Mexico's Apparel Industry Remains Opaque; Brands Need to Implement Rights-Based Approach

A new report—Hidden cost: Human Rights Policy and Practice in Mexico’s Apparel Supply Chains—examines how the North American country’s leading apparel companies address human rights risks in their supply chains and identifies key labour risks in the industry.

Staff Writer

25 September 2024

4 minutes

Long Story, Cut Short

The apparel industry is crucial to the Mexican economy, contributing 6,37 trillion Mexican pesos (approximately US$316 billion) in 2023, or about 25% of that year’s national GDP.
Women make up about 60% of the workforce and face systemic discrimination and gender-based violence, while Indigenous Peoples face cultural appropriation and worse labour conditions.
Micro enterprises (those employing up to 10 people), make up over 95% of the total businesses in the apparel industry, yet contribute only 5.7% of production.

The complex and fragmented apparel industry in Mexico is plagued by poor working conditions, including precarious wages, long hours, unsanitary conditions, and informality, with poor traceability and transparency in the production supply chain. Reports of abuse underscore the need for apparel brands to urgently implement human rights-based approach and ensure corporate accountability for abuse in the industry.

The apparel industry operates in an extremely unequal context, with widespread labour precarity and human rights abuses against workers, says a report by the Business and Human Rights Centre (BHRC).

THE REPORT: Behind the latest fashion trends lie appalling working conditions characterised by precarious wages, long hours, unsanitary conditions and informal contracts, especially for women, who make up the majority of the workforce.

Around 70% of workers are employed informally. This informal nature of employment further complicates transparency and traceability in the supply chain, exacerbating problems related to exploitative conditions and the fast fashion phenomenon.
The risks have differentiated impacts depending on the population group. Women, who make up about 60% of the workforce, face systemic discrimination and gender-based violence, while Indigenous Peoples face cultural appropriation and worse labour conditions.
The report, Hidden cost — Human Rights Policy and Practice in Mexico’s Apparel Supply Chains, examines how the North American country’s leading apparel companies address human rights risks in their supply chains.
It identifies key labour risks in the industry and analyses the human rights policies of 18 major parent companies behind the country’s top apparel brands. The report also provides specific recommendations for stakeholders to promote human rights in the industry.

KEY FINDINGS: The BHRC asked 18 companies to respond to questions on their human rights due diligence processes.

Only one company, C&A México, responded to the survey. Its parent company, Alfar Group, did not respond.
Only three out of 18 companies (H&M, Levi Strauss México and Diltex Group) publicly disclosed information about their supply chain below the first tier.
Five companies (El Puerto de Liverpool, Palacio de Hierro Group, Kaltex Group, Sanborns Group and Axo Group) disclosed only partial information about their first tier, while the remaining 10 disclosed none.
Only three companies (H&M, Levi Strauss México and El Puerto de Liverpool) have publicly available human rights and responsible supply chain policies that apply to all suppliers and partners.
Diltex Group and Palacio de Hierro Group have CSR-focused policies, although Diltex Group reports that it has internal procedures in place to ensure the use of suppliers that respect human rights.
Five companies (H&M, Levi Strauss México, El Puerto de Liverpool, Diltex. Group and Palacio de Hierro Group) publish Codes of Conduct for suppliers that include requirements on human rights Kaltex Group and Sanborns Group’s Codes of Conduct only apply to their direct operations.

KEY RECOMMENDATIONS

To apparel companies

Adopt a robust human rights policy that applies to all subcontractors and suppliers and that explicitly addresses purchasing practices as a critical factor affecting human rights risks.
Align purchasing practices with human rights standards, including: effective planning and forecasting, costing and pricing practices, ring-fencing of labour costs, payment terms, moving to responsible (or “shared responsibility”) contracting in contracts with direct suppliers.
Publicly disclose full, regularly updated supplier lists beyond the first tier, including the name, location and products of each maquila from which they source.
Undertake a robust human rights and environmental due diligence process throughout supply chains which involves effective engagement with workers and trade unions at all stages of the process.
Ensure effective grievance mechanisms which meet the effectiveness criteria defined by the UN Guiding Principles on Business and Human Rights (UNGPS) are in place and commit to providing swift remedy where human rights abuses, including gender-based violence and harassment, occur.
Commit to a just energy transition through respect for the rights of workers and communities and their resources as business models change to reduce carbon emissions and reduce waste.

To the Mexican Government:

Develop and enforce national and sub-national human rights due diligence policies and legislation, in line with international standards, that mandate supply chain transparency, require worker engagement, and extend the scope of due diligence requirements to the entire supply chain beyond the first tier. Clear and proportionate civil liability and penalties should apply that prohibit the tolerance of human rights abuses, especially against women, Indigenous Peoples and local communities.
- Implement measures to promote fair competition in the apparel sector to facilitate fair market access for small and medium-sized enterprises.
- Guarantee a just energy transition in the apparel sector through labour inspections to ensure that the rights of workers are respected as business models change.

THE CONTEXT: The apparel industry is crucial to the Mexican economy, contributing 6.37 trillion Mexican pesos (approximately US$316 billion) in 2023, or about 25% of that year’s national GDP.

The sector also plays a significant role in income and employment, accounting for 34% of the workforce in the commercial sector.
Despite its importance, the sector is characterised by strong economic disparities.
Micro enterprises (those employing up to 10 people), make up over 95% of the total businesses in the apparel industry, yet contribute only 5.7% of production.
Small businesses (with 11-50 employees) account for just over 3%, while medium-size (51–250 employees) and large (over 251 employees) enterprises represent just over 1% of all companies in the sector, yet account for over half of all employment and more than 82% of total production. These disparities highlight the concentration of economic power in the industry in the hands of a few companies.
A significant proportion of the apparel manufacturing sector’s income, around one fifth, comes from maquilas. These are micro and small enterprises that are deeply integrated into the value chains of major brands through maquiladora workshops (large factories).
The industry is characterised by a fragmented supply chain where a few large companies and their subsidiaries, which operate the main apparel brands sold and produced in Mexico, outsource production to medium-sized companies.
These medium-sized companies then subcontract work to small and micro maquiladoras. This multi-layered outsourcing obscures the link between large companies and conditions in the maquilas, creating challenges in ensuring transparency and accountability for human rights harms.
As the most powerful actors in supply chains, the large companies covered in this report ultimately have a responsibility to manage the risks associated with their activities. Importantly, they have the potential to make a significant difference to the lives of people working in their own operations and throughout their supply chains by ensuring respect for labour rights.

Mexico's Apparel Industry Remains Opaque; Brands Need to Implement Rights-Based Approach

A new report—Hidden cost: Human Rights Policy and Practice in Mexico’s Apparel Supply Chains—examines how the North American country’s leading apparel companies address human rights risks in their supply chains and identifies key labour risks in the industry.

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