Caught in the act?

15 April 2015

In this month’s blockbuster Limeblast, Sam Setter muses on whether some people actually know the meaning of social responsibility as allegations made at the end of last year still go unanswered.

The international press gave very little attention to the findings of an investigative Italian television programme called Report. An Italian manufacturing company that produced bags (unspecified whether they were leather or other materials) for Gucci - and held a grudge - approached journalists of Report. The programme said that it investigated the revelations of the Italian manufacturer over a period of five months and, in the report, took Gucci's social-responsibility department to task.


This is the system brought into the open byReport: Gucci buys its bags from a first-level supplier that subcontracts to an artisan factory that is the alleged front of a questionable supply method employing illegal labour. The subcontractor is the company that actually manufactures the bags.


As we know, big brands focus on profit. In order to reach the best bottom line, some brands are - according to their suppliers - absolutely ruthless. You will probably remember the huge fire that killed more than 100 textile workers in Rana Plaza, Bangladesh, which made people aware that these workers have to endure terrible workplace conditions for meagre wages in order to manufacture products at the cheapest possible price. When it became apparent that some brands and well-known distribution chains bought from factories that put price in front of labour conditions, many scrambled for damage control stating that they knew nothing about the dangers to which the Bangladeshi textile workers were exposed (United Colors of Benetton recently decided to compensate the victims or their families).

"In order to reach the best bottom line, some brands are - according to their suppliers - absolutely ruthless."

Additionally, French TV occupied itself in 2011 with a documentary about the incredible labour and ecological conditions in the Hazaribagh tannery area of which international buyers claimed to know nothing about.


Geneva conference: claims on traceability

When UNCTAD and CITES held a conference in Geneva in 2013 on traceability, Kering made a presentation that claimed it had a traceability system in place that ensured that the origin of its Brazilian leather was from legal sources - as it could trace each of the bags back to the very animal that provided the hide. When asked how many bags the system traced, the answer was 200, which comes down to tracing more or less ten bovines. Being able to trace ten cattle when the world daily processes about one million hides shows how so-called good practices can be manipulated when they are made public.


Report said it discovered that Gucci pays €24 for the manufacturing of a particular (non-leather) bag that sells retail for €830. The actual cost was given by the artisan as €31-32, hence they'd be making a loss of about 30% on each bag. Of course, there is the cost of the material, packing and shipping to consider, but it is safe to presume that from cost to sales price the multiplication easily exceeds a factor of six. So why squeeze the guy that actually does the manual work? What difference does it make to pay €32 rather than €24 when you gross €500-600? The interviewed supplier told the journalist that even a mere €2 or €3 more per bag would make a difference to his company.

Why squeeze the guy that actually does the manual work? What difference does it make to pay €32 rather than €24 when you gross €500-600?

However, the whistle-blower told Report that to avoid losing the business of a prestigious client, which Gucci doubtlessly is, his company resorted to a trick. He sent his Italian workers home and hired - via a labour supplier - cheap Chinese labour 'officially' for part-time work. In reality, they allegedly work from 7:00 until 21:00 for a very low income. The Chinese presence is officially unknown to Gucci because the company guarantees that it sells Italian products using Italian accessories made by Italian artisans, according to traditions that are transferred from generation to generation.


The Chinese workers have no rights, no guarantees. If they fall ill, they are not paid, and if they quit or are fired, they receive no severance. They get €12-13 per bag, which is why the Italian artisan is able to supply Gucci at €24. It is to be noted that paying a worker per piece is illegal in Italy. In order to take some money home, the workers, who are officially paid for four hours, need to work 14. On Saturdays, the Chinese work as usual, but officially, they are not at work. There is hence a huge tax evasion, on top of labour exploitation and fraud.


Social anxiety: corporate responsibility gone awry

Gucci is an SA8000-certified company that claims to take social responsibility seriously, and reports that it inspects randomly and without notice its suppliers to discover whether they adhere to its social responsibility standards or not. Gucci claimed that, in four years, it affected 1,300 such checks a year among its Italian suppliers. Report suggested that these inspections, if they indeed take place, are taken with a pinch of salt. I wonder though, how a company that prides itself on being socially responsible is willing to risk its credibility by squeezing its suppliers and walking the line with regard to illegality.


In 2014, a Kering representative, who gave a presentation regarding its collaboration with CITES and the International Trade Centre on Madagascar crocodiles, was asked why, with the huge profits the company was making on its reptile skin products, its raw material suppliers did not get a fair share of the profits. The representative responded curtly that they would not answer such questions. So there is a very subjective interpretation of the words 'social responsibility' with Kering at the one side and reality on the other.


Gucci denies that it knows that its bags are made by Chinese workers in Italian (sub)contractor factories where only the proprietor is Italian - and the frontman of the operation. But the Report journalist cornered a Gucci inspector who visited a factory, and asked what they had seen and whether it was clear to them that the workers in the factory were Chinese.


There was little denied here and the inspector said that they would report back to their employers. The subcontractor maintains that Gucci knew all along and even suggested that it employed local Chinese labour to keep the costs within the dictated purchase limits.


Apart from Gucci, which earns billions a year, everybody is losing: the Chinese accepting long working hours at minimal wages, the subcontractor, the primary supplier that is working for peanuts, the Italian workers who are at home and the Italian state that pays for them. Gucci is currently suing Report in court, asking for €3 billion in compensation. Report has been sued many times before, but never found guilty.


Sam Setter
[email protected]

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