Interview with Primark's ethics chief: "Existence was at stake"

In the spring, Primark will close all stores in view of the corona pandemic and will not place any new orders with its suppliers. That hits countries like Bangladesh hard. Paul Lister, responsible for ethical trade and sustainability at Primark parent company ABF, defends the decision in an interview with ntv.de – and promotes higher wages in the textile industry.

ntv.de: In March Primark decided to cancel all outstanding orders from the suppliers. The decision and that of other fashion retailers caused a shock in countries like Bangladesh, which are dependent on the textile industry. There was talk of the possible collapse of society. Can you tell us how that decision came about at Primark back then? How did you experience the situation?

In order to understand this, it is crucial to realize that we had no idea at the time how the pandemic would develop. Initially, Covid-19 affected Primark as deliveries from China stalled. But then the epidemic continued to spread. All of our stores had to close within twelve days in March – every single one, in all markets! We don't have online sales. Sales fell from £ 650 million a month to zero – with fixed costs of several hundred million pounds. We did the math, and the numbers were clear: Despite solid cash reserves and a far from exhausted line of credit with the banks, we would run out of money within a few months. We paid in full for all goods already delivered and accepted all orders that were already on their way to us. That alone was worth around £ 1.5 billion in goods. We canceled everything beyond that. Nobody knew at the time how things would go on, when the shops in the various countries could reopen and even if they were, how sales would go. From the perspective of the time, we had to act in this way to ensure that Primark survived the crisis and, if necessary, could open again after a long break.

That is, the very existence of the company was at stake?

From the perspective of the time: yes. All government support measures, such as support for short-time working, corporate and VAT cuts and the like, came only gradually. When we saw the situation easing somewhat, the first thing we did was to set up a fund of around £ 23 million to secure wages for the workers at our suppliers. Then, when we felt more confident that the situation was manageable, in the course of April we also took finished or in-process orders worth £ 370 million. This enabled us to transfer money to the manufacturers for their purchases. In July, when our stores were open again, we were also able to undertake to pay our textile suppliers for all finished goods and, in addition, to pay for or use all textiles they procured. This means: we no longer have any outstanding liabilities with these suppliers for the order cancellations in March.

It has now been almost half a year since the lockdown. Shops are open again everywhere. What happened to your fears from March?

Shops are open again, and most importantly, we are seeing customers have come back and are shopping again. In Berlin there are not as many as there are in Great Britain, but we are slowly returning to pre-crisis levels. We will also order goods in normal quantities again. The mix has changed somewhat due to the crisis. We need less formal men's clothing and more casual wear. In times of short-time work and home office, we hardly sell any suits. But the volume is almost normal again.

In view of the actual development, does the complete cancellation from March still seem the right decision to you?

It's easy to look back with today's knowledge. But the numbers back then were just clear. It was the right decision at the time.

Your description of the course of the crisis, as dramatic as it initially looked for Primark, also shows that as a fashion brand you have complete control over the entire value chain. You could choose to protect your own interests first and then, when you were sure you could afford to, support your suppliers. They had no influence or freedom of choice. Doesn't this also show the power imbalance that existed before the crisis between the big fashion companies in the industrialized countries and the manufacturers in mostly poor countries?

I think that's a misconception. Everyone suffered in the crisis. Primark has also suffered massive losses. We lost around two billion pounds in revenue. Some producers had no income for a few months. But we were in constant contact with all suppliers and supported them, among other things with the "Call to Action" initiative, which is run by the International Labor Organization (ILO). The aim here is to secure bridging financing for the suppliers. In addition, the producers are by no means completely dependent on us. 98 percent of our suppliers also work for other brands, which often have their markets in other countries or even continents. As a result, not all orders were canceled at the same time. In contrast to us, other retailers also sell online, which means that their sales did not fall as sharply or even rose in some cases.

Regardless of the Corona crisis, the fashion trade is one of the industries with the largest retail margins in Europe – with particularly poor working conditions and low wages among suppliers in poor countries. Why is that and how can it change?

The textile industry has created millions of jobs that provide people in poor countries with good incomes that they could not achieve elsewhere, for example in agriculture. Historically, the textile industry is a kind of entry-level sector. That was already the case in Great Britain in the age of industrialization. Here people can learn what it actually means to have an industrial job compared to a pure subsistence economy. The electronics industry, for example, has much higher requirements that many developing countries are not yet able to meet. Personally, my job is to work to ensure that working conditions continue to improve. I very much hope that workers' wages in Bangladesh, for example, will continue to rise.

What are you doing specifically for this?

We are constantly talking to the governments of the producing countries and advocating strengthening workers' rights. Among other things, we are working with more than 20 other fashion brands in the ACT initiative – that stands for action, cooperation, transformation – to strengthen the right to form trade unions and their influence in wage negotiations. We advocate regular increases in the minimum wage. On our own, however, we cannot fundamentally change the industry-wide working conditions or increase wages.

Why can't you just pay more if that's what you want?

Unfortunately this is not possible. Because almost all factories produce for many different customers at the same time. The wages are exactly the same, whether it's £ 2 T-shirts for Primark or £ 20 T-shirts for another brand. The factory cannot pay different wages for the same work in the same hall.

Primark positions itself in the competition almost exclusively through its low prices. With rising costs due to higher wages, is your business model still competitive at all?

Absolutely. We can compensate for rising wages by making manufacturers more efficient. Most factories in developing countries are still very inefficient. With further training for entrepreneurs, managers and workers, we help to organize the processes more efficiently. With the cost reductions that are possible, we can continue to offer T-shirts for two pounds in the future, despite rising wages.

German companies are currently very concerned about the supply chain law, which the federal government is currently working on, which is intended to prevent human rights violations by suppliers for the German market. They fear incalculable liability risks. They also?

We advocate such a law. Of course, it depends on the details. But we can work well with what is arguably similar modern slavery law that already exists in Britain. With our ethics team of 120 employees and external partners, we conduct around 3000 inspections a year to ensure that all of our suppliers comply with all laws and standards. A supply chain law would create a level playing field for the entire industry, unless each country uses completely different standards. We welcome that very much.

You go to great lengths to control your suppliers. Smaller companies can hardly do that. Doesn't such a supply chain law play into the hands of the big players and disadvantage smaller companies?

Smaller companies with fewer suppliers wouldn't have to carry out 3000 inspections a year. There are also external service providers who can do this. That's how we started many years ago. I myself placed the first orders for inspections at suppliers to a service provider when Primark was much smaller and didn't have an ethics team. Any company can do that.

Max Borowski spoke to Paul Lister