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OM in the News: Levi Strauss’s Push for More Ethical Factories

November 7, 2014

leviIn an attempt to bolster its ethical credentials and meet the demands of increasingly fussy millennial consumers, Levi Strauss is offering a new financial incentive to suppliers as far away as Bangladesh and China to meet environmental, labor and safety standards. The jeans maker is providing lower-cost working capital to those of its 550 suppliers who do best on those measures. The project sprang out of the 2013 Rana Plaza factory collapse in Bangladesh, which left more than 1,100 dead and prompted new scrutiny of international fashion brands’ supply chains.

“The move reflects two important trends in globalization,” writes The Financial Times (Nov. 4, 2014). As consumers fret about the conditions under which their clothes are made, fashion brands are facing greater pressure to ensure their suppliers in places like Bangladesh, Cambodia and Vietnam abide by higher standards. In some cases that issue, together with rising wages and costs in China and other production centers, is leading to brands “reshoring” production closer to home. But the combination of those pressures and the way global supply chains are becoming ever more intricate is also leading multinational companies to build tighter bonds with suppliers and to use new tools to manage them.

Levi Strauss’s VP of sustainability said the company now relies on “fewer, more capable” vendors and that its relationships go back an average of 10 years with top contractors. The firm claims to require its suppliers to abide by some of the strictest labor standards in the garment industry and employs full-time inspectors to visit factories around the world. It also is rare among fashion brands in publishing a full list of the factories and suppliers it uses around the world. It has, however, had dark chapters in its past. In the early 1990s Levi Strauss was accused of using Chinese prison labor to make clothes. It withdrew production from China on human rights grounds for five years, becoming an example of the potential pitfalls of doing business in China.

Classroom discussion questions:

1. Why is Levi Strauss making this move?

2. What are the advantages of having fewer vendors?

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