From Milan to Myanmar: The Dark Reality Haunting Fashion’s Global Supply Chains

There is a callous pattern of accountability gaps. RepRisk data from the past year shows that 3,958 supply chain risk incidents were linked to 6,596 companies globally, with private companies making up a disproportionate 87% of implicated firms compared to just 13% that were publicly listed. This disparity highlights how supply chain risks often lurk in the shadows of corporate structures, where oversight and accountability mechanisms may be weaker.

Geographically, the world's largest economies bear the heaviest burden of supply chain incidents. The United States and China top the list with over 2,000 recorded incidents each, followed by France with around 1,000 incidents, as well as Italy, Brazil, and Germany. However, when examining risk exposure from the perspective of where sourcing companies are headquartered rather than where incidents occur, a different picture emerges. US-based companies are linked to more than 5,000 ESG-related supply chain incidents over the past five years, followed by significant numbers tied to firms based in Germany, France, the UK, China, and Japan.

The retail sector emerges as the most exposed to supply chain-related risks across all industries. Since 2020, the number of incidents in retail has increased from 1,521 to 2,182, including a concerning 22% rise in the past year alone. This increase reflects not only the sector's vast scale but also its complex global sourcing networks that span multiple jurisdictions and regulatory frameworks. The financial services sector follows as the second most risk-prone, with incidents rising 32%.

Within fashion specifically, supply chain risk exposure varies significantly by geography and issue type. European companies are more than twice as likely to be linked to labour-related incidents in Asia than within their own region, reflecting Asia's central role in the global supply chain ecosystem and its heightened exposure to business conduct risks. This disparity underscores how globalised sourcing strategies can create pockets of concentrated risk in specific regions.

Labour violations dominate fashion supply chain risks across all brand tiers. The RepRisk report shows that poor working conditions, human rights abuses, and forced labour together account for approximately 35% of all recorded incidents across fast, premium, and luxury fashion brands. These risks are neither abstract nor confined to distant locations, as evidenced by recent legal actions in Europe that underscore their immediate relevance.

The real-world consequences of supply chain failures became starkly apparent in Italy's fashion capital, Milan, where courts placed four fashion companies under judicial administration after uncovering serious labour abuses in their supply chains. In one particularly striking case, prosecutors alleged that a luxury brand was able to sell handbags at up to 50 times the price it paid a supplier who reportedly employed staff working illegal 15-hour shifts. This incident, which drew international media attention, illustrates how social risks in supply chains can quickly escalate into significant legal and reputational threats for brands.

Right now, a global “wave” of due diligence and transparency legislation is reshaping the regulatory landscape for fashion companies. The European Union is leading this regulatory charge with several interconnected directives that seeks to fundamentally alter how fashion brands approach supply chain management. The Corporate Sustainability Due Diligence Directive (CSDDD), although significantly narrowed from its original scope, is expected to have substantial impact on large fashion companies operating within or selling to the EU.

The Corporate Sustainability Reporting Directive (CSRD) is another regulatory development, requiring detailed assessment of environmental and social risks across supply chains, including labour practices and material sourcing. By mandating standardised, auditable disclosures, the CSRD aims to drive greater accountability and transparency, compelling companies to actively manage sustainability risks beyond mere reporting. This approach means fashion companies must develop robust systems for identifying, assessing, and addressing risks throughout their supply chains.

The EU Forced Labour Regulations, set to take effect in 2027, will directly target forced labour by banning products linked to child labour, requiring companies to identify and eliminate any form of child labour from their supply chains. The regulations don't explicitly mandate due diligence, but the idea is to force companies to implement comprehensive monitoring and verification systems.

Beyond EU-wide legislation, individual countries are implementing their own mandatory due diligence requirements. Germany's Supply Chain Due Diligence Act (LkSG) and France's Duty of Vigilance Law impose strict obligations to identify, assess, and mitigate human rights and environmental risks throughout the supply chain. The Netherlands' proposed Responsible and Sustainable International Business Conduct Act would enhance corporate accountability, particularly around child labour and broader sustainability issues.

The regulatory momentum extends globally, with Australia's Modern Slavery Act reforms introducing mandatory due diligence requirements following a 2023 review. Norway's Transparency Act requires companies, including fashion brands selling in Norway, to conduct human rights due diligence through regular assessment, prevention, and reporting. In the United States, the proposed Slave-Free Business Certification Act could impose significant obligations on large companies with global supply chains, requiring annual audits to detect and eliminate forced labour.

The United Kingdom's Modern Slavery Act continues to evolve, with the 2025 guidance update emphasising proactive measures to address supply chain risks. Although due diligence isn't yet a legal obligation, large companies are increasingly expected to conduct comprehensive risk assessments and integrate anti-slavery practices into their core operations.

Environmental regulations add another layer of complexity. The EU Deforestation Regulation (EUDR) directly targets the fashion industry by focusing on leather and rubber, both widely used in apparel, footwear, and accessories. Companies must demonstrate that their products aren't linked to deforestation through robust due diligence procedures, requiring detailed traceability systems and supplier verification processes.

This regulatory convergence represents a fundamental shift from voluntary corporate responsibility to mandatory compliance. Fashion companies can no longer rely on self-reporting or general commitments; they must implement comprehensive systems for identifying, assessing, and addressing supply chain risks whilst providing detailed, auditable evidence of their efforts.

The regulatory environment demands that fashion moves beyond mere compliance towards building genuinely resilient and sustainable supply chains. This requires recognising that effective risk management can serve as a competitive advantage rather than simply a legal obligation. Companies that proactively address supply chain risks position themselves not only to meet regulatory requirements but to build stronger relationships with suppliers, investors, and consumers.

Strategic partnerships with suppliers are a shift from traditional transactional relationships towards collaborative approaches that embed sustainability from the ground up. Long-term partnerships with fewer, more strategic suppliers enable fashion brands to consolidate costs, improve quality control, and build sustainability into their operations. These relationships create opportunities for shared investments and incentive structures that support sustainable practices throughout the supply chain.

Research by McKinsey says smart investments can deliver both environmental and financial returns. More than 70% of the fashion industry's emissions come from upstream supply chain activities, particularly textile production, meaning that sourcing decisions can have outsized impacts. Choosing to produce fabrics in Pakistan rather than China can cut related emissions in half due to cleaner energy sources. McKinsey's analysis shows that up to 50% of tier-two emissions can be addressed cost-neutrally, particularly through collaboration with suppliers on energy efficiency improvements.

The 2024 Future Supplier Initiative exemplifies how collaborative approaches can drive meaningful change. This CEO-led effort provides brand-backed financing to help factories afford green upgrades, including energy-efficient equipment and renewable energy systems. By sharing financial risks with suppliers and focusing on high-impact projects, the initiative encourages wider participation and supports both brands and factories in meeting climate goals whilst maintaining commercial viability.

Industry initiatives like the Global Fashion Agenda (GFA) demonstrate growing collective commitment to transforming the sector into one that is "circular, equitable, and net positive." These collaborative efforts reflect recognition that supply chain challenges require industry-wide solutions rather than individual company responses.

Technology and data play crucial roles in enabling effective supply chain management. Real-time data can support proactive risk identification and management. By providing business conduct risk assessments that can be integrated into supply chain management systems, including coverage of private companies and infrastructure projects, such tools enable due diligence during supplier onboarding and ongoing monitoring throughout the relationship.

The integration of sustainability into core business decision-making represents a fundamental shift in how fashion companies approach supply chain management. Rather than treating sustainability as an add-on or compliance requirement, leading companies are embedding environmental and social considerations into their strategic planning, supplier selection, and operational processes.

Brands that invest in comprehensive supplier risk assessments and screening processes position themselves to comply with evolving regulations whilst building competitive advantages. These investments enable better supplier relationships, improved quality control, reduced operational risks, and enhanced brand reputation. As regulatory requirements continue to evolve and consumer expectations increase, companies with robust supply chain management systems will be better positioned to adapt and thrive.

Fashion's supply chain challenges are not abstract policy discussions but immediate business realities that affect brand value, investor confidence, and consumer trust. The industry's high visibility means that supply chain failures quickly become public relations disasters, as demonstrated by the Italian court cases that thrust labour abuse issues into international headlines. These incidents illustrate how operational problems in distant factories can rapidly become existential threats to brand reputation and financial performance.

The convergence of regulatory pressure, consumer awareness, and investor scrutiny creates an environment where supply chain transparency is no longer optional but essential for business survival. Companies that fail to implement robust risk management systems face not only regulatory penalties but also reputational damage that can take years to repair. Conversely, brands that proactively address supply chain risks position themselves to lead in an increasingly sustainability-focused marketplace, building stakeholder trust and competitive advantages that extend far beyond mere compliance.

The path forward requires companies to embrace transparency not as a burden but as an opportunity to demonstrate leadership and build stronger, more resilient business models. By leveraging real-time data, engaging strategically with suppliers, and embedding sustainability into decision-making processes, fashion companies can build supply chains that are not only compliant but genuinely aligned with the demands of a rapidly changing world.