Article

LS International 23 December 2019

Supply Chain Transparency in Fashion: Innovation That Lets You Wear Your Values by Tai Ford

An Industry Cloaked in Mistrust & Uncertainty

The global fashion industry has a transparency problem. Little is known about how clothes are made, under what labor conditions, which raw materials are used, and how the processes affect our planet. The lack of reliable information can lead to hazardous practices, brand reputational risks, and intense media scrutiny. At the same time, consumers are starting to demand more of their favorite brands, governments, and fellow citizens to make more eco-conscious decisions in every aspect of business and life. The stage is set to innovate an industry in need of change.

Fashion brands, trying to remain competitive in a market dominated by the growth of inexpensive and trendy fast fashion, continue to search the globe seeking out low-cost sourcing options. This results in more supply chain complexity scatters the responsibilities behind the production of goods and can increase the chances of environmental damage and inhumane working conditions. A crisis point was reached in 2013, when Rana Plaza, a factory complex in Bangladesh, collapsed, tragically killing over 1,000 factory workers. Even as recently as December 8th, 2019 an “illegal” factory producing bags in Delhi caught fire, trapping and killing dozens. It continues to become clearer that not all companies are making products in ethically-sound ways. Widespread media attention, consumer outcry, and stricter government regulations are forcing business leaders (and innovators) to pay more attention to supply chain transparency.

 

A Mislabeled Approach to the Value of Information

A first step to understanding the industry’s transparency problem is by looking at the context of how supply chain information is exchanged in the fashion market. A recent Harvard Business Review article wrote that supply chain transparency: “requires companies to know what is happening upstream in the supply chain and to communicate this knowledge both internally and externally.” Essentially, transparency calls for the collecting and sharing of reliable data between stakeholders on how a company’s products are made.

Gathering and communicating this data can be tricky. Companies claim that carefully set-up supply chains kept secret from competitors, can offer competitive advantages. Manufacturers can negotiate more favorable prices from their suppliers if they don’t have to disclose who the end-client is. Brands can enjoy exclusive relationships with producers that make unique or specialized fibers at prices that help gain an edge on the competition. The more you know – or rather the less others know about how you do business, the better off you will be.

Consumers, however, could care less about business competitive strategy. They want to know what companies are doing to address the pressing environmental and social challenges of the day. As a phase made memorable by a social media viral campaign from Fashion Revolution suggests, consumers want to know “#WhoMadeMyClothes”.

(Source: CONE, Gen Z CSR Study, Jun 2017)

 

The next generation of shoppers want more information about the values they care about

 

According to a study conducted on European consumers in November 2018 by Fashion Revolution, 67% agreed that they would like brands to disclose where the raw materials used in clothes came from, and 59% wanted more transparency regarding working environments. Similarly, a CONE Gen Z CSR Study in June 2017 indicated that 89% of Gen Z would rather buy from companies that support social and environmental issues.

Shoppers, concerned with the impact that the manufacturing of their favorite items has on the planet, are starting to demand more reliable and verified information so that they can make educated choices about their purchases.

Sustainability is a key topic for consumers (Source: 2019 Pulse of the Fashion Industry Report)

 

An Opportunity for Innovative Transparency

Growing consumer awareness and demand for sustainability promises to have a significant impact on the fashion industry and companies are taking notice.

Newer, more innovative brands are committing to integrating greater transparency into their supply chains and their business models – and they have become more public in their pursuits. Nashville, Tennessee-based Nisolo and Able recently published the lowest wages they pay in their supply chains, and then issued a challenge for other brands to do the same. The unicorn San Francisco-based footwear company, Allbirds, has made the base material recipe for their innovative carbon-neutral soles opensource, allowing any competitor to use it, and challenging anyone and everyone to produce more sustainably, including industry titans like Amazon.

Even larger, well-established giants in fashion and apparel space are also realizing the need to address consumer concerns. A 2019 McKinsey report showed that executives are focused most on changing business practices in “sustainability and transparency” in order to adapt to the market trends. In August 2019, at the G7 Summit in Biarritz, France, over 30 of the biggest fashion industry players – including Nike, ZARA, H&M, Kering, and others – signed the “Fashion Pact”, pledging their support to help improve KPIs related to climate change, biodiversity, and ocean pollution.

New and loud expectations are being addressed with ambitious commitments. End-consumer demanded supply chain transparency is redefining business priorities. Companies who can show (and verify) their commitment towards being better global citizens, can capture the attention of a vibrant market with a passionate customer base.

 

A Market Ready for Customer-centric Solutions

Unfortunately, many brands don’t have the tools or systems in place to efficiently collect supply chain data. They also don’t have the relevant channels for presenting this information in a trustworthy way to their customers. Several supply chain databases, management tools, and tracing solutions exist in the market; however, they focus on in-depth back-end and internal supply chain organization – an important step for creating transparency, but one that doesn’t always communicate reliable information on sustainability and fairness. A few organizations and startups. such as retraced, are stepping up, hoping to address this market gap by using trust-inducing technologies, like blockchain, and interactive end-consumer platforms.

The retraced supply chain transparency tool (source: retraced.co)

Ultimately, greater supply chain transparency promises to help companies connect their customers to the information and values that they care about. Strong business commitments towards more sustainable and ethical manufacturing standards – and to provide easy access to honest information – will help redefine the way fashion products are demanded and consumed.

 

Tai Ford

Tai Ford is the Head of Communications and Partnerships at retraced, a blockchain-powered supply chain transparency solution that gives end-consumers deeper insights into the value chains of the products they care about.