Supply Chain
Transparency and Traceability Must Drive Sustainable Fashion

We see a clear trend in the US and Europe: Conscious consumers are demanding to know how retailers produced their clothes, if the materials used were recycled or organic, and if the workers were paid fair wages with good working conditions. More and more studies point to authentic sustainability strategies as a key differentiator for consumers, making it key to competitiveness. Such buying concerns are especially important to Gen Z consumers and their parents and grandparents, who are being increasingly influenced by their savvy and passionate younger family members.

Regulators are increasingly cracking down and issuing fines for greenwashing, where brands are claiming products to be sustainable without providing the data to back it up. And the US is now withholding fashion goods in customs unless the importer can prove that they do not contain cotton from the Xinxiang region of China. With the International Consumer Protection and Enforcement Network finding that 40 percent of environmental claims made by fashion brands could be misleading, there is ample room for improvement.

Despite the significant and detrimental effects fashion value chains have had in textile hubs worldwide, in anything from soil and water pollution to unfair wages and worker's rights, the need for sustainable transformation in the fashion industry has been a slow burn. But it is only a matter of time. We are seeing the beginnings of a revolution in how fashion is produced and consumed. As more and more consumers, brands and regulators are pushing the agenda in Europe and the US, the topic will quickly move from a niche concern to dinner-table conversations.

It's not necessarily the case that all brands are actively trying to avoid dealing with this issue. In Laundering Cotton: How Xinxiang Cotton is Obscured in International Supply Chains, experts at Sheffield Hallam University found that intermediaries in supply chains often concealed their true origins from companies further up the chain. And if your audits and verification systems rely on external parties that visit factories once a year, it won't be easy to know who your suppliers are sourcing from. But as the researchers wrote: "They can no longer afford not to know."

So, how do we change a system that is fundamentally broken?

Without traceability, there can be no sustainability. If we do not know precisely what is going on at every level of the supply chain — in every remote corner of the world — and if you do not know where things are going wrong, how would you ever be able to right them?

Getting to this granular level of knowledge can be a daunting task when working with something as complex and opaque as fashion supply chains — with as much as 95 percent of the value chain data locked up in documents, in paper or electronic form. But it must be done; and digital technology holds the key to doing it at the scale necessary to make a real difference.

It may have been difficult to imagine a couple of years ago, but today there are tools in place that can help brands develop a complete understanding of their supply chain from raw material to finished goods. With digital traceability, it is possible to collect data throughout the supply chain on not only a company or product level, but down to individual batches. This is obviously helpful for compliance; brands can confidently make sustainability claims and meet consumer and regulatory requirements for transparency, as they have the data to back it up. But more importantly, to create fundamental change in the fashion industry, traceability gives brands a baseline for their actual sustainability performance, so they understand where and how to improve it.

Traceability will fundamentally change fashion — for the better

One of the basic functions of a traceability system is to help brands get an overview of their supply chains and create a digital map of suppliers, allowing them to track their performance and document their certifications. With this fundamental knowledge in place, decision-makers can start drilling down to see how their suppliers are performing on ESG (environmental, social and governance) parameters. They can visualize dependencies and risks in their supply chain and do "what-if" planning. To this end, brands will need to invite and incentivize suppliers to disclose information through the system — from facts about themselves, such as how they treat and compensate workers; to which suppliers those suppliers source materials from; to whether the materials, with validated evidence, meet certain standards.

Providing this information to brands has historically been a painful and time-consuming process, with little motivation for suppliers to participate other than to keep their customers happy and keep the orders flowing. This is changing as more and more brands become dependent on reliable data to measure supplier ESG performance. Providing such information is becoming a prerequisite for doing business; and suppliers should not only take it seriously but see it as a way to distinguish themselves in the marketplace. Because as traceability and transparency gain momentum, the growers, spinners and weavers that have previously operated in the shadows are now under the spotlight.

More and more brands will start defining their working relations not only based on price, but on whether these relations live up to the expectations of their customers and regulatory bodies. They will need to prove that all the garment workers have living wages and good working conditions — or if they find that they do not, the brands will be held accountable to help their suppliers fix this.

Traceability is the great enabler. If consumers have historically paid a premium on an organic T-shirt, we can be almost 100 percent confident that that premium has never reached the garment worker.

Now, when we can track the whole supply chain for individual products and batches, this discrepancy will become visible and can no longer be disregarded. Factories that ignore health and safety will no longer go unnoticed. Traceability is the foundation upon which we can truly revolutionize the fashion industry, revealing the actual costs of products and ensuring that the wealth generated from production gets redistributed more fairly.

A recent McKinsey report deemed that $3.5 billion per year is needed to hold global warming to 1.5°C above preindustrial levels, potentially limiting the most dangerous and irreversible effects of climate change. No one company, government or bank will be able to foot that bill. Cross-industry collaboration is needed to produce the financing and the solutions required to fill the gap between where we want to be in 2030 and where we are today.

For this collaboration to succeed, all industry players — from consumers and brands to factories and auditors — must work together and trust each other. Real, objective data enables trust, allowing brands to set ambitious targets and track and communicate progress — no matter where it happens in the supply chain.

I do not doubt that traceability will change the world of fashion forever — and for the better — especially for the millions of men and women working in production. I aspire to accelerate sustainable transformation by supplying brands with the data needed to fully understand their supply chains and take the proper corrective action to realize these changes. I hope all those working in the fashion and textiles industry will contribute by sharing their data and knowledge.