PSF 2016 – Speeding up sustainable supply chain solutions
A collaborative approach is seen as key to tackling sustainability issues
The new Paris climate change deal struck at the COP21 summit late last year should be yet another catalyst for the apparel industry and its supply chain to devise more environmentally-friendly solutions and to collaborate more effectively. But as speakers at this month's Prime Source Forum in Hong Kong admitted, the path to success in sustainability is never going to be an easy one.
The agreement, struck on 12 December at the 21st session of the Conference of the Parties (COP) to the UN Framework Convention on Climate Change (or COP 21), called on all nations to limit global warming to a maximum of 2°C by 2050.
It also outlined several implications for the apparel sector – one of the most energy intensive industries – whose contribution to climate change is dominated by the requirement for burning fossil fuel to create electricity for heating water and air in production processes such as dyeing and finishing, laundering and land use for resources.
But while there is a high aspiration on the part of the industry to drive change, the actions and real happenings are clearly lagging behind, Tino Zeiske, SVP of corporate responsibility for German retail giant Metro AG, told delegates in a keynote speech at this year's Prime Source Forum in Hong Kong.
"Something that is becoming more important right now is the loss of trust and confidence of investors and the wider public in governments. It looks like many governments in the world are lacking the answers to the challenges which they face. This is something that is frightening on the one hand, but it also gives an opportunity to businesses. With businesses coming under more scrutiny, it is saying business must be the new activist. And if that is true, we need to ask what are the implications? What is it that will drive the context for us in the next couple of years?"
Zeiske outlined five ways the climate change talks are likely to impact businesses:
- A low carbon approach will soon be the only way to do business. Therefore, regulatory change is to be expected as governments come under pressure to deliver on COP21. There is a need for more clarity on the regulation side and on the penalties and incentives.
- Companies will need to embrace their disclosure requirements and the importance of target setting. Without targets and goals it is impossible to communicate what is being done. Soft policies and commitments will no longer hold true. Investors, rating agencies, NGOs, and the wider public will want businesses to be very clear.
- Innovation and digital technologies will be game-changers for everyone. This has already taken over mostly at the front end but also needs to go backwards in the value chain. Even farmers need digitalisation. Use sustainability as a driver for innovation and differentiation, not just risk management.
- Collaboration across the industry is the key amplifier for impact. How we can forums be leveraged for more practical solutions? Much more can be done. Companies with experience in this field need to get on board and seek wider participation from those not yet involved, such as smaller companies that don't have the resources.
- There will be no substantial improvement without engagement from consumers. Ask a consumer about sustainability and "you always get a positive answer, but if you follow them to the shelf then you realise you have lost half of them." The job for the industry is to make the whole story more sexy and enter into a new level of communication. Marketing and sustainability need to be put in the same boat.
One company well-versed in the subject of sustainability is Swedish apparel giant Hennes & Mauritz (H&M). Despite being something of a pioneer in the field, it also admits that the path to success in sustainability is never going to be an easy one – as H&M's global supply chain manager Pascal Brun explained.
"We still have suppliers who don't see workers as their main asset, and this is something we have to address. I spend a lot of time now increasing awareness with suppliers. Too many of them don't really believe in what we believe in when it comes to sustainability. They don't know what is happening and how to tackle it."
In this respect, Brun says taking a collaborative approach is key to tackling such issues. "It's not about just one or a few. If the other brands don't take the lead, things won't change. The transformation is not something individuals will manage, it has to be collaborative."
Hong Kong-based manufacturer TAL Apparel Group is another company that sees sustainability and ethics as core to group strategy. Chief technology officer, Delman Lee, explained that the three-stage journey the company has been on for the past seven years ago began with creating a code of conduct and setting internal sustainability targets, and is now focused on how to make sustainability make business sense.
"We want to engage our customers when we talk about the whole supply chain. Not just upstream to suppliers but downstream to our customers. Not all of them have the same approach, so it's about getting them engaged in the whole supply chain."
And Primark, a clothing retailer often questioned over its commitment to a range of ethical and environmental retail issues, also admits that the biggest challenge is finding a way of working well with its suppliers.
"The feedback we get is mainly positive because we focus on remediation and not penalties," explained Charles Dickinson, environmental sustainability controller at Primark. "But it's important to work with the supplier to help them improve based on the knowledge we have in our team. It's about ensuring your clothes are made with respect to the workers and the market.
"People talk about developing countries, but they are just at a different stage of development. The progress we've seen in Bangladesh and China is huge, and collaboration with brands like the Sustainable Apparel Coalition (SAC) and ZDHC (Zero Discharge of Hazardous Chemicals) is key. They can make a big difference."
Primark is one of a number of retailers that have signed up to the SAC's Higg Index, a tool that gauges environmental sustainability and allows suppliers, manufacturers, brands and retailers to evaluate materials, products, facilities and processes based on environmental and product design choices.
At present, the Coalition's members represent around 40% of apparel market turnover, and since its inception has completed close to 9,000 assessments – 5,500 in the last year alone.
However, Jason Kibbey, CEO of the SAC, admits there is a long way still to go. Not just on the development of the Higg Index, but on the industry's sustainability efforts as a whole.
"If we look at the progress of the last 20 years, it has not worked to the scale people had hoped it would. It has gotten rid of some of the problems but it has not led to systemic change. We have to be systemic and holistic about how we address these issues."
Kibbey believes it is critical for brands to start moving away from proprietor assessments to the Higg Index instead, in order to benefit from improvements being made to the tool. "We're having some growing pains trying to put this on an efficient platform, but it's still growing really fast and we're excited to see how many companies are moving fast with the Higg Index."
While Kibbey says the next frontier for the Index is about improvement, which could potentially be international in scope, both TAL and Primark point out that using the Index to engage with the consumer will be key for brands.
Primark's Dickinson offers a suggestion: "We do believe a consumer facing label is important and for us the Higg is the ideal platform to do this. [The SAC] are ahead of the curve against what the EU is trying to develop. To make it simple we would advocate a rating similar to what the electronic industry uses on energy from A-E (A is good, E is poor), then this gives the consumer an option to choose."
Kibbey admits they are still "figuring out" what the tool will look like in terms of consumer facing information, but says there are three models currently under discussion: a score-scale encompassing social and environmental issues; a simplified traffic light rating system; and one that opens up the data but lets companies decide how to market it themselves.
But he is keen to acknowledge that the Coalition isn't the only sustainability platform, and that tighter industry collaboration is key for any real change to happen.
"We would love to see much more engagement with all the different initiatives. The door is open to try and move some of these tools away from just being SAC tools. Longer term there is going to need to be more consolidation and even greater degrees of collaboration than we have seen before. It's a marketplace of different assessments and there are lots of choices out there. We're not the only game in town and if there's another assessment that provides more value, it's competition. We think the market can make those determinations. But the door is open and we would like to do much more."
Click on the following link to read more from the Prime Source Forum:
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