Prada terminated 222 suppliers and called it zero tolerance. Levi's cut its suppliers' borrowing costs and called it a finance programme. Between those two responses to the same pressure lies the entire unresolved question of who funds a clean supply chain.
In January 2026 the Financial Times reported that Prada had terminated relationships with 222 suppliers and subcontractors across Italy over five years, following more than 850 on-site inspections conducted under what the company called a zero tolerance approach. More than a quarter of the inspections had ended in termination. The inspectors found dormitories inside workshops, unsafe conditions and unauthorised subcontracting, and the terminations were widely reported as accountability. Prada itself was not under investigation, and its audit programme was, by the standards of the industry, unusually serious. I want to be careful here, because nothing in this essay excuses the workshops, and nothing in it suggests Prada acted in bad faith. My argument is with the accounting that followed.
When a buyer terminates a risky supplier, one ledger improves immediately, and it is the buyer's. The risk exits the audited perimeter, the compliance report cleans up, and the brand can honestly tell regulators and journalists that it acted. The other ledger, the one nobody consolidates, records what happened next. The workshop that lost the order did not close its doors and send its workers to better jobs. It slid further down the subcontracting chain, took orders from buyers who inspect nothing, and its workers, many of them migrants with debts and no alternatives, kept working under conditions that had just become invisible to everyone with power to change them. Termination does not remediate harm in any sense. It relocates harm outside the field of vision of the instrument that detected it, and then it books the relocation as progress.
The Milan prosecutors understood this better than the compliance industry does. When they placed the Italian operating companies of Armani, Dior, Loro Piana and Valentino under judicial administration, the remedy they imposed was not divestment from the offending workshops. It was court-supervised improvement of oversight, because the point of the exercise was to change conditions for workers, not to purify a vendor list. The system of exploitation they described, so entrenched it functioned as business policy aimed at profit, was a system of prices and deadlines that the brands themselves had set. You cannot exit a system you are financing.
Unpublished Math
Here is the uncomfortable arithmetic that sits underneath every termination decision. Compliance with the new generation of due diligence law is an investment: traceability systems, recruitment reform, decent housing, verified working hours, grievance channels that function. In agricultural and manufacturing chains across the south, and evidently across Tuscany too, the actors asked to make that investment operate on margins of a few percent, sell into chains where the buyer captures the overwhelming share of final value, and borrow, when they can borrow at all, at rates several times what their customers pay. The legal obligation lands on the buyer; the capital expenditure lands on the supplier; the price paid for the goods does not move. Every serious study of purchasing practices has documented the same pattern, and the brands' own commercial teams negotiate as if compliance were free.
Faced with that arithmetic, termination is not a moral stance. It is the cheapest available accounting treatment for a cost the buyer declines to share.
The reason I refuse cynicism on this subject is that the alternative response is not hypothetical.
Levi Strauss launched a supply chain finance programme with HSBC in February 2021 under which suppliers meeting the standards in its code of conduct borrow at preferential rates against Levi's own credit standing. In the first ten months, sixteen of the twenty-one participating suppliers earned the lower rates, and participating suppliers were paid on average seventy-one days earlier than their contractual terms. PVH, the owner of Tommy Hilfiger and Calvin Klein, launched a programme in June 2022 that was the first to tie discounted financing to social criteria alongside environmental ones, benchmarking suppliers on safety, child labour and harassment through HSBC, DBS and Standard Chartered. Walmart built its programme with HSBC and CDP around science-based targets as early as 2019.
The IFC's Global Trade Supplier Finance facility disbursed 2.14 billion dollars in its 2023 financial year, sixty percent of it through structures where the interest rate falls as the supplier's environmental and social performance rises, serving the chains of Nike, Puma, Levi's and Barry Callebaut. In March 2026, H&M Group published a white paper with EY, HSBC and the Apparel Impact Institute setting out structures for financing supplier transition as a mainstream corporate finance question rather than a philanthropic one.
None of these programmes is sufficient, and several reward suppliers who least need help. But they prove the central point beyond argument. The machinery for sharing compliance costs through the ordinary instruments of trade finance already exists, is already banked, and already prices supplier improvement as an asset rather than a charitable write-off.
## A workable model?
Drawing on those precedents and on a decade spent watching questionnaires arrive at mills and farm gates, here is a model I believe good-faith actors on both sides could sign this year. It has three instruments and one governing principle, and the principle comes first: the cost of due diligence should be borne in proportion to the share of final value each actor captures, because risk follows profit or it follows nothing.
The first instrument is a compliance premium, a per-unit sum added to the price of goods from suppliers enrolled in an improvement plan, ring-fenced in a jointly controlled account and releasable only against verified milestones: recruitment fees eliminated, housing brought to standard, hours systems installed.
This converts the buyer's due diligence obligation into a funded line item instead of an unfunded mandate, and it makes the improvement plan the safe harbour that the amended CSDDD now explicitly rewards, since a buyer with a credible corrective plan is protected precisely for staying engaged.
The second instrument is sustainability-linked supply chain finance of the Levi's and IFC type, extended deliberately down to the tiers where capital is scarcest, so that a supplier's cost of borrowing falls as verified conditions improve. The buyer's contribution here costs almost nothing, because what the supplier is borrowing against is the buyer's credit rating, an asset the buyer holds anyway and currently declines to share.
The third instrument is a pooled remediation facility, funded by a levy on all buyers sourcing from a region and governed jointly by buyers, suppliers and worker representatives, which pays for remediation when harm is found, so that discovery of a problem triggers repair rather than flight. The Italian cases show what happens without one: every incentive points toward concealment, because revelation means termination.
The governing test for any buyer claiming good faith is simple to state. Show me the line in your budget that funds your suppliers' compliance, and show me the clause in your contracts that shares the cost. A brand with 222 terminations and no such line has not run a due diligence programme. It has run a divestment programme with an ethics department attached.
The workers in those Tuscan workshops, were the stated beneficiaries of every audit that ever walked past them. They are owed a system in which being found is the beginning of getting help, not the end of getting work. That system is affordable, it is already half-built by the finance programmes named above, and the only thing still missing is the willingness of buyers to put their own money where their codes of conduct have always claimed their values were.