by Helen Reid

LONDON (Reuters) – Investors in Zara owner Inditex are demanding a full list of suppliers from the fashion group so they can better assess supply chain risks, following the example of rivals H&M and Primark.

Regulators and investors are putting pressure on the garment sector to ensure that workers are not subjected to forced labor and are paid a decent wage.

However, Inditex, unlike its rivals in the sector, does not specify the factories from which it sources its supplies. The group only publishes the number of its suppliers in 12 key countries.

“As part of our engagement with Inditex, we notably ask the company to disclose the list of its suppliers and their geographical location,” Dutch asset manager MN told Reuters.

“Even though Inditex assures us that it has this data, it is so far unwilling to disclose it, unlike other companies in the sector which publish exhaustive lists of their suppliers.”

Fashion brands and retailers, including Adidas, H&M, Hugo Boss, M&S, Nike, Primark and Puma, already publish this information, including the names and factory addresses of their suppliers.

MN, which manages the assets of Dutch pension funds, therefore considers it important to know whether Inditex actually has this information.

Inditex, which is due to release its annual results on March 13, declined to comment on investor requests but believes its traceability system is “best in the industry” and gives it “maximum supply chain visibility.”

Inditex founder Amancio Ortega owns 59% of the company and his daughter Sandra Ortega 5%, totaling around $69 billion.

The five Inditex investors who responded to Reuters’ questions have a combined stake of about $2 billion in the company, which has a current valuation of about $140 billion.

None of the investors Reuters spoke to are considering divesting from Inditex.

RESILIENCE

For Swetha Ramachandran, portfolio manager at Artemis Investment Management in London, knowing the share of revenue by supplier country would help “determine the resilience of their supply chain”.

Supply chain figures published by Inditex since 2019 show that the company has reduced the number of its suppliers in China and increased them in Bangladesh and Morocco. But she gives no details on the quantity of products she buys from them.

Grace Su, a portfolio manager at Clearbridge Investments, which owns Inditex shares, said she had also asked for more clarity.

“It’s very important because of all the attention on ESG [Environnement, social et gouvernance, Ndlr], labor and inputs. The company claims to be a leader in this area, so it’s very important that they have this level of information.”

Shareholder Schroders encourages clothing retailers, including Inditex, to be transparent, said Hannah Shoesmith, head of engagement at the company.

This information, and other environmental, sustainability and governance factors, could influence investment decisions, explained Marie Payne, head of sustainable investing at Cardano, another Inditex shareholder.

Norway’s sovereign wealth fund, which owns a $1.4 billion stake in Inditex, said it regularly engages with the company on supply chain risk management, human rights man and transparency. He declined to give details of those discussions.

The risk, some investors believe, would be that Inditex’s rivals would seize this list to obtain supplies from the same suppliers.

Inditex has entered into an agreement with the international trade union federation IndustriALL under which it provides it with a complete list of its suppliers. But IndustriALL wants all companies, including Inditex, to be more transparent.

(Reporting Helen Reid, with contributions from Gwladys Fouche, Kate Entringer)

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