Sustainability: where is the footwear sector?’The fashion world has had to face the sustainability issue since the 1990s. The footwear sector has always been a precursor and a leader on this subject, but today it has to face the problems linked to the change of manufacturing sites once again.
by Peter T. Mangione - Global Footwear Partnerships LLC (Washington - DC)
Copyright@Global Footwear Partnerships LLC. All rights reserved. No reproduction without written permission
There are few buzzwords as poorly understood as ‘sustainability’. Most would agree that it encompasses a broad range of issues including:
- Safe workplaces: elimination or proper management of hazardous chemicals and machinery;
- Training and monitoring of factory workforces: to ensure proper pay, hours, absence of underage workers, etc.;
- Compliance with laws and regulations on materials/constructions that may pose a risk to potential end users;
- Measures to ensure environmental compliance with applicable mandates and company standards;
- Programs designed to ensure that workplaces achieve sufficient efficiencies to remain viable.
Beginning in the mid-1990s, adverse media attention compelled public companies to add corporate social responsibility (CSR) to the long-dominant list of sourcing/manufacturing imperatives: price, quality and delivery.
Today virtually all footwear companies in the US and Europe have codes of conduct coupled with compliance programs for their suppliers – often with differences in scope and effectiveness.
For the most part, mainstream media has lost interest in the subject.
One reason for the lack of current focus by the media could be that prime whipping boys like Nike have removed nearly all vulnerabilities of misconduct from their supply chains by heavy investment in factory direction/education, monitoring and auditing – often ensuring a ‘no tolerance’ approach to the main issues.
Without media scrutiny and with little in the way of government enforcement at least in the US (an exception would be in safe products for children), we suspect that some well-intentioned CSR programs are less effective than might be desired, despite an auditing ‘overload’ in export factories whose multiple customers each insist on thorough audits regularly.
The footwear sector has much to be proud of in dealing with many of the troublesome sustainability issues. More work, however, is surely necessary.
Decades of commitment and hard work have produced marked progress on the key CSR issues of hours/pay and factory health and safety. For example, proper handling or elimination of many long-time standard volatile organic chemicals used in shoe making, to proper procedures relating to safe working conditions involving dust, noise, lighting, equipment, fire hazards, etc. are now routine in export shoe factories. The introduction of water based adhesives, primers and cleaners were nothing short of a reinvention of the shoe making process – an innovation Nike has much to be proud of, especially as it has been so widely emulated throughout the business. Other firms have led the way on energy conservation in factories and closed loop water and waste programs, among many others.
Industry initiatives like the Zero Discharge Hazardous Chemicals (ZDHC), heavy focus on controlling Chrome VI in products, pursuit of water borne PU and the elimination of DFM in solvent PU production, etc., are positive works in progress that advance a new level of sustainability in the sector. Similar work in the leather sector is also making it friendlier to workers and to the environment.
While the foregoing pretty much covers the conventional scope of sustainability, I would add that this agenda needs viable venues for production to be meaningful.
There can be no serious discussion of sustainability without understanding the myriad of economic, political and demographic considerations that add up to make sourcing locales viable (or not viable) for the sector. If a host country is not suitable based on these criteria, the other sustainability issues are, of course, academic.
The historical migration of shoe production away from home countries likes the U.S., Italy, etc., to alternatives proves the point.
Today 99% of U.S. shoe consumption is imported, while nearly 90% of consumption in the EU is from outside the 28-nation bloc.
The sector moved first to Japan, Taiwan and Korea, and later as these venues became unsuitable, to Brazil, China, Indonesia, Vietnam, India, Mexico, Eastern Europe and Cambodia, and now with others in Latin America vying with the likes of Ethiopia and Myanmar for the next phase of the global scramble for suitable venues.
Clearly, sustainability encompasses more than the usually mentioned five headings noted at the outset.
In fact, the biggest sustainability issue probably is the pursuit of viable venues for shoe production.
What are the key factors in determining a country’s suitability for global shoe production?
Obviously, cost is a fundamental consideration, as are labor supply and investment levels, while lead-time embedded in a firm’s business model can also be determinative.
- Cost. The lowest worker cost locale today is Ethiopia, at about $.45 per hour, all factory costs included. Others including India, Bangladesh, Nicaragua, and others have costs in the range below one dollar or just above it. By contrast, China has the highest worker cost in Asia among major shoe supply countries of about $2.50 per hour. Of course, Italy, Japan and the US have costs in the $10.00 per hour range or higher.
- Labor. Since the 1990s, China’s huge flow of young workers has fueled shoe and other light manufacturing, but with the implementation for two decades of the one child policy (adopted in 1978), the flow of new workers has slowed as the economy has boomed with alternative work opportunities. Better availability of workers (although not unlimited) has driven the shift of some production out of China to Vietnam, Cambodia, Ethiopia, etc.
- Investment. Foreign investment created the shoe export business in China, Vietnam, and Indonesia, and is today the driving force behind development in Ethiopia and Myanmar. Financial inputs come in at least two types: shoe making facilities and supply chain. Vietnam and Indonesia, among many of the others, have the first but lack the second. Indeed, at least in Asia (which accounts for some 90% of global shoe exports), only China has a comprehensive, sophisticated, cost effective and fully built-out footwear supply chain: it is the essential up-stream enabler for global production from Vietnam, Indonesia and many others. China has the first form of investment also in an unparalleled degree: it has more industrial as well as smaller entrepreneurial factory investments than anywhere by a wide margin, despite recent factory closings amid loss of some 1.4 billion pair of global shoe exports in the two years ending in 2016.
- Lead time. Because its amazing supply chain is at hand in China, business models that rely on short lead-times including the immediate availability of all or nearly all inputs for production remain largely committed to China despite its higher costs and labor challenges. Firms focused on women’s fashion or on low cost items are the two most prominent specialties in this group. The former group is also dependent on having close by a large stable of many entrepreneurial smaller factories – which only China offers -- that can operate simultaneously to meet their wide range of fashion demands; nowhere else is likely to develop such capability in the foreseeable future. By contrast, the sport and outdoor shoe businesses tend to have longer lead-times, allowing access to the China supply chain to support its production in Vietnam, Indonesia, etc. without jeopardizing timely delivery schedules.
To sum up: while costs and labor issues will continue to plague shoe production in China, they will not derail its dominance anytime soon.
Nowhere else will draw the massive infrastructure investment needed to supplant China’s un-paralleled inventory of shoe supply chain and factory investment.
As noted, China remains the irreplaceable source for several key shoe categories – women’s fashion, low price, etc., while sport shoes and outdoor items for export accelerate their move out of China (except for sales to the huge local market for these items in China).
Niche shoe production will strengthen in some emerging shoe markets – Vietnam, Cambodia, Bangladesh, India, as well as in Ethiopia, Latin America and likely Myanmar, Asia’s ‘last frontier.’
In addition, ‘reshoring’ – making products in or close to leading consumption markets—has drawn media attention and has been talked about by sport shoe firms. Its viability, however, seems likely to be limited to items that lend themselves to automated processes – like injection type products – or completion of customized items, where higher prices are inherent in the product and volumes are small. Mainstream production is, thus, likely to remain in low cost areas where ample labor is present.
From the advent of the CSR movement in the 1990s to the focus on sustainability/capacity building in recent times, the footwear sector has been a leader.
The current initiatives on chemicals make clear that the sector continues to drive positive change, while at the same time wrestling with a changing world of economics, demographics and politics that is redefining, once again, its access to viable shoe making locales. There is much to be done!
Peter T. Mangione
Managing Director and founder of Global Footwear Partnerships (GFP), he is a recognized authority on the global footwear sector, having served from 1981 to 2009 as president of the Footwear Distributors and Retailers of America (FDRA), the largest shoe trade association in the U.S.
He has extensive experience in the shoe business including retailing, sourcing, logistics, factory social responsibility, product safety, customs, labeling, and government regulation of the international trade.
GFP has many clients including the footwear associations in Asia, Europe, US and Latin America, as well leading shoe retailers and brands, who he advises on strategies for expanding in the US shoe market.
He was the principal organizer of the 2011 World Footwear Congress (WFC) Rio de Janeiro; consultant to the organizing committee of the 2014 WFC, Leon, Mexico; organized the Global Footwear Sustainability Summits (GFSS) in Shanghai 2013-2016; he is currently preparing the August 2017 GFSS.
He has served as a member of the UNIDO Leather Panel and for more than 30 years served as an official advisor to the U.S. government on international trade negotiations.