Supply Chain Organizational Governance

Cotton Laundering Shows Risk of Business as Usual with China

China’s importance to global supply chains as a key source of raw materials and labor puts brands at high risk of inadvertently supporting forced labor. Right now, the focus is on the garment industry; but other industries should pay close attention and ensure they are closely monitoring their entire supply chains.

By Nithin Coca | Published 2 years ago | About a 5 minute read

Image: Charles McCrea/Pixabay

A new report from researchers at Sheffield Hallam University in the United Kingdom has uncovered systematic efforts to obscure the origin of cotton and cotton-derived materials in global supply chains by China — with the intent of making it difficult for countries and global corporations to act on allegations of forced labor.

“The report traces how cotton from China — and especially from Xinjiang — get transported from Hong Kong to Sri Lanka, and then to manufactures in Africa, and then to American or European consumer markets,” Johnson Ching-Yin Yeung, urgent appeal coordinator & campaigner with the Clean Clothes Campaign, told Sustainable Brands™.

This is directly connected to the horrific human rights crisis in Xinjiang — the western-most region of China and home to Uyghur and Kazakh Muslims, who have their own distinct language and culture. What has been taking place over the past four years has been well documented: A vast system of concentration camps that can hold more than a million people; an algorithm that decides who is detained or not, which can decide one's fate based on factors such as what door you entered or left your home from, or how often you pray. Alongside this is ongoing cultural genocide — as Mosques, cemeteries, shrines, and historic Uyghur neighborhoods have all been destroyed.

There are even reports of prison labor camps churning out a vast variety of consumer goods. And this is despite China making the region nearly inaccessible to foreign observers, including canceling the visas of journalists such as Buzzfeed’s Megha Rajagopalan, who first reported on the techno-driven police state back in 2017.

For brands, this is increasingly becoming a problem. Human rights atrocities are not new, still taking place all around the world at varying scales. But in China, they are systemic — with evidence connecting top officials, including Chairman Xi Jinping, to what’s happening. Moreover, China’s importance to global supply chains as a key source of raw materials and labor for the garment industry puts clothing and apparel brands at high risk of inadvertently sourcing from suppliers using forced labor.

“Regulators and brands need to employ more measures in tracing their cotton,” Yeung says. “They need a more robust traceability program to conduct tests in laboratories on cotton-based products, and need suppliers to provide genuine documentation to show where the raw materials are coming from.”

The reaction from brands has thus far been lagging. Many now say they don’t source from Xinjiang, while others express confidence in their monitoring and auditing capability — though few are willing to share data or information on how they ensure they aren’t victims of laundering.

For example, in response to the report, C&A stated that it does “not buy any clothing from manufacturers based in the province of Xinjiang, nor do [we] have any fabric or yarn factory under contract in this province;” and Hugo Boss said it has “not procured any goods originating in the Xinjiang region from direct suppliers.”

Brands must look deeper — as the report shows that Xinjiang cotton is being diverted via secondary suppliers, including ones in countries such as Sri Lanka. Moreover, merely avoiding Xinjiang ignores growing concerns that Uyghur forced labor is merely being exported to other Chinese provinces, as a report from the Australian Strategic Policy Institute found last year.

“All companies claim that their internal auditing mechanism works — until it does not,” Yeung says. “Brands can no longer defend themselves by saying their tier-one supplier did not source from Xinjiang; they have to look into the intermediate agents, too.”

Also concerning is how the Chinese government has responded to forced labor allegations not with investigations, but with reprisals against those who dare to expose what’s happening. This includes the auditing organization Verité, which saw its office forcibly closed by Chinese officials in April after investigating forced labor; and non-profit efforts such as the Better Cotton Initiative, which was attacked for releasing a statement on Uyghur forced labor and now no longer operates in Xinjiang.

If companies do not proactively respond, governments will force them to. This week, the US House of Representatives passed, by an overwhelming margin, the Uyghur Forced Labor Prevention Act — which would put the burden of proof on companies that goods sourced from Xinjiang are not being made with forced labor.

“Both chambers of Congress need to pass matching language before the end of the year, and President Biden needs to sign it into law without delay,” the nonprofit Freedom House said in a press statement. “Evidence has shown that forced labor is a key component of the Chinese government’s extensive network of detention facilities, to which more than one million people remain confined.”

Right now, the focus is on the garment industry; but cotton is not the only supply chain tainted with forced labor — other industries should be paying close attention and ensuring they are closely monitoring their entire supply chains. Xinjiang is also home to a massive viscose processing industry — turning wood fiber from Finland, Indonesia and other countries into polyester. It’s also a major player in the solar industry, with several major photovoltaic producers based in the region. Electronic components, too, may be coming from Xinjiang and may be produced with forced labor.

Brands may have to consider whether doing business in China is worth it at all. The Women’s Tennis Association decided that it was not, potentially forfeiting millions but also getting widespread praise for standing with its values.

Brands, almost without exception, have failed to be proactive on forced labor — maintaining friendly relations with a country potentially committing egregious human rights abuses. And in doing so, they are risking long-term reputational harm in the name of short-term profits — which is increasingly unsustainable.

Nithin Coca

Media, Campaign and Research Consultant

Nithin is a freelance writer who focuses on global economic, and environmental issues with an aim at building channels of communication and collaboration around common challenges.

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