Wage growth supported by brand purchasing practices will improve the living standards and working conditions of garment workers and lead to poverty reduction and more sustainable development. Improvements in wages will increase economic growth through increased demand, stemming from higher incomes.

A wage floor at industry level also functions as a productivity driver, as it rules out competition based on sub-standard wages and working conditions and instead rewards quality and efficiency improvements. Substantial and continuous wage increases above inflation and productivity will also ensure that a larger share of the added value stays in the manufacturing country. Standards applicable throughout the industry will create more stable employment and reduce staff turnover. This in turn enables investment in skills training and human resource development, leading to a more skilled and productive workforce.

By working in a number of countries simultaneously, the ACT approach will reduce wage competition amongst garment manufacturing countries, which has significantly contributed to the downward pressure on labour costs over the last decades. The ACT member brand commitments will provide significant benefits to countries pioneering the ACT approach. In the mid- and long-term, pioneering countries are likely to increase efficiency faster than other countries. For more details please see our background brief.

ACT is currently working in Cambodia, Myanmar and Turkey. Further envisaged countries for the ACT process are Bangladesh and Vietnam. ACT has selected these five initial countries on the basis of sizable garment production with considerable presence of ACT member brands and the potential for trade unions to engage in collective bargaining at industry level. In the coming years, ACT will engage with further garment-producing countries.

The way the industry buys can have a significant impact on suppliers and their ability to provide a living wage. For example, when last-minute orders are given, or forecasts are incorrect, it can make it very difficult for a supplier to pay a living wage and still meet price demands. The ACT process aims to ensure that the purchasing practices of ACT brands become the international benchmark to provide manufacturers with the economic space to pay for the negotiated wage increases and improvement of working conditions.

Members of ACT recognize that poor purchasing practices can leave suppliers less able to provide living wages and good working conditions. ACT member brands have committed to ensure that their own purchasing practices facilitate the payment of a living wage. They will achieve this by assessing and improving their purchasing practices. ACT members acknowledge that a cultural shift in brands’ buying from suppliers is needed to ensure that their purchasing practices enable suppliers to provide living wages and good working conditions.

ACT member brands have made an internal assessment of their purchasing practices. They have identified opportunities to improve current practices and have committed to improving their terms of payment, planning and forecasting and putting responsible exit strategies in place if production is phased out or relocated. They have also undertaken to ensure that higher wages will be reflected in their wholesale purchasing prices and that they will integrate the need for responsible buying into the training of their staff. Some of these changes can be implemented immediately while some others require more fundamental changes in buying practices. ACT member brands are also committed to developing a monitoring process, together with suppliers and trade unions, that will make it possible to measure improvements in their purchasing practices.

The garment and textile industry is one of the most globalized industries in the world. So through collective bargaining at industry level you can regulate the wage competition at national level, but you also have to make sure that international competition does not result in a process where the industry moves to other countries. Therefore, you need a link between national collective bargaining and international purchasing practices. And that is what ACT is all about. In consultation with producing countries that are the first to engage in negotiating a collective agreement at industry level, ACT is developing country-specific sourcing commitments.

In Cambodia, the ACT brands have made a commitment that, once a national collective bargaining agreement is in place, they will ensure increased sourcing until the end of 2022. They will also ask all their suppliers to comply with the collective bargaining agreement. And they will work to improve their purchasing practices, particularly their terms of payment, planning and forecasting, so as to make sure that it’s easier for ACT member brands, as well as for suppliers, to plan production and increase overall efficiency. The aim is to build long-term relationships between brands and suppliers and so facilitate the upgrading of the industry. Finally, a key point is to ring-fence labour costs. Ring-fencing labour costs means that if wages go up, this has to be an isolated cost item in the calculation of the price paid to the supplier. Higher wages have to be reflected in the wholesale purchasing prices. That way, suppliers know that if they negotiate higher wages with the trade unions, this will be taken into account in the suppliers’ price negotiations with the brands.

The ACT country support commitments will come into effect upon the signature of a collective bargaining agreement at industry level negotiated between independent employers’ organizations and trade unions, at the country level, that includes:

1. Wage growth covering inflation plus productivity growth and a negotiated collective bargaining component
2. Full respect of the freedom of workers and employers to establish and join organizations of their own choosing (freedom of association)
3. A robust monitoring and enforcement mechanism for the agreement.

ACT member brands will provide data on their individual sourcing volume in the respective country to a recognized audit firm. ACT will provide employers and trade unions annually with the aggregate figure of total ACT member brand purchases in the respective country measured in US dollars. In addition, there will be a complaints mechanism for stakeholders to file complaints about non-compliance with the commitments, and a dispute settlement mechanism between the brands and IndustriALL as signatories of the ACT Memorandum of Understanding.