As an asset manager focused exclusively on Sustainability Investing, RobecoSAM systematically integrates long-term environmental, social and governanceconsiderations into traditional financial analysis, enabling us to fully understand a company’s ability to create value. Firms that embrace sustainability are, in our view, more likely to be successful over the long term than those that do not. The objective of our engagement activities is to increase shareholder value while at the same time promote responsible and sustainable conduct and good corporate governance.
Consumers increasingly view sustainability as one of the determining factors for deciding where they purchase their clothing. They rely on information shared by consumers and other stakeholders such as NGOs to shape their opinion of a clothing brand. Incidents such as the Rana Plaza disaster in Bangladesh in 2013 endanger a company’s reputation and brand loyalty, leading to decreased sales, directly resulting in a negative impact on shareholder value. Therefore, reducing health and safety risks in the textile supply chain contributes to a better risk-return profile for investments in this sector.
We began our engagement theme ‘Health & Safety (H&S) in the Clothing sector’ in 2013 with a research study conducted by Maplecroft, a leading risk analytics company. The report helped us understand the clothing industry landscape and H&S risks associated with the supply chain of large clothing retailers. Many countries currently experiencing rapid growth in clothing exports have inadequate H&S regulations and weak enforcement mechanisms. Policies and management systems that go beyond legal compliance are essential to effectively mitigating health and safety risks. This understanding served as the foundation for our dialogue with the eight companies we selected for our engagement on this topic.
In the following pages of our report, we offer an introduction to the clothing sector, provide an overview of H&S risks within the clothing sector and highlight the outcome of our engagement on health and safety risks with the eight selected companies.
We have split this report into three sections:
- Section 1: we discuss the clothing sector, its growth, the challenges that lie ahead, and the risks associated within the clothing value chain for investors and companies.
- Section 2: we discuss the engagement objectives against which we evaluated each company, how we helped them improve their practices in these areas, and the overall progress that the companies made over the three years of our engagement process.
- Section 3: we profile each company, providing detailed analysis of its policies, risk management processes, collaborations and oversight of its subcontractors. We also highlight each company’s progress over the three years and conclude by discussing how our findings impact our investment case for each company.
We hope that the report provides readers with an overview of the H&S and other social risks in the clothing supply chain, as well as the initiatives clothing companies have introduced to manage these risks. As an investor, we applaud the companies for their ongoing efforts to address social risks in order to free fashion from any form of exploitation.