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McKinsey: Sourcing Execs Face Uphill Climb as They Prep for Sustainability

Sustainability has long since ceased to be a nice-to-have for the apparel industry, but greening supply chains is not going to come easy.

In the next five years, sourcing executives are anticipating the sector will transition to a more sustainable model, according to initial findings from McKinsey & Company’s fifth annual Apparel CPO Survey, “Fashion’s New Must Have: Sustainable Sourcing at Scale,” which will be unveiled at Sourcing Summit New York Thursday. And that transition will come thanks to greater transparency, increased use of sustainable materials, stronger supplier relationships and better purchasing practices.

To get there, however, McKinsey says it’s going to require a dramatic shift. And as with most momentous advancements, it’s consumers who are propelling sustainability forward.

“We are seeing an increasingly woke consumer who is starting to become sensitive to the sustainability of the fashion she or he buys,” Magnus told Sourcing Journal. “The question will be whether the industry is able to scale up sustainability fast enough to match the pace of increasing consumer sensitivity.”

Progress on this front faces numerous hurdles, not the least of which stem from internal corporate challenges. Companies that wish to transform their operations require the right leadership to do so, and CPOs in the survey pointed to attracting future talent as one of their current priorities in managing overall macro trends.

Companies that are indeed serious about bringing in—and retaining—key talent must have a serious sustainability agenda, according to the report.

“It is not only about the consumer but also very much about talent,” Magnus said. “We see top young talent seeking employers who share and embody their sustainability values.”

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Perhaps less surprising are the findings that trade uncertainty and other headwinds are also challenging the industry’s sustainability efforts. As the U.S.-China trade war forces companies to re-examine their supply chains, the “search for cheaper sourcing locations is running out of steam,” McKinsey notes in the report.

For now, companies are placing a greater focus on process improvements to shore themselves up against the industry’s challenges. And with consumer demand for sustainable sourcing rising, more than 50 percent of apparel CPOs surveyed ranked sustainability and transparency among their top three priorities.

“Our discussions with sourcing executives make it clear that there has been too little focus on process improvement to date,” the report noted. “There is, therefore, considerable room to improve the cost, speed, flexibility, and sustainability of end-to-end product development and sourcing processes in the apparel industry.”

One key to getting there—and for sustainability to finally gain traction at scale—according to McKinsey, will be to “embark on ambitious supplier-partnership programs.”

“Greater collaboration and connectivity with fewer suppliers will be needed to deliver greater speed and flexibility, improve sustainability, and improve cost and efficiency across the value chain,” the report said. “More sophisticated suppliers are already benefitting from stronger partnerships and are innovating more effectively.”

Hear Magnus unveil the full report at Sourcing Summit New York on Oct. 17, during the panel, “Can Sourcing Really Deliver on Sustainability?” Visit our event page for more info and to buy tickets.