Gildan Activewear has woven its position as a vertically integrated apparel manufacturer into the company’s environmental, social and governance (ESG) standards and ethos.
Peter Iliopoulos, senior vice president for taxation, sustainability and governmental affairs at Gildan, said at the Sourcing Journal Sustainability Summit June 1 that the methodology and beliefs can be traced back to 2001 when Gildan embarked on setting up its manufacturing operations in Central America.
“We did that keeping very much in mind social and environmental impacts,” Iliopoulos said. “The leadership of the organization really recognized early on how important sustainability is and how important ESG is to the success in the industry and in the success for our business. And it really is a differentiator…in terms of the overall product offering that what we offer to our customers and different stakeholders that we deal with, and it was firmly embedded very early on in terms of the strategy of the company.”
Iliopoulos discussed how Gildan introduced its sustainable growth strategy in January, forming an overall business plan centered around capacity growth, innovation and ESG.
“We’re a vertically integrated apparel manufacturer, we effectively do everything but grow the cotton,” he said. “We acquire the cotton, we spin the cotton yarn, we do the knitting, dyeing, cutting, ultimately final sewing assembly into a final product. Why we think that’s so important and core to our success is that it really gives us the opportunity to have complete control over the entire supply chain effectively in terms of how we manufacture our product, labor standards that we set up, what we do from a social perspective and environmental perspective, as well. That’s really been a key success factor for us. It’s been at the heart of the company from the very early beginnings and continues to be that way as we look at our business model and strategy going forward.”
The company’s “next generation” ESG strategy has really been a 20-year journey, Iliopoulos noted.
“It’s actually a third generation of targets that we actually just came out with,” he said. “When we developed the strategy, obviously, it’s now the foundation continuing to build on the solid base that we had already done from an ESG perspective. And we really built this ‘how can we continue to make meaningful, strong impacts in this area.’ It’s a journey, right? It’s not a six-month project and set it up and boom, you’re done.”
Gildan put the strategy together using five core pillars. The first focuses on climate, energy and water. Two core strategic elements here are a target to reduce Scope 1 and Scope 2 GHG emissions 30 percent by 2030, which is in line with the Science-Based Target Initiative and the Paris Agreement, with several initiatives being looked at to help drive that target reduction.
“The other area that we looked at was water consumption,” Iliopoulos said. “Water is the single largest natural resource that we use in the manufacture of our products. So, we set a target to reduce water intensity by 20 percent by 2030, as well. And this is building off targets that we’ve already had over the last the last 10 years or so when we first started that our first targets.”
The second pillar of the strategy is around circularity, which involves three core elements. The first one is incorporating more sustainability from a raw material perspective, with 100 percent sustainable cotton by 2025. This means only sourcing cotton under the U.S. Cotton Trust Protocol, which has a number of different metrics it uses to measure sustainability tied to water irrigation, soil consumption and GHG.
“The vast majority of the cotton that we use to manufacture our product is coming from the United States, so we’re going to take it one step further with U.S. Cotton Trist Protocol, and the portion of the cotton that’s not coming from the United States, we’re going to have that all coming under the Better Cotton Initiative,” he said.
The other target Gildan started incorporating is sustainable packaging and trims. The goal here is to have 75 percent of all apparel by 2027 created under a certification or with recycled content material making up the packaging and the trims.
“The third piece that complements this is where we’re driving toward zero manufacturing waste, as well,” Iliopoulos said. “By 2027, our objective is to get zero manufacturing waste by recycling and reusing materials, and the way we break down materials that are used in production. So that’s the circularity target and that’s a big step forward in terms of looking at where we were, obviously, managing our ESG program.”
Another key piece is tied to human capital management. Targets from a diversity, equity and inclusion (DEI) perspective include achieving gender parity for the collective group of director-level employees in the organization by 2020–it already has that at lower levels in the company. The other side of it is health and safety. By 2028, Gildan is targeting for all of its facilities to be certified under ISO 45,001, “which is a gold standard, if you will, with respect to health and safety.”
Next is what Gildan calls its “long term value-creation pillar” centered around community investment, with Iliopoulos noting that in a lot of the countries in which it operates, Gildan is the largest private-sector employer.
“We fully recognize…there’s a big responsibility that comes with that,” he said. “There are significant investments that we’ve done in different communities in which we operate over the years and partnerships that were formed and established. We’re trying to take this also to another level. And what we’re saying is by 2026, we’re committing to invest 1 percent of our pretax income towards these different community partnerships and programs.”
The last pillar is centered on transparency and disclosure, which Gildan is already doing but is looking at “raising the bar and pushing that forward.”
Peter Sadera, editor in chief of Sourcing Journal, asked Iliopoulos about the company’s most recent development, signing an amended and restated credit agreement to its existing $1 billion revolving credit facility to incorporate sustainability linked terms, underscoring the company’s commitment toward ESG targets.
The amendment introduces an annual pricing adjustment based on the achievement of three of Gildan’s Next Generation ESG targets. Gildan, based in Montreal, said it’s the first Canadian apparel manufacturing company to tie financing costs to the achievement of important ESG targets.
“Our credit facility was up for renewal with the banking syndicate we deal with, and we thought it was the right time in terms of pushing forward ESG to the next level, tying our ESG strategy to our finance strategies,” he said.
In addition, in March the company launched Gildan Respects, a global positioning of its ESG program and creative campaign supporting the company’s “Next Generation ESG” strategy. Uniting all ESG communications and marketing under one global message, Gildan Respects aims to reinforce the appeal of the company’s approach to making apparel products.
“The reason why we chose Gildan Respects…we just felt it was a natural commitment in terms of how we view ESG,” he added. “You’re going to see a lot of storyboards that we’re putting together around this in terms of how our manufacturing comes together, and how we run our operations with respect for our employees, with respect for environment–using biomass to provide power generation; it’s how we treat our wastewater. At the end of the day, we just felt that that’s how we view ESG, how we’ve approached it over the years and the authenticity around how we manage our manufacturing operations.”