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Why Levi’s and Nike Top This China-Centric Ranking

Fashion brands disproportionately outscored other consumer goods, technology and automotive companies in Beijing’s Institute of Public & Environmental Affairs (IPE) Green Supply Chain Corporate Information Transparency Index (CITI) report, an annual analysis of enterprises’ actions to promote sustainability across their supply chains.

The data relies on metrics jointly developed by IPE and the Nation’s Natural Resources Defense Council (NRDC) in 2014 to assess brands’ environmental management performance in China. The CITI evaluation criteria analyzes brand responsiveness and transparency, compliance and corrective action, extended green supply chain practices, energy conservation and emissions reduction, and performance disclosure.

Paralleling the United Nations Sustainable Development Goals, the standards were created to encourage brands doing business in China to develop high-functioning ecological oversight and a strong network of suppliers compliant with energy conservation and emissions reduction goals.

The top 10 performers on CITI’s list include eight fashion companies, with Levi’s earning the No.1 spot followed by Belgian, German and Dutch retailer C&A. Nike came in No. 4 after technology company Cisco, followed by Inditex, Primark and Adidas. Target and VF Corp. took the No. 9 and No. 10 spots, respectively, after Apple device manufacturer Foxconn.

Puma, New Balance, Swedish chain Lindex, Gap Inc. and H&M Group took the No.11-No.15 distinctions, out of the 520 companies analyzed, and 99 in the textile or apparel sector.

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Levi’s scored 83.41 out of 100 points through CITI’s evaluation criteria, including a perfect performance rating for its efforts to promote responsiveness and transparency as well as compliance and corrective action. The brand also topped rankings for energy conservation and emissions reduction, making it the highest-scoring brand analyzed for these efforts.

CITI gave the denim giant high marks on transparency due to its willingness to respond to inquiries about its supply chain practices and engage with public discourse on the issue of sustainability. The report also noted Levi’s propensity to engage with suppliers by establishing screening mechanisms, like audits, and pushing them to improve. The company’s energy and emissions score centered on its efforts pushing suppliers to reduce energy use while disclosing data about their carbon emissions and other pollutants.

Despite earning high marks for its environmental stewardship in China, Levi’s produces just a fraction of its product in the country, relying more heavily on suppliers in India, Sri Lanka, Vietnam, and Indonesia, with certain product lines produced in the U.S. In mid-2019, the company said it was actively drawing down its reliance on China as a source for jeans and sportswear, citing the tariff impact. At the time, imports from the country represented just 8 percent of overall production, and the company said it was in the process of “actively managing this down to very low-single-digits by fiscal year 2020.”

Similarly, high performers like Nike (72.08), Zara owner Inditex (71.57) and Adidas (69.07) source just a portion of their goods from China. Nike sources more than half of its production from Vietnam. Adidas ranked its top four sourcing countries in terms of volume as Vietnam, Indonesia, China and Cambodia in 2020, while Inditex said that it sources 53 percent of its goods from Spain, Portugal, Turkey and Morocco and smaller portions from Turkey, India, Pakistan, Bangladesh, Vietnam, Cambodia, China, Brazil and Argentina.

While these brands all base less than half of their sourcing in China, CITI awards higher points to organizations that identify, screen and take corrective action toward suppliers beyond their Tier 1  end-product producers. Brands that evaluate the impact of upstream Tier 2 and Tier 3 suppliers, which produce fabrics, trims, components and raw materials, earn higher scores for delving deeper into their supply chain impact. For example, brands like Nike and Adidas need China-made inputs for their athletic footwear, despite manufacturing those end goods in other markets.

In the No. 9 spot, Target (68.2), pushing Chinese suppliers for environmental action, was the highest-ranked retailer on CITI’s list. The company scored within the 90th percentile for transparency, mandating corrective measures within its supply chain, conserving energy and limiting greenhouse gas production.