Long, complex, and delocalized supply chains, fragmented over different continents, make it difficult for fashion brands to monitor their operations closely. Companies often don’t fully understand the true social and environmental impacts of their business practices due to a lack of visibility along the supply chains.
The complex global nature of the fashion industry makes transparency a challenging goal. The supply chain for each garment is unique. It involves multiple stages and countries, making it difficult to track products from raw materials to finished goods and ensure that they are produced responsibly. Manufacturers often outsource specific tasks to smaller companies, creating additional layers of abstraction that can shield the overarching brand from liability and make it difficult to verify and ensure that suppliers adhere to ethical and sustainable practices, such as fair labor standards and environmental regulations.
As things stand, the fashion industry still has a long way to go toward being more transparent. According to a study from the United Nations Economic Commission, only a third of the top 100 clothing companies track their supply chains. More than two-thirds (69%) find the fragmentation and complexity of the global business network a key obstacle. To rebuild consumer trust, and meet new legislative requirements, this must change.
Due to poor monitoring and limited control over fashion supply chains, high environmental and social security risks arise in this sector. One of the worst examples of this can be traced back to April 24, 2013, when a garment factory called Rana Plaza in Dhaka, Bangladesh collapsed, killing 1,134 workers. This tragedy exposed the major lack of transparency in global fashion supply chains that has detrimental consequences for many garment workers.
Implementing sustainability in brands’ operations and achieving traceability not only makes it easier to reduce their impacts, it also improves efficiency and resilience in supply chains, which allows brands to take control, monitoring costs and detecting risks. Sustainability can represent a strategic business tool that allows for major competitive advantages in terms of market penetration, brand identity, and community development.
The power of transparency is truly a life-saving one; it’s needed to prevent disasters like the Rana Plaza incident. By shining a light on opaque supply chains where poor working conditions and environmental exploitation thrive, transparency has an immense power to bring about positive change.
The growing awareness of consumers about environmental and social issues means they’re unlikely to align themselves with brands that are known to pollute rivers, drive up greenhouse gas emissions or fail to pay their workers properly. Companies have a responsibility to provide that assurance and to evidence it with accurate and verifiable claims.
In 2016, nine human rights and labor rights organizations, together with global unions, formed a coalition to improve transparency in garment and footwear supply chains. The coalition reached out to more than 70 companies with own-brand label products, urging them to align their supply chain disclosure practices with the ‘Transparency Pledge’ standard and advance industry good practice. The Transparency Pledge asked companies to publish on their own websites a list of the names, addresses, and other details of at least the factories involved in assembling, embellishing, and finishing their goods (called tier-1 factories).
In the two years since the coalition’s first report in 2017, there has been a significant increase in the number of companies that have published the details of their tier-1 supplier factories. The 2019 Fashion Transparency Index (FTI)—coming 14 years after the first company publicly disclosed its supplier factories list—shows that 35 percent of the 200 brands surveyed have published their tier-1 factory lists. The percentage of brands publicly disclosing has more than tripled from 12.5 percent of the 40 brands surveyed in the 2016 FTI that reported doing so at that time.
Large fashion brands and retailers are requiring product chain-of-custody documentation from suppliers at every tier by collecting transactional data as raw materials are transformed into a finished product. Also, new laws are in the works to mandate greater environmental, social and governance (ESG) disclosures, documentation and tracking...Faltering on the ESG front can result in shipment seizure, lost sales and damaged customer relationships. On the other hand, strong ESG compliance offers opportunities to build sales, profits and trust between trading partners and with consumers.
ESG initiatives leapfrogged from the sixth position to the second-highest growth opportunity and from the seventh to the second-highest improvement priority among 350 apparel and consumer goods professionals surveyed by CGS in the last quarter of 2022. Eighty-seven percent of CGS survey respondents said supply chain visibility is a major challenge they are addressing. An Ernst & Young-commissioned survey of Fortune 1000 C-suite executives found that 100% of respondents said sustainability and social compliance are important to the success of their business.
Stay curious! Signing off with a smile.
-Savannah
Sources:
https://www.forbes.com/sites/forbestechcouncil/2023/04/07/fashion-supply-chain-transparency-takes-center-stage/
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