Dynamic duo: how investors, Millennials are fighting modern slavery

By Lucy Dean

January 18 2018
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Who made your T-shirt, and what were they paid for it? It’s a question that Millennial consumers care about, and so investors do too.

According to a recent AMP Capital insight, young Australians’ spending power and habits could end modern slavery in the clothing industry as they shift away from cheap but dubiously sourced garments.

AMP Capital’s responsible investment leaders’ Kristen Le Mesurier explained that investors are being influenced by Millennial concerns to push companies for change in order to meet Millennials’ moral standards.

“The conversations we have with companies suggest that some consumers consider sustainability when they buy apparel but most are still primarily driven by price,” she said.

“Investors [shareholders in listed companies] are playing a much more significant role in driving change.”

She continued: “As a large investor, we can ask listed companies to do a lot more; to audit their supply chains, to provide full transparency over where materials are coming from, who is making them and whether those workers are being paid a living wage.”

The popularity of eco-friendly and supply chain aware fashion is popular among Millennial celebrities like Emma Watson, who publicly documents the sustainability qualifications of her red carpet garments.

She’s joined by the 75 per cent of Millennials who would pay more for sustainable goods, according to a Nielson poll. That’s up from 50 per cent in 2014.

Further, Millennials are twice as likely to buy from sustainable brands than older generations, AMP Capital added, noting: “Millennials are quickly becoming the most important consumer segment of our time.”

“There is a great wealth transfer on the horizon, with more than 75 million Millennials born between 1981 and 1997 set to take over an estimated $30 trillion in wealth from their Baby Boomer parents,” the Insight continued.

“On a global scale, 85 per cent live in emerging markets and have a spending power that is expected to grow three times by 2025. The opportunities, from a brand perspective, are vast.”

To Ms Le Mesurier, the fact that the Australian government is also cracking down on poor supply chain transparency, investor pressure and regulator scrutiny is a “double whammy for listed companies”.

“Now, more than ever, companies need to take supply chain issues seriously,” she said.

According to the Oxfam Naughty or Nice list, big brands like Zara, Topshop, Just Jeans, dotti and Gorman are “failing” to reveal where garments are made, while Kmart, Target, H&M, Gap, Bonds, Jeanswest, Forever New, ASOS and UNIQLO get a “pass”.

Companies who fail the test are those that have not published the locations of at least 70 per cent of their factories, or 80 per cent of their supply chain, Oxfam noted.

The ethics of the garment industry have been in the public eye since the Rana Plaza factory collapse in Bangladesh which saw 1,134 underpaid workers die. Brands like Benetton and Mango were implicated in the tragedy.

“While there are strong links between human rights and business performance, one of the greatest barriers to change is that slavery itself is profitable in the short term,” Ms Le Mesurier said.

“Companies can influence their suppliers to improve working conditions, but there is no incentive from those who profit from forced labour to improve, unless of course, investment managers, such as AMP Capital, continue to press for change and consumers gradually prioritise sustainability over costs.

“Poor working conditions are not only unethical, they also carry significant investment risks [in the longer term] including brand, reputational and business risks,” she continued.

Ms Le Mesurier said a focus on human rights violations and labour standards by ESG (environmental, social and governance) investors is a good start, but argued that there’s much more to ethical and sustainable practices.

She explained that a supply chain’s sustainability measure can depend on how far down the supply chain an investigator goes, claiming: “Whilst clothes marketed as being responsibly sourced may guarantee basic pay for their garment workers – it’s also important to understand where raw materials are sourced from, how hazardous chemicals are disposed of, how waste is managed and what processes are in place for reducing water wastage”.

All companies are affected by population growth, climate change and the availability (or lack) of water and land, the portfolio manager said, arguing that fast fashion – or fashion dictated by trends and seasons, rather than sustainable practices – exacerbates the issues.

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