‘“First mile thinking” applies to regulators just as much as companies. And as they challenge us to get it right, we need to hold them to that same standard,’ Steve Lamar, AAFA President and CEO
To paraphrase Game of Thrones, “regulations are coming.”
In some parts of the apparel and footwear industry, they’re already here.
Ned Stark’s oft-mentioned quote refers to challenging and wintry times ahead. But the new regulatory landscape – if it is properly constructed and we all act together to ensure that occurs – has the potential to both usher in a more predictable and pragmatic era for our industry, and to mitigate the challenging times we are already experiencing.
In a previous BBI blog, we discussed the importance of shared regulatory requirements, alongside clear, pragmatic and commonsense rules that are understood by the industry and supported with proper education and resources. Such shared frameworks have the potential not only to foster stronger collaborative relationships across the supply chain, but to support companies to make the right decisions at every stage of their product “journey”.
How so?
Our entire industry is on a journey to ensure more responsibly sourced and ethically produced items. While that journey often ends with the “last mile,” as brands and retailers are constantly perfecting ways to connect their products to their consumers after the point of sale, it always begins with the “first mile” – the point at which a company has to decide if a good should be made in the first place. Smart first mile thinking requires effective communication with supply chain partners, and that communication works best when it is grounded in a commonly-understood regulatory framework.
Critical to this are the development of regulations that adhere to what the American Apparel & Footwear Association (AAFA) refers to as the THREADS Protocol, a handy mnemonic listing good regulatory principles policy makers should use to guide their rule-making processes. Regulations work best when they are Transparently developed & enforced, Harmonized across jurisdictions and industries, reflect Realistic timelines, are Enforceable, are Adjustable, are Designed for success, and use Science-based concepts.
But what happens if these principles are missing from the regulatory recipe? Not only would such an outcome create chaos as supply chains try to contort to diverse and conflicting rules, but the systems enabled by that chaos become a new source of audits. And what do we always find alongside newly-created audits?
Audit fatigue.
The best of intentions on social responsibility, coupled with a lack of consistency, create this costly problem where serial auditors visit factories to measure the same things using slightly different measurements. In an effort to do the right thing, we collectively do the wrong thing by burdening our supply chain partners with endless inspections.
In an effort to do the right thing, we collectively do the wrong thing by burdening our supply chain partners with endless inspections.
The problems caused by and associated with audit fatigue have been well documented, both in this space, but also by many others, including the Worldwide Responsible Accredited Production (WRAP), AAFA’s Social Responsibility Partner. It doesn’t have to be this way. Research by Better Buying Institute outlines the multiple benefits to both buyer companies and suppliers, when companies accept recently completed audits instead of insisting on their own. These include significant financial savings, sometimes up to $20,000 a year, with suppliers typically investing those savings in better working conditions, environmentally-friendly technologies, and ensuring workers are paid a living wage.
Let’s look next at the case of the Uyghur Forced Labor Prevention Act (UFLPA), a vital law to make sure forced labor associated with the Xinjiang region of China does not infect supply chains. The law was enacted more than three years ago. Yet Customs and Border Protection (CBP), the US government agency responsible for enforcing it, has not been able to promulgate clear due diligence or reliable evidentiary standards during that time. Although it has crafted answers to frequently asked questions and publishes regular data on enforcement efforts, industry practitioners are still left to guess what steps they need to take to demonstrate compliance.
That guess work – which is based on a zero-tolerance requirement – ricochets further back in the supply chain as individual factories are compelled to use diverse solution providers with conflicting systems.
A common, consistent product safety standard with science-based test methods would provide a simple and effective way for collaboration.
A common, consistent product safety standard with science-based test methods would provide a simple and effective way for collaboration. Products either meet the rules, and can be sold, or don’t meet the rules, and can’t be sold. Nobody wastes time on guessing, compliance results are widely shareable, and resources are more wisely spent on education instead of duplicate audits. And because bad actors have a harder time hiding when requirements are clear, government agencies can allocate their scarce enforcement dollars better.
When we’ve talked about first mile thinking, we’ve been emphatic in arguing that this thinking applies to regulators as well. As they challenge us to get it right by designing, producing, marketing, and recirculating products before they are built, we need to hold them to that same standard. In fact, in the United States, and other countries, it is our constitutional responsibility to do so.
Regulators must stop this dance via the creation of a common rule book. Nothing will improve if regulators just turn up the music and create a frenzy by tossing more rule books at us with abandon. Or by not even using rule books at all.
Spying this through the Game of Thrones lens, we’d be stuck in permanent Winter, with no prospect of Spring.
This new regulatory area, as we’ve pointed out, can be an opportunity for great collaboration and partnership. But it can equally give rise to new audit fatigue pressures that must be prevented at all costs, especially if this new era is crafted to help us manage costs.