White paper on commercial compliance definition, application released

The Fostering and Advancing Sustainable Business and Responsible Industrial Practices (FABRIC) project in the clothing industry in Asia is implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, which works on behalf of the German ministry for economic cooperation and development (BMZ).

The document illustrates the key results of their Sustainable Terms of Trade Initiative (STTI), a manufacturer-driven project that focuses on creating fairer purchasing practices in the textile and garment industry, according to a press release from the Better Buying Institute. 

The first phase has centred on creating a space for manufacturers and their associations to exchange their experiences and wishes and starting to make recommendations of how, from a manufacturer’s perspective, purchasing practices should be improved.

Through five thematic working groups challenges and needs covering key topics such as delivery conditions, planning and information exchange, etc. have been identified. The second phase will be dedicated to actions within the supply chain to improve purchasing practices based on the findings from phase one. 

Due to fierce competition, the pressure on manufacturers has long been enormous. Manufacturers are expected to reduce costs while increasing services. This was already the case before the COVID-19 pandemic, but during the pandemic, the unhealthy buyer-supplier relationship was taken to a new level and became more visible.

A lot of trust in buyer’s ability and/or willingness to enact good purchasing practices was lost. The discussion around purchasing practises has been growing among manufacturers and among brands and retailers, the press release said.

STTI developed a concept for commercial compliance in the thematic working groups and defines it as ”a common understanding of purchasing practices that do not cause obvious and avoidable harm to manufacturers”.

A major focus of the initiative in phase 1 has been the conversation among manufacturers/associations about those purchasing practices that, in their experience, are harming them and thus blocking the manufacturers' ability to meet their own and their buyers’ objectives for sustainable business.

Three important lists have been formulated in phase one: The ‘Key Recommendations on purchasing practises’ can be considered as central elements of terms of trade that manufacturers wish to do business under. Therefore, they form the foundation of ‘commercial compliance’.

The ‘Further Recommendations’ are manufacturers’ recommendations for further improvements to purchasing practices that are important to the creation of a healthier buyer-supplier dynamic, but that aren’t considered key recommendations.

Finally, ‘Research suggestions’ are topics and potential solutions for improved purchasing practices that require further legal and technical research before concrete measures can be planned. 

The roll-out of the principle of commercial compliance for improved purchasing practices requires a structural discussion. The dialogues will involve manufacturers and buyers on both national and international level as well as engaging the multi-stakeholder initiatives (MSIs) to incorporate commercial compliance into existing tools or initiatives. 

A supplier contract will be drafted, and a system will be developed to improve global transparency on the improvement of purchasing practices. 

Both internal and external research will be conducted to further define the STTI’s principle of commercial compliance and to aid its application.

ALCHEMPro News Desk (DS)