Leading German sports retailer linked to rights abuses overseas, as German government looks set to kill EU ethical supply chain law

• A crucial new EU law meant to prevent human rights and environmental abuses in the supply chains of European firms - the Corporate Sustainability Due Diligence Directive (CSDDD) - is in danger of being scrapped at the last hurdle, due in large part to lobbying by German industry associations. 
• The German coalition government is expected to decide how it will vote on the law in the coming days, before a meeting of representatives of EU Member States at the end of this week. 
• Now new Earthsight research has revealed the hypocrisy of the German industry associations campaigning to kill the law. 
• Trade records obtained by Earthsight show that a large German sports retailer whose CEO is a key figure at one of the industry associations lobbying against the law is buying clothing from a Turkish company previously accused of using child labour, while its largest Bangladeshi supplier is purchasing cotton fabric from a Chinese firm implicated in the Chinese government’s forced labour program in the Uyghur Region.

EU consumption and use of services are taking a huge toll on the planet and its people every day. The EU has promised to address this, and its flagship project for doing so is the CSDDD. After years of negotiations, the European Parliament and the Council finally came to a political agreement on this ethical supply chain law in December 2023. It was scheduled to be rubber-stamped early this year. 

However, the directive is now at risk of being stopped altogether. Having been instrumental in the negotiation of the law, the German liberal party FDP, which is part of Germany’s current coalition government, suddenly decided on 15 January to no longer support the agreed-upon text. Last week, German Minister of Justice Marco Buschmann and German Minister of Finance Christian Lindner (both FDP) then wrote a letter stating that they cannot support the law. They argued that the obligations and liability under the agreed-upon CSDDD, which the FDP had already managed to significantly weaken, were too stringent for companies. With the final Council and Parliament votes still outstanding in spring of this year, an abstention by Germany could mean that the law does not gain sufficient support in the Council and will therefore get killed.

The U-turn by the FDP didn’t come out of nowhere. In January, four big German business associations – the confederation of employer’s associations BDA, industry associations federations BDI and DIHK and the skilled trade lobby ZDH – had demanded a veto on the law in a letter to the German Chancellor Olaf Scholz. The letter said that the CSDDD text was “neither practicable nor proportionate.” Earthsight has previously reported on earlier attempts by the BDA and BDI to significantly weaken the CSDDD. Now it looks like they may have succeeded in killing it altogether. 

It is perhaps no surprise that the companies these business associations ultimately represent include many of the same firms that have been accused of human rights abuses and environmental harm in their supply chains in the past. However, even key individuals within the business associations themselves are hardly uninterested parties, as fresh Earthsight research reveals.

One of the key people at the BDA is Vice President Dr Alexander von Preen, who is also the CEO of INTERSPORT Deutschland. The Intersport Group is a large multinational which is Germany’s largest sports retailer. The firm has 5300 stores worldwide and reported revenues of €13.7bn in 2022. With its size the firm falls well inside the scope of companies supposed to be covered by the CSDDD.

One of Intersport’s main businesses is sports-related clothing. Which is very relevant to the CSDDD. In fact, the garment sector was one of the key industries which inspired the development of the now-threatened EU draft directive. The sector has a long history of human rights abuses in its supply chains, and journalists and non-government groups have exposed case after case of clothing sold in Europe, including in Germany, linked to such abuses overseas. After failed promise after failed promise from clothing retailers to voluntarily clean up their supply chain, the need for regulation had become glaring. The CSDDD is meant to deliver that change.

‘The number of people living in modern slavery has risen by 10 million since 2018, according to the latest findings from Walk Free’s Global Slavery Index, bringing the count to an estimated 50 million people globally. One thing that hasn’t changed? “Fashion’s role in that number,” says founding director Grace Forrest'

- Vogue Business, 23rd May 2023

In 2016, a BBC investigation exposed how the child labour of Syrian refugees was being used by clothing manufacturers in Türkiye to produce goods for sale by major brands in Europe. The brands they named dropped the supplier involved – a Turkish firm called Hazar Tekstil – in response.

In its 2023 global assessment of modern slavery, the organisation Walk Free found that Türkiye, especially its garment industry, remained one of the highest risk sectors for modern slavery in the world. “Türkiye has the highest prevalence of modern slavery in Europe and Central Asia. It is also among countries taking the least action to respond to modern slavery in the region”, the report states.

Earthsight has now obtained records showing that Intersport is a big buyer of clothing from Türkiye. In 2023, it imported over 230,000 items of Turkish-made clothing into the EU for sale in its stores. The largest market for these imports was Germany, where 95,577 items of Turkish-made clothing were imported by subsidiary Intersport Deutschland last year. The biggest Turkish supplier? None other than Hazar Tekstil, the same firm exposed by the BBC in 2016 for using child labour.

One such record shows a shipment of 688 pairs of women’s cotton trousers, shipped by Hazar to Intersport Deutschland on 23rd December 2023 (see below). In total Hazar shipped Intersport 74,497 garments last year, with a retail value likely in excess of €5 million.

Türkiye is not the only high-risk country, we found, where Intersport is sourcing its goods. Records obtained by Earthsight show Intersport is also shipping large volumes of goods from Bangladesh, Indonesia and Pakistan, all of which are ranked among the countries with the worst records for forced and child labour. In Bangladesh alone, a 2023 report estimated that 1.2 million people were in living in modern slavery on any given day.

Intersport’s indirect supply chain connections raise further concerns. Intersport’s largest supplier of finished clothing in Bangladesh, Earthsight’s analysis of thousands of shipment records shows, is a firm called 4 A Yarn Dyeing Limited. This supplier, Earthsight found, is in turn importing cotton cloth from a Chinese company called Lu Thai Textiles. A November 2020 report by Worker Rights Consortium in the US described Lu Thai as “heavily implicated in the Chinese government’s forced labour program in the Uyghur Region”. ¹ 

Since 2017, the Chinese authorities have detained as many as one million Uyghurs and subjected them to forced labour, and in 2022 the US passed a law forcing cotton clothing retailers to ensure their supply chains were clean of connections to what it described as ‘atrocities’ against the minority people.

Lu Thai was the subject of an NBC News investigation into cotton clothing sector links to abuses of Uyghur minorities in Xinjiang province of China broadcast in September 2020.²  Though Lu Thai reportedly sold its majority stake in its Xinjiang subsidiary in late 2021, a University of Nottingham study published the following year found that the firm continued to source its cotton from the province.³

This was not the only example of links to human rights abuses of the minority Uyghur people in China which we found. The parent company of another Intersport supplier in Bangladesh, Reliance Denim Industries, purchased $4.4 million of cotton fabric in 2023 from a Chinese firm called Winnitex. Winnitex is a subsidiary of the Texhong Group, which a 2021 report ‘Laundering Cotton’ by Sheffield Hallam University linked to the Uyghur region.⁴ 

Intersport’s commitments on clean supply chains have also been called into question before. In 2020, for example, its Swedish arm was called out by NGOs for failing to be transparent about suppliers of its garments. A Clean Clothes Campaign report from 2019, meanwhile, found the company had no published commitments on living wages for garment workers and was failing to publicly identify its suppliers. It also points out the deep flaws in the BSCI Code of Conduct which Intersport relies on to ensure its supply chains are clean – and which it apparently continues to rely on to this day.

There is no evidence that child labour has continued at Intersport's Turkish supplier. Winnitex and Lu Thai have also denied wrongdoing, and perhaps Intersport has a method to ensure its Bangladeshi suppliers don’t use their cotton linked to Uyghur forced labour in the clothes they supply it. Indeed, it could be that Intersport is confident its supply chains are clean. But if so, why is its German CEO and representative in the BDA supporting the dropping of CSDDD?

Sam Lawson, Earthsight’s Director, said: “The Intersport example goes to show why industry cannot be the decision-maker when it comes to regulations on sustainable corporate behaviour. German Chancellor Olaf Scholz must this week use his authority to support the CSDDD, a crucial law needed to prevent European citizens being made complicit in horrific abuses overseas.”

Earthsight contacted Mr. Von Preen and Intersport in advance of publication. Intersport International said it had launched a ‘thorough internal investigation’ in response to our findings. It stated that Intersport’s sourcing is carried out via subsidiary IIC-INTERSPORT International Corporation GmbH and are not the responsibility of INTERSPORT Deutschland, and are therefore ‘not impacted or affected by Mr. Von Preen and his presidency of the BDA’.

Though shipment records obtained by Earthsight show exports of items under Harmonised System Customs Codes specific to various types of cotton clothing, the company claimed that its sourcing in Bangladesh focuses on products which do not contain any cotton, and that fabrics used at the supplier factories in Bangladesh are ‘nominated’ by Intersport to ensure they meet sustainability standards. The company said it was ‘aware of the issues linked to Syrian refugees within the Turkish textile sector’ and is ‘taking all possible measures to mitigate these risks’, including BSCI audits and twice annual visits to Turkish supplier factories by Intersport’s own in-house teams. Intersport admitted that there remains “a lot of work ahead of us on our due diligence journey".

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References:

1. Worker Rights Consortium, WRC Issue Brief: Inditex Linked to Companies Complicit in Uyghur Forced Labor, November 2020, https://www.workersrights.org/wp-content/uploads/2020/11/WRC-Issue-Brief-on-Inditex_Nov.-4.pdf
2. Aliza Nadi, Anna Schecter and Didi Martinez, “Major brands try to determine if cotton in their clothes is from Uighur forced labor in China,” NBC News, September 22, 2020, https://www.nbcnews.com/news/china/majorbrands-try-determine-if-cotton-their-clothes-uighur-forced-n1240756
3. Cockayne, J., Making Xinjiang sanctions work: Addressing forced labour through coercive trade and finance measures. The University of Nottingham, July 2022. https://www.nottingham.ac.uk/research/beacons-of-excellence/rights-lab/documents/xjaflcm/making-xinjiang-sanctions-work.pdf, p80
   
4. Laura T. Murphy, et al. (2021). “Laundering Cotton: How Xinjiang Cotton is Obscured in International Supply Chains.” Sheffield, United Kingdom: Sheffield Hallam University Helena Kennedy Centre, https://www.shu.ac.uk/helena-kennedy-centre-international-justice/research-and-projects/all-projects/laundered-cotton. The parent company of Reliance Denim is Salim & Brothers.