Responsible purchasing practices are designed to ensure commercial compliance between buyers and their suppliers. According to STTI, commercial compliance is defined as purchasing practices that do not cause obvious and avoidable harm to manufacturers and do not prevent manufacturers from achieving their sustainable business goals. Responsible purchasing means negotiations are conducted and contracts are drafted in such a way that suppliers are not induced by financial pressures to violate workers’ rights, such as underpayment, excessive overtime or unauthorized subcontracting, in order to fulfil buyers’ demands. This includes sufficient lead times, avoiding short-term changes to the agreed product quantities and ensuring fair payment terms.

There is currently only one law, the EU Directive 2019/633 on unfair trading practices in business-to business relationships in the agricultural and food supply chain, that regulates purchasing practices and explicitly prohibits a number of unfair trading practices (e.g. unilateral contract changes by the buyer; risk of loss and deterioration transferred to the supplier).

Recent legislation on due diligence, which is particularly relevant to the textile and fashion industry, has made Human Rights and Environmental Due Diligence (HREDD) mandatory, which ultimately seeks to change the underlying behavior. The most recent addition, the EU Corporate Sustainability Due Diligence Directive (CSDDD), does not include responsible purchasing practices in the legal text, but makes ample reference in the recitals to using them as an effective tool to address negative impacts on human rights and the environment. Obliged companies are expected to “adapt business plans, overall strategies and operations, including purchasing practices, and develop and use purchase policies that contribute to living wages and incomes for their suppliers, and that do not encourage potential adverse impacts on human rights or the environment” (recital 34).

The German Supply Chain Act also does not regulate purchasing practices, but mandates companies to conduct a risk analysis and adopt appropriate preventive measures if human rights and environmental risks have been identified. The Act states that companies need to implement appropriate procurement strategies and purchasing practices to prevent or minimize identified risks in their own operations or those of their suppliers (Section 6(3)2.), for instance, through training or contractual assurances from the supplier. However, preventive measures must be designed to be appropriate and effective.

Sources:

Directive – 2011/7 – EN – EUR-Lex (europa.eu) (Late Payment Directive)

Directive – 2022/2464 – EN – CSRD Directive – EUR-Lex (europa.eu) (CSRD)

EU Corporate Sustainability Due Diligence Directive (CSDDD)

Directive – 2019/633 – EN – EUR-Lex (europa.eu) (Directive on unfair trading practices in the agricultural and food supply chains)

Federal Office for Economic Affairs and Export Control (BAFA) 2023: Guidance. Collaboration in the supply chain between obliged enterprises and their suppliers. URL: https://www.bafa.de/SharedDocs/Downloads/EN/Supply_Chain_Act/guidance_cooperation_supply_chain.pdf?__blob=publicationFile&v=4 (last access: 21 May 2024)

The MSI Working Group on Responsible Purchasing Practices developed the Common Framework for Responsible Purchasing Practices in order to support companies in the implementation of RPP. The MSI Working Group consists of the Ethical Trading Initiative (ETI), Ethical Trade Norway, Fair Wear, the German Partnership for Sustainable Textiles (PST) and the Dutch Agreement for Sustainable Garments (AGT/NGA) and has consulted with ACT (Action Collaboration Transformation), Better Work (BW), Better Buying Institute, STTI and amfori. The framework defines five principles that buyers should prioritize in order to implement RPPs, namely integrating RPP in a company’s strategy and reporting practices, developing equitable partnerships with suppliers, collaboratively planning production, setting and upholding fair payment terms and ensuring a sustainable costing strategy.

The Better Buying Institute has established Five Principles of Responsible Purchasing that provide guidance for companies to improve their purchasing practices. The principles include visibility (providing suppliers with information about their direct business with them), stability (giving suppliers consistent and predictable business throughout the year), time (giving suppliers sufficient time to complete all relevant processes in compliance with laws and standards before and during production), financials (making sure that financial practices are fair and transparently communicated) and shared responsibility (taking responsibility in addressing potential negative social and environmental impacts in the supply chain).

The Ethical Trading Initiative’s (ETI) Guide to buying responsibly provides practical advice for organizations to purchase responsibly. Practitioners responsible for purchasing will find information on the relevance of sourcing strategies and human rights policies for responsible purchasing practices. Buyers at all levels learn how change is initiated, how roles and responsibilities can be defined, and what impact current purchasing practices have on business and working conditions. That entails action steps for all buyers, both individuals and management teams responsible for purchasing and procurement. It provides guidance on the self-assessment of e.g. the organization and behavior that need to change in order to improve RPPs or understanding current purchasing practices. The guide contains also a modular toolkit for the practical implementation of purchasing practices.

ACT, which is an agreement between global brands, retailers and the trade union IndustriALL Global Union to improve working conditions in the garment, textile and footwear industry, has set up five Global Purchasing Practices Commitments that ACT brands take to improve purchasing practices: 1) purchasing prices include wages as itemized costs; 2) fair terms of payments; 3) better planning and forecasting; 4) training on responsible sourcing and buying; 5) practicing responsible exit strategies.

The Cascale (formerly Sustainable Apparel Coalition) has added human rights, labor practices, and responsible purchasing practices as a new social impact area. The questions on responsible purchasing practices are now more aligned with the due diligence steps and the Common Framework for Responsible Purchasing Practices, reflecting the STTI’s mission to improve commercial compliance between buyers and suppliers.   

The Fair Wear’s Brand Performance Check Guide follows a shared responsibility approach to improve working conditions in the textile and garment supply chain. It recognizes that management decisions and practices have far-reaching impact on working conditions. The guide contains five indicators that are critical for establishing responsible purchasing practices: support of Fair Wear’s Code of Labour Practices in written contracts, integration of responsible purchasing practices into decision-making processes, effective collaboration between buyers and suppliers in production planning, connection between buying prices/policy and wage levels, compliance of sourcing intermediaries with the Code of Labour Practices.

The Fair Labor Association (FLA) highlights the responsibilities companies have towards their workers and provides a clear framework of ethical practices in sourcing and production. One of the ten principles that companies have to implement focuses on responsible purchasing practices, supported by benchmarks (e.g. written policies and procedures for production planning, responsible planning and sales practices) and key performance indicators (e.g. document, review, evidence gathering, frequency checks, measurement and analysis).

Sources:

ACT-purchasing-practices-report-2021.pdf (actonlivingwages.com)

CIPS Official Knowledge Partners | CIPS

Common Framework for Responsible Purchasing Practices

Ethical Trading Initiative, Danish Ethical Trading Initiative, Ethical Trading Initiative Norway: Guide to buying responsibly.

Fair Labor Association 2022: Manufacturing Principles – Fair Labor Association

Fair Wear Performance Check Guide

In the Better Regulation Toolbox, the European Commission provides standards for quality in the lawmaking process and proposes different ways to participate. In the inception period of a new law, the European Commission carries out an impact assessment that entails analyses of economic, social and environmental aspects that will be affected by the law. Representatives from industry, NGOs, national authorities and technical experts can get involved in this evaluation via the Commission’s online-portal Have your say which allows individuals, businesses and organizations to contribute to lawmaking. On the platform SINAPSE e-communities experts are invited to exchange knowledge on EU level. The Commission may also seek advice from experts through targeted consultations, workshops, small-business panels or online discussion forums. We encourage manufacturers to share their views on specific regulations, which we then consolidate and submit on behalf of a larger group of manufacturers.

Sources:

Planning and proposing law – European Commission (europa.eu)

Policy, law – decision-making process | European Union (europa.eu)

As mentioned in Section 2, companies that are obliged to comply with the due diligence obligations in CSDDD or the German Supply Chain Act must take responsibility for their supply chain and ensure that recognized human rights and environmental standards are upheld by themselves and their contracted supply chain partners. Both laws require obliged companies to carry out a risk analysis to ensure that they fulfil their responsibilities in the supply chain. This means that they must identify, prioritise and address human rights and environmental risks along the supply chain. It is not permissible for obliged companies to shift the risk onto suppliers and replace the risk analysis with written assurances or self-declarations from their suppliers. Instead, obliged companies should assess carefully what measures are required and cooperate with suppliers where possible or provide support to implement appropriate preventive measures (e.g. trainings, procurement strategies, purchasing practices).

A number of organizations has already developed different types of evaluations that aim to measure the impact of responsible purchasing practices.

The Better Buying Institute has developed the Better Buying Purchasing Practices Index (BBPI), which uses a scoring system to help suppliers anonymously rate the purchasing practices of different companies and allows buyers to identify which practices they need to improve. The assessment covers seven categories, including payment terms and cost negotiation.

With the help of the Better Buying Partnership Index, buyers can monitor the quality of their partnership with the suppliers. The index entails mainly subjective measures but also open questions which allows for in depth-feedback. Buyer companies can subscribe with Better Buying and participate in its annual supplier surveys, to measure year-over-year progress towards meeting the 5 Principles.

The ACT Purchasing Practices Surveys by Brands and Suppliers monitors the progress of ACT members against the ACT Global Purchasing Practices Commitments (see 3). Buyers and suppliers are asked 71 questions across 16 different sections of purchasing practices (e.g. forecasting and capacity planning, changes to orders, sales and transparency, incentives and compliance scoring).

Source:

ACT Purchasing Practices Surveys by Brands and Suppliers

Better Buying Purchasing Practices Index

Better Buying Partnership Index

Since 2007, the EU has been enforcing the REACH regulation, which stands for Registration, Evaluation and Authorization and Restriction of Chemicals and provides a comprehensive legal framework for the manufacture and import of chemicals to protect health and environment. The regulation applies to all companies operating within the EU, including suppliers, manufacturers and importers. REACH helps companies to assess the substances used in their products and to take appropriate risk management measures. To improve safety, REACH requires, among other things, that harmful chemicals are substituted and safety protocols are prepared.

The Multi-Stakeholder Initiative Working Group on Responsible Purchasing Practices established a Learning and Implementation Community (LIC) consisting of garment brands/retailers who want to implement responsible purchasing practices and create case studies with selected strategic suppliers. The community serves as a peer-learning group to share best practices and provide guidance to each other.

The Responsible Contracting Project (RCP) has developed a set of model contract clauses that suppliers of the textile and garment industry can bring into the contractual negotiations with their buyers to address human rights violations based on unfair contract terms. Following a shared-responsibility approach, the model contract clauses are designed to be built into contracts so that buyers and suppliers together conduct risk-based human rights and environmental due diligence (HREDD) to effectively prevent and address negative human rights and environmental impacts in global supply chains. Currently, the RCP is developing the European Model Clauses (EMCs), a series of model contract clauses that help ensure HREDD in compliance with European due diligence legislation (e.g. German Supply Chain Act, CSDDD). The EMCs are expected to be launched in summer 2024.

Source:

REACH Regulation – European Commission (europa.eu)

The Common Framework for Responsible Purchasing Practices: The Learning and Implementation Community

Responsible Contracting Project