Opinion: Norwegian banks can and should do more for textile workers

18 November 2021

The corona pandemic has hit textile workers hard. Through its investments in the textile sector, the Norwegian financial industry should have done more to safeguard workers' rights during the pandemic. This is according to a new report from the Fair Finance Norway Lead Framtiden i våre hender.

Embla Husby Jørgensen, policy advisor with Framtiden i våre hender outlines the report’s findings and looks at how Norwegian banks should have done more to protect worker’s rights in this field and how they can do better in the future.

The textile workers who sew our clothes have ended up in a a perilous and unsustainable situation during the pandemic. Many factories have experienced a sharp decline in the number of orders, and clothing chains have also pushed up prices. This has resulted in many workers not being paid wages for already-performed work.

Closed clothing stores and great uncertainty have led to cancelled orders, closed factories, lack of pay and union crushing in the companies' supply chains. At the same time, clothing companies are at the top of the food chain with thumping profits.

Norwegian banks could have contributed to preventing and minimizing the consequences of this.

The power of financial institutions

Investors have a duty to exercise due diligence and prevent violations of rights. Through owning shares in companies they can have an impact; they can stop investing in the worst companies and make demands and influence others through dialogue and voting at the annual meetings.

The report "Crises and Clothing" looks at the tools that financial institutions use when a crisis strikes and how the external assumptions that previously underpinned investments are rapidly changing, as seen in the example of when clothing shops close due to corona measures and companies cancel their orders from the factories.

The report maps internal systems and the available tools for dealing with rights violations during Covid-19 in particular, and during crises more generally. The report focusses on three companies; Hennes &Mauritz, Nike and Tapestry; which Framtiden i våre hender has followed during the pandemic, working with the Clean Clothes Campaign of which we are members. The financial institutions mentioned, Storebrand, KLP, DNB, Danske Bank and Nordea, are Norwegian banks with fund investments in at least one of these three companies. In addition, the oil fund and its work are also discussed in the report.

Banks haven't done enough

The corona pandemic has led to brutal and rapid upheavals in the textile sector, creating a need for a holistic and systematic look at the entire sector.

Although the financial institutions in this survey have relatively good guidelines for working with workers' rights, and have identified textiles as a sector at risk of rights violations, none of the participants in the survey have their own procedures that apply to crises, but rather point to different ways of dealing with changes.

We believe that banks have generally not done enough to prevent rights violations and ensure adequate compensation for textile workers. In general, Norwegian banks were too ill-equipped to deal with the rights violations in the textile companies in which they invest.

Investing in such a problematic sector requires close follow-up, holistic approach and flexibility in the use of policy instruments. Banks have taken a too passive approach during the corona.

Storebrand and KLP best in class

In our survey, Storebrand and KLP stand out for being clearest in their work with this sector. This applies to everything from identification of violations and credible, well-worked and flexible approaches to the most effective means of impact, as well as close and continuous follow-up to achieve concrete and long-term objectives.

The need for systems that can respond adequately to crises

Although few of us were prepared for the Covid-19 pandemic, investors must expect similar crises in the future, leading to increased pressure on workers' rights. Responsible investment in the textile sector requires a holistic approach with continuous follow-up, close contact with local stakeholders and clear requirements for improvement, as well as clear consequences if the improvements are not made even during a time of crisis.

It is a huge challenge for both the garment and finance sector that responsibility is spread widely across different actors – making it more difficult to demand one company or investor to fix a specific problem. It is crucial that investors are aware of their responsibilities and ensure that they minimise the risk of contributing to rights violations among companies they invest in and throughout their supply chain.

We expect Norwegian banks to now follow up all reported cases from local unions and organisations and to provide compensation to the workers who were not paid their legal wages.

We also expect banks to improve their systematic assessments of appropriate instruments, companies, stakeholders and opportunities for cooperation and to influence. These are factors that are crucial for raising the sustainability level in a highly vulnerable sector.