to understand the root causes of systemic issues found in the apparel industry – and crucially, how they affect the rights of people, impact business and influence investment and financial returns.

Despite the economic and social development the sector offers, it also carries risks including poor working conditions, low pay, human trafficking and child labour. This in turn translates into investment hazards such as consumer backlash, loss of sales and potential lawsuits.

Bettina Reinboth, senior manager, social issues at the PRI said: “The starting point for respecting human and labour rights is to understand the impacts of a company’s business on people. These days, there is an expectation from consumers around the world that companies respect human rights; the investment community has a real role to play in ensuring investee companies address these issues and mitigate any negative impacts. 

“This briefing serves as a resource to help investors – both those who are advanced in their approach and those that are new to it – do just that.

“The consequences of not addressing risks – as we have seen with disasters such as the Rana Plaza factory collapse – speak for themselves.”

The consequences of not addressing risks – as we have seen with disasters such as the Rana Plaza factory collapse – speak for themselves

Bettina Reinboth, PRI senior manager, social issues

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