How much did you pay last time you bought a t-shirt?
Maybe $3 if it came in a six pack? Or, $30 dollars if it was a fancy one with a nice label?
Or, maybe you don’t even remember because even that fancy t-shirt costs less than 0.1% of the US median annual household income in 2011.
So, what makes that t-shirt so cheap? The low wages and poor conditions of the workers, says NPR’s Planet Money.
More than 1,000 workers died in Bangladesh earlier this year when a factory that produced 15 brands of clothes collapsed. The disaster sparked protests and campaigns to pressure Western companies to make a change.
This week apparel industry workers in Bangladesh made a small but important step forward. The government is increasing the minimum wage for workers from $39 per month to $68 per month (~75%).
Although this is an improvement, it fell short of the workers request for $104 per month. Workers and activists plan to continue to seek improvements.
But who is the voice for other people who are affected through-out the apparel industry supply chain, like the small farmers who take water from the same rivers that feed large-scale cotton plantations? Or the towns and cities that experience land-slides due to conversion of forest to agricultural fields that supply cotton, rubber, and leather?
Last year, PUMA released a ground-breaking study that estimated the total monetary impact of its direct and supply chain operations at 197 million U.S dollars. Water use (32%) and greenhouse gas emissions (32%) represented the greatest percentage of these impacts, followed by conversion of land for agriculture (26%).
Unsurprisingly, most of these impacts occur in the Asia-Pacific region (66%) because this is where Puma gets most of its supplies.
Puma undertook this new and complex exercise to enable their business to address these impacts strategically and integrate them into their decision making processes.
Their finding that 85% of their impacts are outside of their operations or the operations of their direct suppliers presents a critical challenge in addressing these impacts. If PUMA, or the rest of the apparel industry, wants to address these impacts, that means they need to go beyond the areas where they have direct influence.
Economists and many others believe that it is the role of government to address these impacts (sometimes called externalities) that occur outside of the marketplace.
Governments have used various tools to reduce environmental impacts and improve human well-being, such as regulations, taxes, and subsidies.
For instance, in the US, the Clean Water Act of 1972 led to dramatic improvements in our ability to ensure that we have clean water to drink and healthy rivers and lakes to enjoy. And, more recently, based on a 2011 IGM Forum poll of 41 prominent economists, 99% agreed that a tax on carbon would be the least expensive way to reduce carbon emissions than the collection of regulations put forward by the Obama administration.
However, the problem with this way of thinking is that the developing countries that experience the greatest impacts often do not have the governance capacity to develop or support regulations, taxes, and subsidies.
In developing countries, local and international organizations as well as businesses have an important role to play improving ecosystem health and human well-being. This may seem like familiar territory for local and international organizations, but, what can a company like PUMA do?
Two promising approaches are 1) on the supply side, invest directly in the reduction and sustainable use of resources and ecosystems and 2) on the demand side, embed the information on the cost of their impacts (and, hopefully, eventually the low cost of their impacts) in signals to the consumer such as prices, certifications, and indices.
Companies have already made significant headway using these two approaches. Recognizing that water is its main ingredient, Coca-Cola has made investments to protect local water sources and support local communities. The Sustainable Apparel Coalition, including Nike, Target, and H&M and representing 30% of the global apparel industry, launched the Higg Index in 2012.
The Higg Index gives companies a tool to identify and reduce environmental impacts in their supply chain, as well as communicate these impacts to consumers.
The major innovation with PUMA’s Environmental Profit and Loss Statement is that it provides a systematic way to measure progress that may results from the various sustainability initiatives corporations are now undertaking.
And, it gives a voice to all the people behind your t-shirt (or shoes in this case).