Consumers demand disclosure


Dear company, who made my clothes?

Is this a question your fashion brand could answer from the top of their head?

During the 2022 Fashion Revolution Week people were spotted holding placards saying “who made my clothes” or “what’s in my clothes”. Increasingly, consumers demand fashion brands to disclose information about how and by whom the clothes they are wearing are produced. Fashion Revolution Week emerged as a response to the tragic Rana Plaza accident in 2013 in Bangladesh, where the collapse of the Plaza, housing five garment factories, killed at least 1,100 people and injured 2,500 more. On top of that, many global fashion brands were not aware that their garments were produced at the Rana Plaza until weeks after the accident, stressing a transparency issue and the need for responsible supply chain management. Fashion Revolution has made it their mission to drive transparency in the fashion industry by mobilizing citizen action

Fashion Revolution Week and their campaign #whomademyclothes and #whatsinmyclothes has grown immensely over recent years with more than one million posts on instagram today of consumers demanding companies to step up their transparency game. 


Vis dette opslag på Instagram

 

Et opslag delt af Fashion Revolution (@fash_rev)

Dear consumer, your clothes were made by … -  a not so easy answer

When fashion companies receive questions from consumers wanting to know about the environmental and social impact of their clothes, they are expected to respond. Responding to those questions implies that companies know their supply chain from field to consumer, which often is  not a simple task. Knowing your extended supply chain involves mapping and assessing: Identifying facilities at each stage of the production chain as well as knowing about their performance and compliance across a range of ESG issues. Because fashion brands often work with a large, ever changing, and opaque supply chain, a systemic way to engage the supply base to gain transparency  and act on the information gathered is critical.

We are far away from achieving transparency of fashion supply chains

As evidence suggests global fashion brands do not know their supply chain sufficiently to be able to respond to the consumer questions posed during Fashion Revolution Week. According to the Fashion Transparency index, which annually reviews 250 global fashion brands, companies on average score 23% (out of 100%), marking only an increase of eight percent since 2017. The low disclosure of companies sneaks through all elements of environment, social and governance (ESG) matters, and while disclosure is acceptable on company levels, disclosure on raw material level is extremely low: 

  • Environment – 31% of the reviewed brands publish an annual water footprint in their company’s own facilities but only 5% publish the footprint at a raw material level. 
  • Social – 27% disclose an approach to achieving living wages for workers within the supply chain, but only 1% publish the number of workers being paid a living wage. 
  • Governance – 47% publish a list of their first-tier manufacturers but only 11% publish selected raw material suppliers.

Transparent supply chains are a requirement for not only juggling risk but for unraveling opportunities

Not knowing your supply chain is not an option anymore. Increased focus among consumers, investors and employees on supply chain transparency such as through the Fashion Revolution campaign poses a risk for companies businesses if they do not live up to set expectations. When public awareness and scrutiny goes unanswered, companies find themselves in a situation where stakeholders lose trust in the company. Edelman’s annual trust barometer study on the relationship between stakeholders suggests that 58% of consumers will buy based on their beliefs and values, which  includes the trust in a company. Hence if companies lose the trust of their customers they risk a drop in sales. 

However, only focusing on addressing possible risks when working with the transparency of your supply chain would be like feeding only one of two birds with one scone. Understanding your supply chains builds the foundation to address and improve ESG matters. If companies know their supply chain they are for example able to report on scope three emissions, an element that is increasingly demanded in ESG ratings.

Yesterday was the best  time to understand your supply chain. The second best time is today

Fashion Revolution Week is not the last opportunity to start acting, because consumers will continue to demand that companies disclose their supply chain. A survey by McKinsey suggests that 52% of millennials agreed that they always research for background information before buying and 42% percent of millennials say they want to know what goes into products and how they are made before they buy. Further regulations such as the German supply chain act (Lieferketten Gesetz) or the most recently proposed EU Directive on Corporate Sustainability will eventually pressure companies to step up their supply chain transparency.

Embark upon and take the first steps to improve your supply chain transparency

Are you a fashion company that not only wants to be able to understand who made the garments that you are selling but also take advantage of the opportunities that sustainable supply chain management brings? We, SupplyShift and Sustainia believe that the first step you need to take, to be prepared for consumer demand for transparency is to lay a foundation for ongoing visibility on the most critical sustainability issues in your supply chain. This involves initially engaging your tier 1 suppliers to get them on board with your needs, as well as building bridges internally between sustainability and procurement functions, so that when information starts rolling in, there is a mechanism in place to act on it. This approach sets the groundwork for ongoing performance tracking and remediation to both avoid risks and take credit for improvements made.

And still achieving transparency in your supply chain on ESG matters is only halfway – working and collaborating in your own organization to make the right purchasing decisions and with your suppliers to improve their ESG performance is what really makes an impact. At Sustainia we have many years of experience of working with all aspects of ESG strategy and implementation. Working together with SupplyShift’s proven supply chain technology platform, we can help you and your suppliers in finding the business opportunities in that impact.

If you like to know more, feel free to contact us


Anna Schellenberg

Analyst

Anders Quitzau

Partner