Fashion brands did not pay $16 billion for orders

Fashion houses faced a crisis due to the pandemic, and refused to pay suppliers, also demanded discounts and delays.

According to a report drafted by the Global Workers' Rights Center (CGWR) and the Workers' Rights Consortium (WRC), brands and retailers in the U.S. and Europe have not paid a total of $16.2 billion in liabilities since March. It includes non-payment to suppliers for pre-pandemic orders and industry workers' unpaid salaries (about $2 billion).  

The report aimed to highlight companies' and workers' situation at the lower levels of the global apparel supply chain, affecting those most affected by the pandemic. It assessed clothing brands and retailers responses to the case when there was a sharp drop in demand for fashion products due to the global crisis.

Starting in March, many companies began to give up financial obligations to the factories where clothes are made. And this is despite the previously issued orders, which at that time were partially or entirely fulfilled. Also, suppliers have responded to mass requests for discounts from brands, and sometimes companies even demand values in exchange for consent to accept the order and pay for it. It has also become a common phenomenon to postpone orders and payments unilaterally and sometimes indefinitely. 

As a result, factories sewing clothes were in a complicated situation - many of them even had to close - and production in Myanmar, Cambodia, and Bangladesh was closed in mass, leading to increased unemployment.

According to the report, the data analysis shows a rather disturbing picture of corporate irresponsibility and attempts by fashion houses and retailers to shift the financial burden on those below the supply chain. The payment system currently in place in the apparel industry allows brands to pay for orders weeks or even months after factories have shipped them. As a result of the crisis, many Western fashion houses and retailers have only strengthened their position, while factories and workers have taken the most significant blow.