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MYTHS AND TRUTHS:
AMERICA’S RETAILERS AND SWEATSHOPS

There are a number of myths about the US retail industry and sweatshops. The truth is, American retails are doing what they can to stop sweatshops.

Myth: The retail industry purposefully buys its products from sweatshops to increase profits.

Truth: In business, especially one like ours where you sell directly to the consumer, reputation is everything. No retailer would jeopardize his or her company’s hard-earned reputation by doing business with an illegal or unethical sweatshop operation and turning a blind eye to the consequences.
Sweatshop products are not necessarily good buys. While the price might be low, the quality probably is too. Saving a few pennies on an item does you no good if you have to reject half the shipment.
Dealing with sweatshops is risky. America’s retailers depend upon a predictable flow of merchandise arriving just-in-time. Sweatshops put this predictable supply at risk, because there is always the chance that production will be shut down, either by local government officials finding labor violations or by workers protesting their working conditions. In fact, in the United States the Department of Labor can prevent retailers from receiving goods made in factories violating the law. Such a disruption in supply is a risk no retailer wants to take.

The truth is, there has not been a single instance where a US retailer was shown to be doing business knowingly with suppliers who use sweatshops.

Myth: Retailers can enforce labor laws in the countries from which they source.

Truth: Only governments can enforce the labor laws. Retailers cannot impose labor laws on countries, nor can they guarantee that the laws will be enforced.
Retailers are working with governments around the world to assist them in enforcing the local labor laws. The retailers’ efforts include training programs for workers and managers that educate them about the laws. In the United States especially, the Department of Labor often contacts retailers when they find a violation by a supplier to ask for assistance in persuading the supplier to pay back wages promptly. Finally, retailers will often notify the appropriate enforcement agencies when they find evidence of labor law violations.
In the United States, enforcing U.S. labor laws is the job of the U.S. Department of Labor. U.S. retailers have consistently encouraged the Department of Labor to enforce the laws strictly. Retailers have consistently cooperated with the Department in its enforcement activities.

The truth is, efforts by the private sector cannot be a substitute for legal enforcement of labor laws, even though the private sector can try to help.

Myth: Retailers encourage, or at least tolerate, violation of labor laws by their suppliers.

Truth: The retail industry has taken a strong stand against violation of labor laws by our suppliers. In 1995, the retail industry’s largest and most influential organization, the National Retail Federation (NRF) developed a Statement of Principles on Supplier Legal Compliance that specifies the rules for suppliers doing business with retailers. The NRF Statement of Principles unequivocally states that suppliers must comply with local labor laws, and pledges cooperation with local officials to assist enforcement. Over 250 companies, including most of America’s largest retailers, have signed the Statement.
Many retailers also have strong codes of conduct that apply to their suppliers. These codes address such matters as wages, hours, and treatment of workers. Under the NRF’s Statement of Principles, compliance with these provisions must be included in retailers’ contracts with their suppliers, so that these labor standards become legally-binding contractual obligations of the suppliers.
Many retailers have implemented elaborate systems for ensuring compliance with labor standards by their suppliers. There is no legal requirement to undertake this expensive and difficult task. Retailers do it because it is in their economic interest, and because it is the right thing to do.
The truth is, the U.S. retail industry has taken, and continues to take, energetic steps to identify and end violations of labor standards by suppliers.

Myth: Retailers cannot be trusted to enforce their own labor standards; even so-called "external" monitors are paid by the company, and do its bidding.

Truth: Retailers have a vested interest in enforcing labor standards. Labor violations can disrupt their supply of merchandise, bring them adverse publicity, and end up costing retailers a lot of money. Although labor standards are expensive to enforce, they end up saving retailers money.
External monitors are trained professionals with high standards of professional responsibility. Retailers often use external monitors, such as the major accounting firms, to check supplier compliance with labor standards. These monitors have enormous expertise in this area. As importantly, they are professionals who can incur legal liability for failing to report their findings accurately.

The truth is, retailers have the greatest interest in ensuring that their suppliers comply with both the local laws and their own codes of conduct.

Myth: By moving their sourcing around the world, retailers exploit labor and force down prices.

Truth: Retailers must provide what their customers want – the widest variety of goods at the best value possible. To do so in a highly competitive environment, they must seek the best sources of supply for the products they sell. Sometimes a U.S. producer may be the best source for a particular item, while in other instances it may be a foreign producer. The United States simply does not produce all the products, especially the apparel and footwear, that American consumers demand. Moreover, because of U.S. trade laws limiting apparel imports, retailers may be forced to source apparel from a number of different countries.
American consumers demand, and deserve, the best value in their products. To meet this demand, retailers must travel the world finding suppliers who can provide the quality and value customers require.
Far from exploiting labor, retailers have created millions of jobs worldwide. When retailers buy from suppliers in the United States or overseas, they create jobs. Jobs in the apparel industry in particular are often the first step up from poverty for people in many developing countries, especially women. Moreover, economists have found that companies producing for export usually pay higher wages than those producing for domestic consumption – and that this can raise wage levels throughout the economy.

The truth is, by sourcing throughout the world, U.S. retailers provide American consumers with the greatest selection and value in the world, while creating jobs, and the first step towards economic independence, for millions worldwide.

Myth: Retailers can direct and control the actions of their suppliers, including observance of labor laws.

Truth: Retailers do not own their suppliers. Retailers source the merchandise they sell from suppliers that are separate and independent companies. They can encourage their suppliers to observe labor standards; they can even contractually require them to do so. In the end, though, the only leverage retailers have over their suppliers is the same as that of any other customer: they can only withdraw their business.
It is not possible for retailers to oversee and direct all of their suppliers’ activities. Even the smaller retailers purchase from hundreds or even thousands of suppliers. Besides, retailers buy many products through distributors or other agents, after the products have been manufactured.
Although retailers cannot control their suppliers, they do what is possible to ensure that suppliers obey labor laws. Retailers who subscribe to the NRF’s Statement of Principles have pledged to include compliance with labor standards as a term in their contracts with suppliers. Retailers also monitor compliance with labor standards through their own enforcement systems. Finally, retailers will stop doing business with suppliers who violate labor laws and standards.

The truth is, retailers cannot control the actions of their suppliers, but they have taken a variety of steps to encourage suppliers to comply with labor standards, and to stop doing business with them if they are unable or unwilling to do so.