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The Price of a Cheap Suit

Companies spend millions to assess overseas suppliers. So why are they still missing so many problems?

No-Sweat Equity

While some apparel companies struggle to quiet the controversy surrounding inhumane working conditions, a small group of businesses are taking a different tack. They’re making an issue of sweatshop labor.

No Sweat Apparel, for example, which was started by a group of labor-rights activists in Waltham, Massachusetts, trumpets the fact that it is a “sweatshop-free” employer (the company uses only suppliers that are unionized). Likewise, Los Angeles-based American Apparel, the largest garment manufacturer operating within the United States, refuses to use sweatshops. Even Bono, lead singer for Irish rock group U2, is getting into the act. Along with his wife, Ali Hewson, he launched Edun, a sweatshop-free clothing line that will sell at Saks Fifth Avenue.

These companies are striving to do what many retailers cannot: guarantee that their clothes aren’t made in sweatshops. No Sweat sources from 14 factories in the United States, Canada, El Salvador, and Jakarta, Indonesia. Before any orders are made, the company insists on an independent audit of the factories. The inspections are done unannounced — and employees are interviewed outside of the workplace. “Since they are union shops, we’re very confident in them,” says No Sweat’s CFO, John Studer “But we do inspections, just to make sure.” (COO Anne O’Loughlin visited the Jakarta factory in order to view the working conditions firsthand.) Studer says the workers at the facility in Indonesia get six weeks of paid vacation and free health care. No Sweat shoots for wages at about 20 percent above the minimum wage.

The giant of the sweatshop-free trend, however, is American Apparel. The company employees 3,000 workers and operates 20 retail locations. All the clothes are made at a factory in Los Angeles, where the average worker is paid $12.50 an hour. The company recorded $150 million in sales in 2004, and expects to grow to $250 million this year.

But can socially conscious apparel be profitable? No Sweat’s Studer thinks so. The company, which expects to more than double sales to $1.6 million this year, was able to eke out a small profit in only its second year of existence. “We want to show big brands that you can be profitable,” says Studer, “and still effect positive social change.”

It’s not easy. SweatX, an antisweatshop brand launched by a venture-capital fund run by Ben Cohen (of Ben & Jerry’s ice cream fame), closed its doors last year after two years of operating at a loss.

— J.McC.

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