Milan wants to set up a supply-chain database to help address incidents of labour exploitation in the fashion sector, according to a draft of the plan seen by The Business of Fashion.

The protocol put forward by the Prefecture of Milan comes amid a scandal over poor working conditions in Italian factories used by major luxury brands. Since the start of the year, Milanese prosecutors have linked companies including Dior and Armani to sweatshops operating on the outskirts of the city. Their presence in luxury brands’ supply chains reflected a lack of adequate controls to prevent and stem labour exploitation, prosecutors concluded.

Armani has said it has always had measures in place to minimise the risk of supply chain abuses. Dior has said the findings don’t reflect the way it operates and that it is working to improve its supply chain oversight.

The scheme put forward by the Prefecture of Milan is an effort to address holes in the industry’s controls. It aims to establish a common system to support supply-chain monitoring processes and would create a centralised platform where manufacturers could upload documents certifying their compliance with tax and labour laws, making it easier for regulators and brands to carry out checks.

However, participation would be voluntary and it would only apply to the Lombardy region, according to the draft plan. Many of the small and medium-sized businesses that populate Italy’s manufacturing base are located elsewhere in the country and are already struggling to meet demands for additional investment in compliance from brands amid a market downturn.

The proposal is in the process of being finalised in consultation with a working group of government and law enforcement agencies, unions and fashion trade groups.

Several important details remain under discussion and how the protocol will be implemented still requires clarification, said Camera Nazionale della Moda Italiana president Carlo Capasa in an email. Outstanding concerns include its limited geographic scope, challenges in ensuring confidentiality of sensitive information and the complexity of documentation the scheme would require, he said.

Still, any initiative agreed in Milan would likely set a precedent for other manufacturing hubs in the country, particularly since brands, who drive the industry’s purchasing power, are largely based in the city, said Matilde Rota, a partner in the Milan team at the law firm Withers.

Others worry adding more layers of screening will place additional pressure on manufacturers without addressing the underlying cause of the problems. “It’s not a problem of control; it’s a problem of how much pressure brands put on costs,” said Flavio Sciuccati, a senior partner and director of the fashion unit at consultancy and think tank The European House - Ambrosetti.

Simone Stern contributed to this article.

Disclosure: LVMH is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholders’ documentation guaranteeing BoF’s complete editorial independence.