Italian fashion signs a pact to combat undeclared work and labour exploitation

On June 26, 2025, at the Palace of Justice in Milan, the “Memorandum of Understanding for the Legality of Procurement Contracts in the Fashion Production Supply Chains” was signed—an historic agreement aimed at combating undeclared work and illegal practices, still too widespread along the supply chain of one of the most iconic sectors of Made in Italy.

The signing involved the associations representing fashion sector employers, trade unions, and numerous Italian public authorities, most notably the Criminal Court of Milan, whose involvement highlights the legal and institutional importance of the initiative.

This represents a further step in the ongoing evolution of Italian and international regulations aimed at combating forced labour and modern slavery in supply chains, in line with the social pillar of ESG. For a useful tool to navigate this complex regulatory framework, see the CMS Expert Guide on Human Rights and Forced Labour. 

A sector of excellence with critical shadows

The fashion industry is a flagship of the Italian economy—not only due to its cultural and symbolic value but also for its significant economic and employment impact.

However, in recent years, the production chain has come under scrutiny due to the presence of “grey areas,” characterized by contractual dumping, undeclared work, opaque subcontracting, and modern forms of labour exploitation.

To address these issues, the Protocol aims to strengthen principles of social responsibility, contractual legality, and shared monitoring, promoting a new model of supply chain management that is fair, transparent, and verifiable.

Tools of the Protocol: the Supply Chain Platform

A central component of the Protocol is the creation of a digital Supply Chain Platform, available in both Italian and English. Participation will be voluntary, and the platform will allow for the profiling of companies involved in the various stages of production.

The goal is to enable lead brands to verify their suppliers’ compliance with legal, contractual, and regulatory obligations.

Companies that meet the required documentation standards (including tax and social security compliance, and health and safety in the workplace) will be granted a "Transparency Certificate in the Fashion Sector," symbolised by a green label.

These accredited entities will be included in a “Green List” accessible to brands and other authorised users within the platform.

Access to data will be regulated by a system of “visibility cones”, ensuring confidentiality and information security: no supplier will be able to access the data of suppliers at the same or higher levels, or those belonging to a different supply chain.

Concrete commitments for brands and suppliers

The Protocol establishes clear responsibilities for both brands and supply chain companies. Brands commit to encouraging their suppliers to join the platform, by including specific contractual clauses related to labour legality, health and safety, taxation, and social security compliance.

In addition, brands may adopt one or more of the following operational tools:

• Onboarding and monitoring procedures for suppliers/sub-suppliers, based on risk criteria.
• Codes of Conduct, setting ethical principles and behavioural expectations for supply chain partners.
• Targeted training programs for personnel responsible for implementing the Protocol’s controls and processes.

First-tier suppliers are also expected to play an active role by reporting their subcontractors to the brand—according to defined onboarding procedures—to enable proper audit planning. Subcontractors will be required to sign contracts that mandate compliance with the applicable national and territorial collective bargaining agreements, including those governing the fashion industry and artisanal production.

Monitoring Committee

To ensure the Protocol’s effectiveness, a Monitoring Committee has been established. It includes representatives from the Prefecture of Milan, trade unions, employers’ associations, and labour law experts.

Beyond overseeing the platform’s development, the committee plays a crucial role in supervising the implementation of the Protocol and evaluating the effectiveness of the adopted measures.

The committee periodically analyses the data collected through the Platform and checks the accuracy and authenticity of the documentation submitted by companies.

In collaboration with labour inspectors and law enforcement, the committee can also plan additional audits or extraordinary inspections, particularly in cases of non-cooperation or suspected irregularities.

Strengths and weaknesses of the Protocol

The Milan Protocol stands out as a virtuous and replicable model, capable of balancing the needs for legality, social sustainability, and market competitiveness. However, it is not without its limitations: the voluntary nature of participation represents a potential weakness, as it allows brands to continue working with suppliers who are not registered on the platform—thus reducing the systemic effectiveness of the initiative.

To encourage participation, the Lombardy Region will issue a renewable transparency certificate valid for six months and offer financial incentives to companies that demonstrate concrete commitment and maintain employment levels across the supply chain. Importantly, no costs will be charged to the companies for joining or maintaining the platform.

Conclusion: toward a more ethical and sustainable fashion industry

The signing of the Protocol is a strong institutional and cultural signal. It introduces an innovative model that integrates digital tools, incentive systems, and joint monitoring mechanisms.

It is also a further sign that demonstrates that companies must pay increasing attention to compliance with labour laws and HR issues, both within their own organizations and within the organizations of the companies that are part of their supply chain.

A full impact assessment is scheduled one year after the signing, which may lead to the revision of access criteria, incentives, and control procedures.

However, to ensure a truly transformative effect, it will be necessary to extend the Protocol’s application nationwide and support it with legislative measures that reinforce its scope. Only in this way can we envision a fashion supply chain in Italy that is free from exploitation, grounded in legality, human rights, and sustainability.