PART 3 — ENVIRONMENTAL SUSTAINABILITY: TAKING THE NEXT ESG STEP
Protecting the environment is a concern for consumers, retailers, fashion and consumer goods businesses. Natural disasters and extreme weather are more frequent, and people are paying greater attention to manufacturing waste, recyclability, natural resources conservation and ecologic diversity.
Is your business prepared to meet customers’ sustainability requirements? Will your supply chain operations comply with environmental laws potentially coming this year? In two years? In five years? Now is the time to build a big-picture environmental, social and governance (ESG) strategy.
There’s no shortage of new software promising to solve ESG documentation and compliance reporting. However, most are Band-Aids. Rarely do they deliver comprehensive tools for managing both social and environmental requirements, much less day-to-day priorities like product development, quality and order management. They might help shipments clear Customs for a season, but what happens when ESG laws and your supply chain change? The solution cannot keep up.
Rest assured, you do not have to add staff or reinvent the wheel when you want to add environmental elements to ESG — and fundamental business processes — you’re already managing. Within a single technology toolset such as CGS BlueCherry®, your team and suppliers can:
- Comply with track-and-trace rules of the Uyghur Forced Labor Prevention Act (UFLPA) and other social/labor laws and retailer requirements
- Manage environmental metrics related to each supply chain process and handoff
- Strengthen, streamline, simplify and speed core business processes, from planning to point-of-sale and product end of life
THE ENVIRONMENT: ON EVERYONE’S MIND
Consumers, brands, manufacturers and governments are all prioritizing environmental issues. Fashion, retail and consumer goods executives consider ESG initiatives their No. 2 most important growth opportunity and improvement priority, second only to e-commerce/online sales and reducing costs, respectively, according to the CGS 2023 Supply Chain Trends and Technology Report.
Amazon’s Supply Chain Standards, effective January 2023, address environmental sustainability and other ESG expectations. Regarding raw materials procurement, Amazon said its suppliers should be aware of upstream suppliers’ practices and prepared to show evidence of acceptable practices upon request. “Suppliers should source commodities used in products in a way that respects local communities and protects ecosystems,” the Amazon Supply Chain Standards said. “Suppliers should consistently monitor the social and environmental performance of their upstream suppliers in line with recognized due diligence frameworks and provide supporting documentation at Amazon’s request.”
Many consumers are willing to pay more for sustainably produced products. A CGS survey of 1,000 shoppers found 79 percent believe sustainability is at least “somewhat important” when shopping for fashion, apparel and footwear. After a brief dip during the pandemic, interest in sustainability is taking off more than ever with U.S. consumers, the CGS research found. In fact, according to survey findings, 25 percent of consumers will pay more for sustainable products. Gen Z survey respondents said they would pay 16 percent to 100 percent more for sustainable products, the most of any age group.
Governments globally are also taking environmental protection seriously. Europe often sets the pace for changes that eventually make their way to America. For example, recently reported by The Interline, “The EU’s Carbon Border Adjustment Mechanism (CBAM) aims to deter production relocations by taxing carbon intensive materials at the point of import, signaling a shift towards more universal sustainability standards in a way that will mandate wider industry transformation.”
CBAM does not apply to fashion and textiles yet, The Interline said. However, it’s probably just a matter of time until it does. “What does this all mean for fashion? The key … is to look at CBAM not just as the next step in a steady march of regulatory compliance, but as a shift towards global decarbonization and entirely new market dynamics,” said The Interline. “Decarbonizing the world economy — and the fashion supply chain — is going to be a radical reshaping of what it means to do business in the modern world. This drive may start with Europe, but over time carbon loopholes will close everywhere — the same way that ports have already started to detain products that were processed or sourced from particular regions. The core problem might be different (human rights abuses instead of emissions) but the mechanisms for enforcement are the same.”
As with UFLPA compliance, meeting environmental sustainability standards across global fashion supply chains can be a challenge. Often companies have strong relationships and visibility to Tier 1 suppliers, but beyond those trusted partners, there are blind spots and blurry links in supply chain visibility across upstream tiers, such as fiber producers, dyeing houses, mills, printers and other subcontractors.
At the same time, internal teams and suppliers might have only manual, time-consuming methods to collect information, such as through emails and inconsistent documentation they use to piece together the essential information to ensure they meet local laws and pass inspections. Some use spreadsheets to try to manage information for both social and eco compliance — plus quality and other business performance metrics. Such processes are difficult to scale, error prone and labor-intensive, all of which are risk factors for shipment seizures or damaged customer relationships if expectations are not met.
Moreover, as often is the case among retailers and their supplier for other business processes and penalties, whether acceptable delivery windows or chargebacks, there are not across-the-board ESG standards between retailers and brands, not between governments and non-governmental organizations.
OPPORTUNITIES AND SOLUTIONS
Efficiently add environmental sustainability to your fundamental business processes, including existing ESG track-and-trace data management and reporting. CGS BlueCherry® experts can help your company forge a pragmatic, comprehensive ESG strategy to support your immediate needs and readiness for what’s coming down the pike. Then, we can identify the right technology tools suited for your specific requirements. The key for most companies is centralized data management within an end-to-end integrated technology platform — a business control center.
- Meet or exceed Compliance with labor laws, including UFLPA, retail customer requirements and industry standards and best practices.
- Compliance with environmental requirements.
- Strengthen business competitiveness with regard to on-time shipments, quality, efficiency, speed, etc.
Making supply chain improvements? Shifting the sourcing mix? Onboarding new suppliers? Adding a new product or collection? Integrated ERP/PLM/SFC helps you perform fundamental business processes while weaving in ESG priorities.
Steps to Get Started
- Design for sustainability. Much of clothing’s eco impact is related to upstream activities such as fiber production, dyeing and finishing. That’s why it’s so important to specify sustainable materials and production processes. “In many industries, the supply chain accounts for more than 80 percent of the environmental impact,” said Ecochain in “Life Cycle Assessment — Complete Beginner’s Guide.” In its assessment of apparel eco impact, Ecochain said textile dyeing and finishing account for more than 25 percent of the environmental impact, compared with 5 percent for assembly.
- Determine Environmental Impact. Evaluate each transformation stage, including transportation between suppliers. Build a digital twin of your supply chain network. This gives your business visibility to who sells to whom and who works with different suppliers across tiers.
- Calculate the Lifecycle Assessment (LCA). For each product, you can devise an LCA to determine the item’s eco impact, make changes where possible to improve sustainability or offset impacts and plan for responsible disposal, recycling or reuse at end of life. Partners like CGS BlueCherry can help capture and manage the relevant data. Consulting firms specializing in LCA such as SCS Global Services, Intertek, Ecochain, Quantis and Terrasustain, offer services to help businesses identify opportunities to improve their sustainability. The LCA process can be integrate with Higg, FEM, MSI, FSLM and other environmental assessment agencies and organizations.
- Publish Social and Environmental Metrics: It’s important to publicize and amplify your ESG efforts through reports, website highlights, social media and marketing, being careful to avoid greenwashing, which impacts trust and authenticity. The ultimate goal is to publish item-level ESG information for consumers, which can be shared through QR codes and Digital Product Passports (DPP), which can be integrated into product hangtags.
When you work with a technology partner like CGS, you’re investing in a long-term vision for managing not only ESG but all the ever-evolving business issues.
To learn more, see the CGS BlueCherry ESG Blog Series Part 1— ESG and Supplier Network Modeling and Part 2 — Steps to Successful ESG Supply Chain Mapping. For ESG insights from CGS Vice President Mark Burstein, see Forbes’ Fashion Supply Chain Transparency Takes Center Stage .
Mark Burstein is CGS Vice President of Strategic Accounts. His experience as a global software executive and business consultant for large global fashion brands enables him to provide clear vision and implementation guidance for digital transformations. Currently, Mark is highly engaged in strategy and initiatives surrounding traceability, sustainability and ESG performance.
Kathleen S.C. Heberger, Responsible Research & Writing LLC, is a writer and researcher specializing in business technology and manufacturing trends. She covers fashion industry IT, advanced materials and supply chain issues.