Better ESG Performance Will Unlock Fashion’s Supply Chain Resilience in 2022

Building a sustainable fashion supply chain and improving ESG performance will require a more deliberate approach in 2022.

Numerous fashion executives have shown genuine signs of evolving their mindsets and frameworks to factor in their company’s impact on the planet in their decisions. But for all their planning and talk about sustainability, few of them have achieved substantial and meaningful progress toward becoming truly sustainable.  

Let’s face it – circularity remains elusive, emissions are still rising, next-gen textiles and zero-waste cutting techniques have yet to scale, and far too many garment workers are still going hungry. And frankly, consumers, investors, and stakeholders are demanding better from fashion brands. 

A commitment to improving environmental, social, and governance (ESG) performance at COP26 is unquestionably commendable. But if the outcomes are inconsistent and do not produce tangible impacts, it means nothing. The industry stands to gain too much to accept mediocre attempts, such as shifting to vertical production, embracing made-to-order business models, or creating new pieces from vintage garments or deadstock materials. 

build a sustainable fashion supply chain

Go Beyond Tweaking Around the Edges 

joint report by the Business of Fashion (BoF) and McKinsey & Company has set off alarm bells that a more deliberate approach is necessary for 2022. Digitalization and sustainability are expected to offer more significant returns, and supply chain pressures are poised to continue growing. Meanwhile, social commerce is surging among consumers, investors, and shareholders alike as they willingly seek and pay more for goods proven to be sustainable. 

These findings from the BoF-McKinsey report are particularly profound because they connect the social mandate to improve ESG performance to the need for greater transparency to offset current supply challenges. 

Another industry shake-up is proposed new legislation out of New York, the first-of-its-kind Fashion Sustainability and Social Accountability Act, which, if passed in spring of 2022, will require every fashion retailer and manufacturer doing business in New York state and generating more than US$100 million revenue annually to report on their environmental and social impact and due diligence policies. Reporting will need to reveal such information as total volume of material produced, carbon emissions, water consumption and pollution, chemical usage, storage, and disposal practices, median wages, and measures for responsible company conduct embedded in policies and management systems. Businesses that fail to comply may be penalized up to 2% of their annual revenue.

Add to this the U.S. Customs and Border Protection Agency’s Withhold Release Order (WRO) on cotton products sourced from China and other countries in south-east Asia. Without a verifiable chain of custody proving imports are in no way connected to the Xinjiang Uyghur Autonomous Region (XUAR), all cotton products detained by CBP will need to be re-routed to another country, abandoned or destroyed.

Technology purpose-built to support a sustainable supply chain provides the level of visibility and resources needed to help fashion and apparel brands navigate this swiftly changing landscape, monitor suppliers across all tiers, and capture the data and insight necessary to comply with new laws and fulfil stakeholder expectations. Fashion brands can collaborate with suppliers continuously to manage and verify that predetermined environmental and social metrics are being met. More importantly, they can trace materials and the labor that touches them to prove to consumers and investors that goods are indeed sustainable and in compliance with new legislation. 

Digitize Supply Chains with the Right Technology 

Enterprise resource planning systems (ERPs) may do an excellent job handling the day-to-day activities of accounting, financial management, and reporting. However, they are not designed to address the needs of an extensive network of interconnected internal and external stakeholders and exchange the massive volumes of data it generates. 

A digital supply chain platform that includes corporate sustainability solutions and integrates with the existing ERP system can help your brand overcome this hurdle to improve supply chain operations in two key areas:  

1. Full traceability 

  • Determine the importance of specific factors that must be monitored to help adhere to regulations, earn consumer trust, and respond to investor expectations 
  • Identify gaps in the multi-tier supply network and steps to address them quickly, efficiently, and responsibly 
  • Communicate changes mandated by federal and local legislation to suppliers and request data and documentation for proof of compliance.  

2. Supplier collaboration 

  • Manage the vendor base to help ensure compliance with corporate social responsibility initiatives 
  • Drive proactive, quick, and consistent reporting of environmental and social sustainability assessment results 
  • Reduce the risk of misinformation, unreported accomplishments, and missed regulatory documentation deadlines 
  • Receive immediate notifications when suppliers implement suggested or required improvements 
  • Benefit from a seamless stream of information from suppliers across all tiers and decrease the need for follow-ups. 

By establishing these critical aspects of a sustainable fashion supply chain, businesses can create a consistent set of metrics that enables the entire network to understand the company’s objectives and how goals are measured. Plus, all this information can be linked to operational responsibilities to optimize efficiency, reduce costs, and respond to disruptions. 

Drive Growth with Sustainability 

Facing a complex mix of challenges and opportunities, fashion brands have very little room for missteps, especially when it comes to sustainability. They must work harder than ever to protect their product lines, suppliers, stakeholders, and consumers, while navigating supply chain disruption, patchy demand, and persistent pressure on the bottom line. 

While most of the industry struggles to turn a profit and keep up with consumer preferences, fashion brands that adopt a digital supply chain platform can adapt to the expectations of a sustainable supply chain with greater ease and speed. But, more importantly, they can use this edge as a nexus for long-term growth in the years ahead. 

Mark Burstein

Written by

Mark Burstein

Short bio

EVP, Industry Principal, Logility Mark Burstein is a seasoned expert in fashion and retail working with the world’s most renowned brands. He is active in industry organizations including the National Retail Federation (NRF) and sits on the board of the American Apparel & Footwear Association (AAFA), the California Fashion Association and Goodwill Industries. He earned an MBA from Emory University and a bachelor’s degree in Finance from the University of Florida. Supply Chain Brief