You're likely to spend an average of $2288 on clothing and footwear this year. And if you want to know the story behind your spending, it's harder than you think to find out what conditions your clothing was made under.

Sweatshops aren't exclusive to low-wage countries. In fact, it's likely any clothes you wear with a label saying "Made in Australia" were made by an outworker in a backyard sweatshop, perhaps not far from where you live or work.

CHOICE explains:

Made in Australia

Many outworkers are paid below-award wages according to the Textiles, Clothing and Footwear Union of Australia (TCFUA) – often about $7 an hour and, in some cases, as little as $4. That's well below the legal minimum of $17.49 an hour wage for a machinist. Many will work 12- to 15-hour days, seven days a week to make ends meet, says TCFUA national secretary Michele O'Neil.

Such home-based work accounts for the majority of Australian garment manufacturing, spanning high-end fashion to school uniforms. Well-known brands flouting Australian labour laws are common, says O'Neil. "We find them every day."

The sourcing network for garments is complicated: brands outsource to factories, which outsource yet again. A textile order can be passed down through three different contractors before ending up with an outworker. And knowledge of supply chains among brands and retailers is often poor, so outworkers are hidden at the bottom of the supply chain.

Ethical accreditation

Ethical Clothing Australia (ECA) works to combat the issue of outworkers by providing ethical accreditation for Australian-made clothing. ECA accreditation guarantees that brands obey the law, which means all workers throughout the supply chain receive fair wages and decent working conditions. To receive accreditation, brands' entire supply chains are mapped, including the hidden workforce, a process which often uncovers parts of the supply chain that even the brands weren't aware of.

Cutting corners

The TCFUA suspects one Australian women's fashion label, Morrison Clothing, has at times disregarded labour laws. Two outworkers in Morrison's supply chain told CHOICE they get paid an average of $8 an hour. They said they were paid $3.00–$3.50 per shirt for a recent order, each taking about 30 minutes to make.

Elizabeth Macpherson, an organiser at the TCFUA, says the union was investigating the company at the time of publication and knew of about 20 outworkers in Morrison's supply chain who aren't receiving the correct wages.

Morrison director Richard Poulson said the allegation is "absolutely incorrect. I believe we pay well above what the award would be. We're certainly not trying to strip margins. They [suppliers] quote – we pay them what they want."

However, brands manufacturing in Australia are legally responsible for their entire supply chain so the amount that labels pay suppliers has to take into account how much it will cost to make the item of clothing using fairly paid labour.

Buying ethically made clothes

For Australian consumers wanting to shop ethically, the first port of call is the price tag, says Paula Rogers, an international fashion supply chain consultant. "If you go and buy a $3 T-shirt, common sense would say someone hasn't been paid a whole pile to make it."

Although studies suggest a majority of consumers would be willing to pay more for ethically produced clothes, brands won't change without commercial incentive. "They're in business, not in social enterprise," says Rogers.

Buying ethically made clothes: a checklist

  • Don't buy clothes at rock-bottom prices. Think about how much work has gone into the garment – is the price tag fair?
  • Write to your favourite brands and ask them questions via social media (see below for what to ask).
  • Ask sales assistants for details.
  • Use ethical report cards to learn about brands, such as the Australian Fashion Report, Let's Clean Up Fashion Report, and Shop Ethical!

Shop with certified brands

  • Ethical Clothing Australia certifies cut, make and trim for Australian-made clothes. It lists 85 accredited brands including Cue, Jets swimwear, Nobody Denim, RM Williams, Collette Dinnigan and Carla Zampatti.
  • Fairtrade certifies the supply chain for cotton production. Accredited brands include Etiko, 3Fish, Audrey Blue, Nudie Jeans Co, RREPP.
  • GOTS certifies organic textiles and ethical labour conditions in textile manufacturing.

The story behind the garment

When you're buying clothes made overseas, it's all but impossible to discover each step of the journey your clothes have taken. The clothing brands themselves can rarely trace the journey from fibre production through to textile and garment manufacture.

A recent report into clothing supply chains, the Australian Fashion Report from Baptist World Aid found:

  • 61% of companies didn't know where their garments were made
  • 76% didn't know where their fabric was woven, knitted or dyed
  • 93% didn't know the origins of the raw fibre.

As Australian garment manufacturing has moved offshore, there's been a shift in responsibility. A longer supply chain means brands may not know about safety issues and poor working conditions. Russell Mullane, CFO and group logistics manager of Sussan Group, which owns Sussan, Sportsgirl and Suzanne Grae, told CHOICE that although he's confident the company is acting ethically by conducting factory audits, it can't monitor every link in the supply chain continuously. "We live in Australia and it's happening way up yonder. How can we really know?"

But ethical clothing campaigners are adamant companies should be responsible for their entire supply chain. They say poor working conditions are a result of companies' sourcing practices that put pressure on suppliers to cut prices further down the line.

The real cost of clothing

Brands source clothing by bargaining with suppliers on price. This price usually equates to 10-20% of the retail price and includes everything involved in the garment's production up to the point of shipping, including fabric, manufacturing and middlemen's profits. Macquarie Bank research estimates such production costs for a pair of jeans retailing for $US109 to be $US12.

While the labour costs involved with a garment are only a small part of the total cost of sourcing the product, many brands still seek to cut costs at this level, shifting their production to Bangladesh or the western provinces of China.

Where do our clothes come from?

Based on value, 92% of clothes sold in Australia are imported, according to the Council of Textiles and Fashion Industries of Australia. While China still dominates the textiles market for imported clothes, imports from low-cost countries such as Bangladesh and Cambodia have been increasing at a rapid pace.

Codes of conduct

Sweatshops, characterised by exploitative wages, excessive work hours and unsafe working conditions, are widespread throughout Asia. "Unfortunately, that's the norm," says Oxfam's labour rights advocacy coordinator Daisy Gardener.

But following the Bangladesh factory collapse in April 2013, consumer concern has resulted in some steps in the right direction. There's been a shift in the ethics of the industry over the past six to 12 months, says Paula Rogers, an international fashion supply chain consultant. "I've never seen retailers want the information [about their suppliers] so much. They'd never asked for codes of conduct before," she says.

Unfortunately, a code of conduct doesn't necessarily guarantee better conditions for garment workers. In 2011, Spanish fashion brand Zara was found to be making clothes in a Brazilian sweatshop, despite having a code covering key labour conventions. One of Zara's factories had subcontracted out the work without its knowledge.

Flawed audits

Without an independent regulatory regimen protecting workers' rights globally, companies have devised their own processes for workplace inspections, resulting in an $80bn market for corporate social responsibility programs.

Unfortunately, the inspections don't always lead to improvements for workers. For example, prior to the collapse of the Rana Plaza building in Bangladesh, two of the factories inside it had been audited but safety risks had not been identified.

Often audits are announced in advance and auditors may lack the expertise to do the job credibly. While independent audits can identify issues at factories, they aren't always helpful in resolving them, as Måns Carlsson-Sweeny, an analyst at AMP Capital, has pointed out. Audit results are usually kept secret, so the problems may never be fixed.

Some brands have been working to improve the transparency of their auditing by disclosing factory locations for third-party auditors. In 2005, Nike became the first brand to publish a list of its suppliers, and others such as Levi's, Puma and H&M followed. So far, Kmart is the only Australian retailer to disclose any of its suppliers, and Target has committed to do so .

What to look for in a brand

  • Does the company have an ethical sourcing code? Is it public?
  • Does the code cover important International Labour Organization conventions: living wage, no forced or child labour, freedom of association and the right to collective bargaining, safe and hygienic working conditions, working hours are not excessive, no discrimination, regular employment is provided and no harsh or inhumane treatment is allowed.
  • Does it audit its factories? How often? Are the audits independent, unannounced and are results made public?
  • Is it part of a multi-stakeholder ethical scheme?
  • Is it aware of its fibre and textiles supply chain?
  • Are its factory locations public?

Clothing brands in the spotlight

CHOICE contacted Australia's four biggest clothing retailers as well as four discount retailers to ask about their sourcing practices.

Country Road, Trenery, Witchery, Mimco

Made in: China, India, Vietnam, Pakistan, Thailand, Indonesia, Turkey.

Ethical sourcing code? Yes (not public).

Wage commitment: Living wage.

Supply chain traceability: Knows all its primary suppliers, which must ensure subcontractors comply with the code of conduct. Says it's difficult to trace fibre and textile production as it's traded on an open market.

Publishes factory details? No.

Audits: Regular announced social compliance audits are conducted by an accredited third-party auditing company.

Millers, Katies, Autograph, City Chic, Crossroads and Rivers (as of November 2013)

Made in: China, Bangladesh and India.

Ethical sourcing code? Nothing publicly available.

Wage commitment: Minimum wage.

Supply chain traceability: All cut, make and trim (including subcontractors) factories are known. Fibre sourcing and textile production is managed by the factory.

Publishes factory details? No, but has signed the Accord.

Audits: Conducts announced audits. Plans to start unannounced audits this year.

Sportsgirl, Suzanne Grae, Sussan

Made in: China and Vietnam.

Ethical sourcing code? Yes (not public).

Wage commitment: Minimum wage. Says all audited factories pay above the minimum.

Supply chain traceability: Doesn't know factories of its wholesalers. Textiles are sourced through mills suggested by agents.

Publishes factory details? No.

Audits: Yearly announced audits of all factories are conducted by an independent auditing company. Audit information is not made public.

Just Jeans, Jay Jays, Jacqui E, Peter Alexander, Portmans and Dotti

Made in: Bangladesh. Would not comment on other source countries.

Ethical sourcing code? Nothing publicly available.

Wage commitment: None.

Supply chain traceability: No comment made.

Publishes factory details? No. Has not signed the Accord.

Audits: Prior to doing business in a factory, an independent auditor checks the factory complies with local laws and Just Group principles.

Targets home brands: Essentials, Modernista, Hot Options, MODA, Bellecurve, Adamsville, MAXX

Made in: Bangladesh. Would not specify any other countries where it manufactures.

Ethical sourcing code? Yes.

Wage commitment: Minimum wage.

Supply chain traceability: No comment made.

Publishes factory details? Has committed to publish and has signed the Accord.

Audits: Conducts independent regular scheduled and unannounced factory audits throughout the year.

Kmart's home brand

Made in: Bangladesh. Would not comment on where else it sources clothes.

Ethical sourcing code? Yes.

Wage commitment: Minimum wage.

Supply chain traceability: No comment made.

Publishes factory details? Has published Bangladeshi factories and has committed to publish all its factories. Has signed the Accord.

Audits: Mainly conducts announced audit every six, 12 or 24 months.

Blacksmith, Match it, Pink Sugar, Tweed River, Dymples, Joe and Co, Wave Zone

Made in: Bangladesh. Would not comment on where it manufactures.

Ethical sourcing code? Yes.

Wage commitment: Living wage.

Supply chain traceability: No comment made.

Publishes factory details? No, but has signed the Accord.

Audits: No comment made.

Made in: Bangladesh. Would not comment on where it manufactures.

Ethical sourcing code? Yes.

Wage commitment: Living wage.

Supply chain traceability: No comment made.

Publishes factory details? No. Has not signed the Accord.

Audits: No comment made.

What about Myer and David Jones?

As well as stocking other brands, Myer and David Jones have their own. In Baptist World Aid's Australian Fashion Report, which ranks companies on ethical sourcing policies, transparency and traceability, monitoring and training, and worker rights, neither scored favourably. In this A-F rating system, Myer scored a D+ and DJs an F.

Living wage vs minimum wage

Many ethical sourcing policies have provisions for the legal minimum wage, however this is often not enough to meet the costs of basic living. A living wage is considered to meet basic costs such as food, water, shelter, clothing, energy and transport.

The Accord

Companies signatory to the Bangladesh Accord must supply their factory locations so independent inspectors can audit them. They must also provide funds for safety improvements.