Supply chain transparency

Supply chain transparency is an emerging norm, and FLA has taken action to ensure our members are meeting these expectations.

A company’s global supply chain generally operates at multiple levels, also known as tiers. Suppliers at each tier contribute to a specific step in the production process. A cotton shirt might proceed through the supply chain tiers as follows:

Tier One is the supplier closest to the company that assembles the final product – these are known as direct suppliers. Here, the cotton fabric is cut, sewn, and assembled into shirts that are ready for distribution.

Tier Two suppliers contribute to earlier production and processing, providing components of the final product. The cotton yarn is turned into fabric and may receive extra treatments like printing or embellishing.

Tier Three is where raw materials are first processed. The cotton is turned into yarn through cleaning, spinning, dying, and other techniques.

Tier Four is the first step in the supply chain, where raw materials are harvested. The cotton is picked from farms.

Generally speaking, companies have closer relationships with suppliers downstream in the supply chain, such as the direct suppliers in Tier One. Companies often have less transparency into operations further upstream, including Tiers Two – Four.

FLA’s work in supply chain tiers

Fair Labor Accreditation for manufacturing sets companies on a concrete path to improving labor conditions in its Tier One and owned manufacturers. One of the requirements for participating companies is factory list transparency.

For agriculture companies, the accreditation program is designed to verify and strengthen working conditions in the agricultural tiers of their supply chains, most often Tier Four. One of the requirements for participating companies is sourcing profile disclosure.

Factory disclosure

While some apparel brands began disclosing supply chain information in the mid-1990s and early 2000s, the practice has dramatically increased over the past decade.

Although no exact figure exists for the number of apparel brands and retailers disclosing supplier information, Fashion Revolution’s Fashion Transparency Index, which assesses and ranks the biggest fashion and apparel brands and retailers based on how much information they disclose on their suppliers, estimates that 47% of brands now disclose their manufacturing supply chain. For instance, Open Supply Hub has gained momentum as an open and accessible global supply chain map used by companies from diverse sectors to disclose supplier data.

Factory disclosure supports company efforts to comply with due diligence requirements, such as the UK Modern Slavery Act and the French Duty of Vigilance law among others.

Factory disclosure also addresses multi-stakeholder-driven standards such as the Transparency Pledge, an initiative of nine human and labor rights organizations, and the Corporate Human Rights Benchmark, which includes supply chain disclosure indicators used by investment managers.

Sourcing profile disclosure

Material origin disclosure or country of origin labeling require retailers to identify where agricultural or food/beverage raw materials come from. While the origin identification might also be considered for quality or safety, it is increasingly aimed at improving traceability for responsible or ethical sourcing practices.

Similar to factory disclosures, this supports company efforts to comply with due diligence requirements, such as the UK Modern Slavery Act and the French Duty of Vigilance law.

Fair Labor Standards

We require participating companies in both our manufacturing and agriculture Fair Labor Accreditation programs to publicly disclose information about their supply chains.

FLA adopted a requirement for factory list transparency in February 2019 with a vote by its board of directors. FLA members must make public their Tier 1 factory list by March 2022.

Specifically, FLA members must publish on their website (or other public platforms) a list naming all applicable sites that manufacture its products.

Site list information requirements

Full name of the facility;

Site address(es);

Parent company of the facility;

General description of the type of product(s) made or produced at the facility;

Approximate number of workers at the facility.

Additional criteria

The information should be in a spreadsheet or other machine-readable format (see the Open Data Standard for the Apparel Sector.

The information should be in English. Best practice would also include the name of the supplier in the local language where applicable.

The information should, at a minimum, be updated every 12 months.

With the approval of the Fair Labor Principle of Fair Labor and Responsible Sourcing for the Agriculture Sector in October 2020, participating companies are required to disclose sourcing information of the commodities in the scope of the Fair Labor Agriculture Accreditation Program (Principle 1B: Risk Assessment and Traceability, Benchmark 1.B.2, KPI (b).

FLA member companies are required to publish on their website (or other public platform) sourcing profiles of all commodities in the scope of the Agriculture Accreditation Program. The sourcing profile should provide the following at global-level and country-level.

Global Commodity Profile

All countries from which applicable commodity is sourced

Global aggregate volume or acreage (depending on the information the company is collecting)

Percentage volume or acreage traced to the farms globally and percentage traced to the mills for certain commodities

Country Commodity Profile

Total volume or acreage range (high, medium, low) of the commodity by country (to demonstrate the importance of country’s sourcing)

Percentage volume or acreage traced within the country (high, medium, low)

Main regions sourced from (e.g. names of the states/regions/villages)

All traced suppliers in the country (e.g. large-scale suppliers, traders, cooperatives, other entities not protected by GDPR – General Data Protection Regulation).

Other information (optional)

Percentage certified and the name of the certification programs

Subcontracting is a common business practice in all supply chains, where a supplier outsources all or part of the production tasks to a different supplier known as a “subcontractor.” Subcontractors do not have a direct contractual relationship or orders with the original buyer, such as an FLA member company.

Fair Labor Principle 2, Benchmark 2.1 for the manufacturing Accreditation program does not permit unauthorized subcontracting of Tier One production processes, but this may not necessarily apply to Tiers Two – Four. Companies may not always directly monitor subcontractors’ facilities but are still responsible for working with their suppliers to ensure that their products and the production processes used protect workers’ rights.