This article aims to help you better understand the key principles behind supply chain transparency, namely:

1. Why supply chain visibility is critical to accelerating decarbonisation
2. Why the global fashion industry has a notoriously opaque and complex supply chain
3. The business opportunity that supply chain transparency presents
4. The role of technology in unlocking end-to-end visibility and engagement

What is the current Impact of the fashion industry?

The fashion industry accounts for 4% of the world’s greenhouse gas emissions (GHGs) and 10% of the world’s CO2 emissions. If the industry continues to incrementally decarbonise at its current pace, and grow at the forecasted CAGR of 2% year on year until 2030, it is on a trajectory to exceed the 1.5° pathway outlined by the IPCC by a shocking 50% (McKinsey).

Supply chain visibility is critical to accelerate decarbonisation

With 96% of a fashion brand’s emissions attributable to Scope 3 emissions (indirect emissions that occur in a company’s value chain) according to research by the World Resources Institute, the industry’s decarbonisation efforts need to be focused on its supply chains. To accelerate Scope 3 decarbonisation efforts you first need to understand the impact of your supply chain. Blind spots and information gaps mean emissions often go undetected. Gaining end-to-end visibility will enable enterprises to increase the accuracy and breadth of their emission understanding. This can in turn help to identify and prioritise impact reduction initiatives.

Why the global fashion industry has a notoriously opaque supply chain

With one of the most globalised and fragmented supply chains in the world, untangling fashion’s sprawling supply chain to identify emissions is a costly and time-consuming data headache. It is particularly complicated because supply chains are:

• Fragmented - the fashion industry has stretched supply chains, relying on sequential levels of suppliers for raw material extraction, raw material processing, material production and assembly (see diagram below). Disjointed suppliers make it harder to establish consistent data inflows and collaboration frameworks. The current piecemeal data collection approach makes tracking emissions from fibre to factory uniquely challenging.
• Global - fashion’s supply chains touch nearly every corner of the world. Facilitating supplier dialogue and data collection across numerous languages, operational formats and regulations presents itself as a monumental task. A shift in sourcing and manufacturing hubs has seen fashion brands like Benetton and Hugo Boss make strategic decisions to ‘nearshore’ production to better close the transparency gap.
• Highly variable - the number of collections across a seasonal calendar drastically increases sourcing and manufacturing complexity.

A typical fashion supply chain, demonstrating the extent of supply chain fragmentation

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Having aligned and committed to the Transparency Pledge, H&M was one of the first global fashion retailers to disclose supplier details including the name, location, product type produced, and number of workers employed by each supplier. Engaging in business with over 602 commercial product suppliers who manufacture products for brands in over 1500 tier-one factories across Europe, Asia and Africa, supply chain disclosure and visibility is a priority area for H&M Group to achieve a more sustainable value chain.

Supply chain transparency and engagement present one of the biggest opportunities for business

Brands that lead on supply chain transparency can secure a competitive advantage and win a large market share. Five key opportunities that supply chain transparency presents:

1. Measure your sustainability performance: robust data measurement enables accurate data gains in a space where data gaps are common. Calculating primary emission data directly from suppliers rather than using assumption-based secondary data will identify areas of materiality and enhance understanding of your impact.
2. Accelerate progress towards Net Zero: with improved confidence and ability to prioritise abatement initiatives backed by strong data. More than 50% of fashion decision-makers say traceability will be a top-five enabler to reduce emissions in their supply chain before 2025.
3. Efficiently comply with regulation: traceability enables companies to proactively respond to the fast-moving regulatory space with confidence.
4. Meet increasing consumer demands: according to Fashion Revolution, 69% of consumers in European markets want to know how their clothes are made, with 80% of respondents agreeing that it is an important buying consideration for a brand to have sustainability certifications. The increasing demand for reliable and demonstrable data to back up claims is important to consolidate brands’ value propositions and consumer base.
5. Unlock climate finance: demonstrate to investors how you are comprehensively meeting investment criteria and secure preferential financing for sustainability initiatives.

How a digital solution facilitates supply chain transparency

Digital emissions management solutions like Altruistiq will be critical for fashion companies to overcome the complexity and fragmentation of supply chains and compile accurate, reliable data from across the supply chain.

Altruistiq’s platform accelerates reaching accurate supply chain transparency in four key ways:

• Streamlines data gathering from across the fashion value cycle and minimises piecemeal collection: automated, consistent data gathering of data in any format, from across the supply chain to build an accurate and reliable emission baseline.
• Tracks emission impact continuously in a centralised data hub: integrate data streams from across your operations and supply chain to provide up-to-date impact assessments. Use these insights to track progress against targets and prioritise abatement initiatives.
• Engages your supply chain to improve data collection: onboard suppliers onto the platform to enable the easy sharing of emission data, or create a quick estimation baseline, to provide your baseline with more accurate data with supplier-specific data, surface emission hotspots across individual suppliers, and engage suppliers in measurement, reduction initiatives and target setting.
• Maps emissions data down to product-level granularity: aggregate data and map it down to a product or SKU level to provide granular and actionable insight.

Putting collaboration into practice through easy-to-use platforms and extending access to these tools to suppliers will be key to building a more transparent industry.

Summary

Whilst transparency isn’t itself an end goal, it is a vital enabler for brands to target improvements, collaborate across the industry and invest in long-term change. To accelerate progress towards supply chain transparency, companies should look to digital solutions to enable automated data gathering, processing, consolidation and supplier engagement.

Altruistiq is an impact management platform, enabling large enterprise companies to automate sustainability data measurement, management and exchange - with unparalleled accuracy and ease.

Please get in touch with amy@altruistiq.com if you are interested in hearing more.

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