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How the Sustainable Terms of Trade Initiative works toward fairer purchasing practices

By Simone Preuss


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Business |Interview

Handshake. Credits: Cytonn Photography / Pexels

When the going gets tough, it is often the manufacturing end of the supply chain that bears the brunt: orders get cancelled, payments delayed or delivery times ever shorter. In September 2021, the Sustainable Terms of Trade Initiative (STTI) was formed, a global, manufacturer-driven initiative focused on creating fairer purchasing practices in the textile and garment industry. 

More than two years later, many milestones have been reached and hurdles overcome. FashionUnited spoke with IAF’s secretary general Matthijs Crietee about some of the initiative’s achievements, the role of due diligence, the way forward and more.

STTI is  led by the STAR Network (Sustainable Textile of the Asian Region), the Better Buying Institute and the International Apparel Federation (IAF) and driven by 13 apparel manufacturing associations from 10 countries, among them BGMEA and BKMEA (Bangladesh), TAFTAC (Cambodia), CNTAC (China), AEPC (India), API (Indonesia), Amith (Marocco), PTA, TMA and PTEA (Pakistan) and TCMA (Turkey).

What are some of STTI’s major achievements?

According to Criettee, the publication of a white paper in September 2021 was the first key achievement: “The white paper answered the question: What purchasing practices do manufacturers need to see their clients apply and what purchasing practices do they not wish to see again?” 

“It was unique in letting the manufacturers themselves identify the priorities. It introduced the concept of ‘commercial compliance’ – a common understanding of purchasing practices that do not cause obvious and avoidable harm to manufacturers, which do not block the manufacturers’ ability to meet objectives for sustainable business – with the terminology deliberately chosen to communicate the importance of reciprocity in supply chain relations,” explains Criettee.

A major part of the white paper was also included in the “Common Framework for Responsible Purchasing Practices”, a framework created by a group of multi-stakeholder initiatives, including the Fair Wear Foundation, the Ethical Trade Initiative (ETI) and the German Partnership for Sustainable Textiles. This was a second major achievement, which included an Memorandum of Understanding being drawn up between STTI and the Fair Wear Foundation and STTI and ETI. 

The joint STTI and Common Framework also provided major input in the Sustainable Apparel Coalition’s Brand Retail Module (BRM) and served as a basis for the Supplier Model Contract Clauses of the Responsible Contracting Project (RCP). Regular appearances at numerous international conferences, including the annual OECD’s Forum on Due Diligence in the garment and footwear sector, should also be mentioned. 

A collaboration with the Better Buying system made sure to incorporate questions pertaining to “commercial compliance” in supplier surveys. STTI also assists manufacturers in engaging with the Learning and Implementation Community, together with the Common Framework, to collaborate with brands on improving purchasing practices. Last but not least, STTI served as a catalyst and example for more involvement of suppliers in the design and execution of global sustainability initiatives. 

IAF and STTI emphasise that purchasing practices are fundamental to effective due diligence. How is STTI supporting European corporate sustainability due diligence legislation?

“Purchasing practices are clearly included in the OECD’s “Due diligence guidance for the apparel and footwear sector” and STTI emphasises this point in its contacts with legislators and with the media,” says Criettee. 

“STTI also communicates with the participating manufacturers and their associations that, when correctly implemented, the European corporate sustainability due diligence legislation is very good for them, particularly because of the inclusion of the need for improved purchasing practices. The more manufacturers realise that this legislation is potentially a big improvement on the current audit- and risk-shifting-based sustainability approach, the more they will be able to pressure and support their clients into a correct adherence to the new legislation. So STTI will be focussing on knowledge transfer to its own constituents to support correct implementation of the legislation that ultimately supports an improvement of purchasing practices,” adds Criettee. 

STTI’s objective is to deliver a major contribution towards purchasing practices that allow textile and garment manufacturers to run a socially, economically and environmentally sustainable operation. Credits: STTI

Whenever a crisis like the recent Covid pandemic, inflation and natural calamities like earthquakes hit - buyers try to lower prices or back out of orders - how can STTI help in these cases?

“We all operate realising that we are dealing with systemic problems. The way the fashion industry is organised as dictated by the predominant business models, there is continuous and harsh price pressure. In this context, changes to purchasing practices will not suddenly materialise; it requires a combination of a change of business models and legislative pressure. STTI works on both,” explains Criettee. 

“Currently and in the current years, we will be working with partners to develop an institutional infrastructure that will allow legislators and others to assess buyer’s purchasing practices and their efforts (their due diligence) to make improvements to their purchasing practices. We will work with our partners trying to influence the implementation of European due diligence legislation in such a way that it truly leads to improved purchasing practices,” he adds. 

STTI partner IAF will also publish a paper together with the International Trade Centre (ITC) in the first quarter of 2024 on alternative sourcing models based on “Shared Risk”.  "This will be able to create more revenue for all supply chain partners so that profit margins per product and a better economic rationale is created for risks and rewards to be more evenly and fairly distributed across the supply chain."

The minimum wage in Bangladesh remains one of the lowest worldwide, even after the recent increase by the wage board. What can an organisation like STTI do to support fair wages and living wages?

Criettee points out that STTI is about purchasing practices and about collaboration between manufacturers and their associations worldwide. “It is not set up to directly address the issue of wages. However, undeniably, wages are connected to purchasing practices. It is the same with the relation between environmental sustainability and purchasing practices. As we say here: “you can’t act green when you are in the red”. So, in the vision of STTI, the improvement of purchasing practices will create the necessary room for the improvement of social and environmental conditions in the apparel and textile industry,” states Criettee.

What are some of the future events or milestones that are currently in the pipeline?

As some of the activities carried out directly by STTI or by some of its partners in collaboration with STTI, Criettee mentions the co-publication of a study on “full supply chain profitability”, pilots on the implementation of the RCP’s Supplier Contract Clauses and training for manufacturers, buyers and combinations of both on them manufacturer training on corporate sustainability due diligence. 

Other important areas are the continuing work on the building of grievance mechanisms on purchasing practices for manufacturers and the ongoing participation of manufacturers in the Learning and Implementation Community as well as work on the creation of an assessment framework for purchasing practices. 

A round table session on purchasing practices and (due diligence) legislation will be held at the OECD’s Forum on due diligence in the garment and footwear sector in Paris at the OECD conference centre on 23rd February.  

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This interview was conducted in written format.

Sustainable Terms of Trade Initiative