Sam Setters Pills: Audits and reality aren’t always the same thing

On the last day of 2024 I read a very interesting article on Reuters’ website which I want to share with you hoping it is still available https://www.reuters.com/business/retail-consumer/inside-luxury-goods-broken-audit-system-2024-12-31/
The article focusses on two important issues, being the lack of transparency of part of the supply chain of the top brands, and the superficiality of the auditing system by the various auditing entities.

We as an industry and the consumers need to know what is happening under our eyes. I shared the Reuters article with a couple of friends, who told me that the article describes known facts, but little is done about the described issues. The Italian leather magazine La Conceria published an article related to the Reuters report. However, in my view we have to distinguish between the leather supply chain and the manufacturing supply chain of the brands. The brands have assaulted the leather suppliers over the years with demands for the auditing of their tanneries and related supply chain and as a result more than a thousand tanneries worldwide have been “successfully” audited at a great cost with me expressing herewith my doubts about successful audits in some countries. 

The Reuters article does not report on the leather supply chain of the brands, but expresses its concerns related to the manufacturing supply chain of the brands, something very much underlined by various proceedings in Italian investigations of the Carabinieri and Guardia di Finanza, who have found in several manufacturing units even forced-labour conditions with illegal workers working up to 12 hours for peanuts and in questionable safety and sanitary conditions.

It seems that the first tier of leather goods suppliers of the brands are working under legal conditions, but here comes the lack of transparency, many of these first tier suppliers are just a cover for their own suppliers who are engaging in illegal conditions. The brands are known to pull the blood from under the nails of their suppliers when negotiating prices, forcing the suppliers to outsource the products that they engaged to manufacture for the brands as with legally required minimum wages, maximum work times, particularly in Europe, they are simply not able to make even a minimum of profit.

Hence they outsource to third parties, which are not officially known, nor checked by the brands nor audited. All looks great on the surface but when you dig deeper there is no transparency. One must admit that the tannery audits, initiated by LWG, have definitely contributed to the ESG improvement of the tanneries, even if at a great cost. But in terms of objectivity there is a lot to discuss as the to-be-audited companies are advised well ahead when an audit will take place, allowing the subjects to adjust to what is expected of them. Once an audit has been done and the auditors leave, the company can go back to its usual routine. There is definitely a need to review this system and make it really transparent throughout the various layers, not only in words, but in reality!