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Supply Chain Transparency for Apparel: No Longer Lip Service

Apparel brands are acutely aware that transparency makes for good business and are taking bold action. Nike, for example, recently announced that for the first time it will tie executive compensation to progress against explicitly stated diversity and sustainability targets. High street fashion brand Zara, has also publicly pledged that all their clothing will be made from 100 percent sustainable materials by 2025.

Transparency also reduces the risks of regulatory action and reputational damage. Governments are now getting involved. Germany is the latest country to pass legislation forcing businesses to be more socially and environmentally sustainable in their supply chain.

Most important of all, transparency appeals to an ever growing segment of consumers who want to know how their products are made, and where the materials that go into them come from. What we wear is a reflection of who we are. Beyond our aesthetic preferences, our sartorial choices can reveal our social values.

Where does it come from?

Unfortunately, building transparency can be a herculean task given the complexity of supply chains in the apparel industry. The reality is that most companies still don’t know where their raw materials come from.

Tracing the origins of raw materials requires troves of data to come together from multiple sources. For example, bales of cotton from multiple farms are often blended in the spinning process and can take years to make their way into a garment.

There are also participants in the ecosystem who benefit from opacity. Subcontracting is common in the industry. Adhering to the multitude of ESG requirements requires investment, and not every supplier has this commitment.

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Even the most progressive companies find it difficult to get a granular view of their suppliers and vendors. To top it off, most supply chain data is managed manually and in disparate systems.

Technology enables

This is where technology can help, in particular, with end-to-end supply chain traceability solutions. Brands and manufacturers can upload and store vast amounts of supply chain data including the origins of raw materials, garment production and shipment and order details.

Having all this data in one place is powerful – companies can easily look up where a specific fabric is sourced from, or where it was produced. They can also see the ESG credentials of the participants in their supply chain in one place. In addition to demonstrating ESG commitments, this knowledge will also help businesses identify inefficiencies and gaps in their supply chain.

Technology gives the apparel industry the opportunity to do things the right way and can make sure the industry adopts transparency practices that are, pun intended, sustainable.

Making leeway

A consumer-oriented report from e-commerce personalization platform Nosto shows sustainable practices and fair wages for workers are top of mind for consumers. So the demand for transparency is clear will only grow as awareness build.

Unfortunately, not everybody is on board. According to a 2020 report by The Fashion Revolution, only 40 percent of the 250 large brands surveyed were disclosing part of their supply chain.

This has to improve.

What we wear is a reflection of who we are. But I believe that it’s also a reflection of how we think.

Businesses who are proactive at managing transparency and sustainability will reap the benefits – they will have a better grip on costs and risks. Their reputation and credibility as businesses committed to sustainability will grow and this will inevitably increase sales.

The result: a boost to the bottom line. This will be the deciding factor in who survives the apparel industry transformation.

Vivek Ramachandran is the CEO of Serai, a technology subsidiary of HSBC Group that brings together buyers and suppliers to build trusted relationships, with an initial focus on the garment and apparel industry. He was previously the head of growth & innovation, global commercial banking, responsible for driving strategic growth and innovation initiatives for commercial banking and the adoption of new technologies. He earned a Ph.D. in Economics from Carnegie Mellon University.