Panellists discussed innovations for supply chain efficiency

Panellists discussed innovations for supply chain efficiency

With most of the environmental impact of an apparel brand or retailer's business embedded in its supply chain, knowing and understanding exactly who's on the list is a vital first step to tackling sustainability.

"Where things really need to start is for you to know your supply chain...where your manufacturing is occurring," says Linda Greer, senior scientist, health programme, at the National Resources Defence Council (NRDC).

"You can't really be disruptive [or] innovative until you take this very first important step of actually knowing where stuff is made and benchmarking the environmental performance of those facilities before you get started so you know where to go," she told delegates during a panel discussion on 'Innovations for supply chain efficiency' at the recent Copenhagen Fashion Summit.

Environmental impacts usually take place in Tier 2 of the supply chain, where fabric is dyed and finished, rather than in Tier 1 where most of the labour issues lie, Greer says.

Pam Batty, vice president of corporate responsibility at British luxury brand Burberry, concurs.

The company conducted an environmental baseline assessment in 2012 that looked at its end-to-end operations and was "super helpful," Batty says, in developing Burberry's first environmental strategy by highlighting where the big impacts were within its supply chain.

As a result, Burberry found almost 50% of its environmental impacts happen before any materials reach a factory, with 20% at the raw material stage and 29% at processing.

It has also rolled out NRDC's Clean by Design programme, which sees the non-profit work with major apparel retailers and brands by using their buying power as leverage to clean up the factories in their supply chains. 

During its first deployment in Italy, despite what Batty calls the country's "mature and established textile industry," Burberry achieved energy and water savings of 14% and 11% respectively. Since then, the initiative has been rolled out in 28 facilities globally – which process about 43% of Burberry's total products – and has identified 230 individual opportunities to save water or energy.

Géraldine Vallejo, sustainability programme director at French luxury goods group Kering, offers a similar view.

"To start with, you have to know your supply chain and you have to know where the impacts are to effectively reduce them; [to] know where to innovate and where to prioritise."

To do this, the group behind brands such as Gucci, Stella McCartney, and Puma has created an Environmental Profit and Loss (EP&L) methodology, which measures and monetises the environmental impacts from business activities across the entire supply chain.

The methodology, which Kering has been using for the last five years, helps better manage the impact of its activities through product design, informed sourcing decisions, and manufacturing research and development. 

The company, whose other brands include Saint Laurent and Balenciaga, also uses its annual EP&L report as a tool to drive decision-making in the design, sourcing and manufacture of its products.

"It's a great exercise because we really have a clear view of where and how our activities create environmental impact, and based on these results we are able to take action," Vallejo explains. "The results were amazing because we see that less than 10% is due to our own operations, [while] 90% is due to the impact within the supply chain."

Consequently, focusing only on your own operations is "missing the point. You have to address the efficiency in the supply chain."

Vallejo is also an ambassador of the Clean by Design programme, which – like Burberry – Kering first implemented in Italy.

"Very quickly our textile suppliers were able to achieve on average a 20% greenhouse gas emission reduction," she says, adding due to its success and as the majority of Kering's environmental impacts were upstream in the supply chain, the programme was moved to Tier 3 and Tier 4 suppliers – the wool scourers and silk reelers.

"It's a win for the supplier on its energy bill, it's a win for us because it helps us achieve our target, and it's a win for the collaboration between suppliers."

Forging partnerships?

It's this sense of sharing best practice that the panellists believe will help navigate the path towards not only developing a more sustainable company, but a more sustainable industry overall.

The group hailed forging partnerships as the single most important thing their respective companies have done to enable supply chain success.

According to Batty, it's about three things: partnerships with non-profits such as the NRDC; partnerships within the supply chain; and partnerships with internal supply chain teams too.

"All of those three things together were a very important unlock and a way in which we were able to deliver the resource efficiency programme in our supply chain," she explains.

"There's that lightbulb moment [when] you pick the right partner," agrees Nicolaj Reffstrup, CEO of Danish clothing brand Ganni. "To me, it's very much about all the little projects [that] in the end turn out to be this patchwork of sustainable supply chain solutions.

"It changes the entire culture of a company and in the end, that's what you want to achieve...[Sustainability] needs to be part of the DNA of your company in the end."

Meanwhile, equal partnerships are also "really important" at Turkish denim manufacturing giant Isko.

"We [need to] demand the same standard from each other. If my customer demands something from me, I demand the same from my supplier," explains CSR executive Ebru Ozkucuk Guler. "I really strongly believe that next year, more manufacturers will believe in equal partnerships."

And collaboration needs to happen across the company, not just in the teams dedicated to working on the supply chain, as Vallejo explains.

"An important step for us was to set a target as a group so that internal people were motivated to take action. It's really a collaborative approach," she says.

Susanna Wilson, global head of sustainable networks and entrepreneurship at HSBC, favours a similar approach.

"Executive, senior management, support is critical," she says, adding the bank – which is the first to be represented at the Copenhagen Fashion Summit – has "listened closely" to the NGOs it works with within the apparel sector, including the WWF, WaterAid and the Apparel Impact Institute.

"Learning from those organisations where there's a really deep understanding of what the issues are is invaluable," she says.

According to Greer, the bank has a unique role to play in supporting the shift to sustainability as finance is key.

It recently announced a commitment to develop commercial propositions for clients and is looking at how it can embed sustainability components into its existing financial products – whether that's a sustainability element to working capital, rewarding good sustainability performance, or offering preferential terms for capital expenditure that is required for sustainability performance improvements.

But forging partnerships with companies that are willing to share their success stories is often difficult, especially if you're a smaller business.

"The problem, in particular with SMEs, is we're not experts in sustainability," says Ganni's Reffstrup. "We're experts in design, sales, marketing, and in sourcing, but we do not possess the skills or the capacity to create innovative solutions for own supply chain which we control.

"There's nobody out there to help us [and] the consumer does not want to pay a premium for a sustainable product. There are no governments out there that are truly helping us, it's up to us and our supply chain."

Ganni, which was taken over by Reffstrup in 2009, has mapped its carbon dioxide footprint since 2016 through an external auditor and now buys "carbon credits" to be able to offer products that are "carbon compensated".

"It's been a great tool for us," Reffstrup explains. "It turns an abstract challenge into something that's measurable and tangible, which is what it's all about when you're an SME and it helps that it's something we pay for every year. There's nothing like a monetary punishment when you want to adjust people's behaviour."

He adds the company roughly spends about 5% of its total sales on sustainability, noting the exercise could be a useful one for the industry.

"Frankly I've got no idea if that's a lot or if it isn't [but] I'd love to understand if there's a benchmark for the industry. Imagine if as an industry [we] knew that if we collectively spent X percent of total sales on sustainability, we'd make profound changes. That would be an awesome project."

Collaborate to innovate

But Reffstrup admits the pressure to scale up the firm's social responsibility efforts is tough at times and figuring out what to do next is a "huge challenge."

"As an SME I can only change my supply chain profoundly if someone bigger than me will help create that innovation and make it available to me, or if we pool resources with other SMEs to gain leverage towards our supply chain.

"It doesn't mean we're not committed to the cause, it's simply overwhelming sometimes," he says, adding that while SMEs are willing to invest in pushing through sustainable supply chain innovations, these tools need to be turnkeys as "creating that change from scratch is a tough one."

At Isko, Guler is championing the collaboration cause. She has spearheaded a number of environmental social and educational projects including working to create an independently verified environmental product declaration and a product category rule for denim that other companies can follow.

A globally recognised methodology, life cycle assessments (LCA) are used to assess and quantify the environmental footprint of a product, considering impacts across the entire product lifecycle from raw material to finished product – allowing customers to make fully informed decisions.

In order to ensure the validity and replicability of the LCAs, publicly available and independently verified Environmental Product Declarations (EPD) have been produced by Isko, which claims to have become the first denim manufacturer globally to obtain pre-certified EPDs for all of its products, grouped into nine categories.

The results of these industry-first EPDs are being used to create independently devised Product Category Rules (PCR) for future denim industry EPDs, due to be published in November 2018.

The reality of making a denim fabric, Guler explains, is that when you compare it with other fabrics, its production is more damaging to the environment. As a result, you have more responsibility and so the need for transparency along the supply chain becomes that much more important.

"If you say you are a leader, you have a responsibility [to] share with the market," she says. "Maybe you don't want to share your know-how with others but if you are doing something good in responsibility, in innovation, then you have to share [it]."

According to Burberry's Batty, innovation is going to be the key to helping the industry move to a more sustainable model.

Last year, the brand's Burberry Foundation pledged GBP3m (US$4.01m) to the Royal College of Art in London to establish the Burberry Materials Future Research Group – the first of its kind in the world to be in a traditional art and design university.

The aim is to "bring some radical thinking" to sustainability matters and as all of the group's research will be publicly available, hopefully benefit the wider industry.

Vallejo agrees. "We have a role to address the challenges of our industry like closing the loop [and] this means breaks for innovation."