This year, The Interline and Coats Digital have committed to constructing a detailed picture of the modern fashion supply chain, and to providing pathways from its primary challenges to solutions that encompass technology implementation, process and mindset change.
In spring, we examined the drive for greater supply chain visibility and control – explaining why high-level orchestration and transparency matters, and how it can be achieved through mutual data-sharing. In summer, we explained why genuine transparency – an essential building block of that orchestration – must begin on the factory floor.
In this feature – and in the live, free-to-attend roundtable discussion that will soon follow – we tackle the true scope of sustainability head-on, shining a spotlight on the underrepresentation of people in many sustainability strategies and solutions, and underlining why independent, internationally-recognised labour quantification and compensation standards will be essential for turning outward commitments and rhetoric into the systemic change the market now demands.
Sustainability: statements without substance
In the wake of the pandemic, consumer and regulator interest in the equitability and environmental profile of manufacturing and sourcing practices has deepened. As a result, building a reliable, resilient supply chain that can also stand up to the scrutiny of shoppers and policymakers has become synonymous with business continuity.
More than 60% of businesses (across various sectors) reported this spring that they were working to “de-risk” their supply chains, with 40% also diversifying their supplier bases, and nearly a third investing in digitising their supply chain operations. At the same time, a majority of fashion consumers are now taking steps to mitigate the environmental impact of their shopping, a similar majority of luxury fashion buyers rate brands’ labour rights commitments as important to their purchasing choices, and around a third of fashion consumers in the younger demographics – millennials and generation Z – will pay more for products with a reduced cost to the climate.
Similar step changes are also being made in the regulatory landscape. The UK’s Modern Slavery Act, which mandates that organisations with a turnover of £36 million or more produce an annual statement on the steps they have taken to ensure that slavery and human trafficking are not present in their extended supply chains, is being given greater punitive power – including the ability to impose custodial sentences on offenders. And while fashion brands and retailers do not risk criminal charges if breaches of the Act are discovered in their supply chains, the UK government is already tightening reporting requirements with a view to potentially introducing civil proceedings against companies that do not make adequate declarations or take appropriate action.
Behind the scenes, the gears of commerce are also turning quickly towards sustainability: the amount of money held in funds labelled as being environmentally and socially sound reached a high watermark of $2 trillion USD this summer. And recent case studies show just how closely correlated sustainability and market performance are, with a high profile brand losing more than a billion dollars in share value following an exposé into under-payment of its workers, and then subsequently rallying when action was proposed to address that issue.
As a fashion brand, retailer, or manufacturer, you are facing greater scrutiny than ever before from stakeholders in every corner – all of whom give planet and people equal weight to financial performance. Combined, these various pressures are setting new expectations for fashion: brands, retailers, and their supply chain partners are required to create products that offer quality and value for money, that reach the market on-time and with the right margin baked-in, and that achieve these aims without compromising the different sustainability metrics by which they are being judged.
But despite those clear justifications, “sustainability” and “transparency” remain open definitions. And while nearly every brand has an outward commitment to measuring and improving common metrics, segment-wide this work has been halting at best. The first global Sustainability Index published this spring found that, at an industry level, published targets are very rarely being substantiated with “tangible progress”.
Performance, planet, people
Progress has also not been equally distributed across the six critical areas that the 2021 Sustainability Index measured. On average, the fashion industry has made considerably more progress towards measuring and minimising its carbon usage and emissions than it has towards enshrining and improving worker rights. This stands at odds with the vital role that overseas workers have played in supporting fashion’s post-pandemic recovery.
More specifically, the payment of living wages to manufacturing workers (defined as the income required to cover all essential living expenses, determined by the cost of living in a specific region) is singled out as being the area in which the industry is the furthest from its established targets. Less than 1% of the cross-section of fashion brands and retailers surveyed in the separate 2021 Transparency Index disclosed how many of their workers were paid a living wage, and the Sustainability Index found no brands that were willing to stake a claim in this area.
This suggests a de-prioritisation of people in sustainability and supply chain transparency initiatives of even the world’s biggest brands – emphasising environment over ethics. In reality, the root cause of the difference in the treatment of climate metrics and human ones is more practical: it is much harder to measure the latter.
Historically, data sharing between manufacturers and their brand customers has focused on performance and delivery targets. As consumer sentiment and regulator focus has evolved towards the environmental impact of apparel and textile, other concrete variables have also started to be measured and managed: material waste, energy consumption, water usage and so on. Crucially, these are all metrics that have well-defined standards and frameworks; factory emissions are calculated using pounds of CO2, water consumption is quantifiable in litres.
As a consequence, progress in these areas can be benchmarked against what shoppers and governments consider to be acceptable values. And unacceptable values are therefore comparatively simple to identify, even if addressing them and managing their impacts on communities is still a significant task.
Therefore, there are concrete routes to improvement when it comes to performance and planet. Defect rates and on-time deliveries can be quantified as moving in the right direction over time, and greenhouse gas emissions and dye effluent output can be demonstrated to be reducing as a result of targeted interventions, new technologies, and new processes.
This is why brands are taking bold stances on environmental issues – going so far as to target climate positivity, beyond climate neutrality – but remaining relatively mute on how compensation standards for supply chain workers are being measured and managed.
Where concrete data and common standards are being widely used for environmental measurements and accountability, the same cannot be said for labour, with few brands signing up to initiatives like the Better Work programme. And where established standards such as those governed by the International Labour Organisation have existed for decades, they are still not routinely used to shape relationships between brands and their suppliers, with negotiations typically relying on historical averages, legacy data, intuition, and opacity in the specifics of sourcing and production.
This leaves most fashion businesses with little hope of being able to benchmark and control something as complex as the regular payment of a living wage across different suppliers, different supply chain tiers, different product categories, and different territories – despite a clear mandate from the market for change.
A language to talk about labour
This is, perhaps, the steepest hill that sustainability has to climb. According to the 2021 Sustainability Index, the lack of attention paid to the people piece of the sustainability puzzle has allowed “systemic inequalities” to remain in place, and even to deepen. By their very definition these inequalities require systemic overhaul to eliminate – necessitating a comprehensive re-evaluation of how fashion as an industry values and compensates the people who produce its goods.
There will be two prerequisites for transformation this deep-rooted to take hold: 1) broad uptake of proven, objective, internationally-agreed standards; and 2) adoption of the right technologies and platforms to allow those standards to become the foundation of future commercial relationships, and then to shape future, fact-based sustainability disclosures.
The de facto methodology for quantifying labour operations in manufacturing is a Predetermined Time Standard, which uses objective measurements of different operations to arrive at an international standard for the sewing, assembly, and finishing of components and complete products. These standards then become benchmarks against which both brand expectations and factory capacity can be measured – using proven achievability to establish realistic timeline, quality, and efficiency targets that avoid the mandatory overtime that has come to characterise both domestic and international manufacturing relationships.
In the fashion and textile industries, the universally-accepted industry time standard is GSDCost which is used by manufacturers around the globe, and which forms a core component of the Coats Digital ecosystem of solutions. For brands and retailers who now face the inevitability of needing to assess and control the labour component of their products, GSDCost offers an instant framework for ILO-recognised labour quantification, transparency and accountability.
This level of visibility is, crucially, distinct from the tools that fashion brands have traditionally relied on to request ethical compliance from their supply chain partners: policies, codes of practice, and third-party inspections and certifications.
In the case of policies and codes of practice, brands have sought to mandate safe working environments and equitable compensation structures in the factories they order from, but their ability to enforce compliance with the payment of fair wages is limited by the absence of an implemented standard like GSDCost. In principle these codes are sound; in practice their reliance on historical averages and the absence of an objective standard against which to benchmark can easily leave brands operating outside policy and, by extension, making sustainability statements they cannot back up.
For that reason, the responsibility for enforcement has tended to fall on outside inspections, post-hoc audits, and third-party certifications. But as well as being undermined by the same reliance on subjective tools of measurement rather than objective standards, third party inspection and certification are currently being called into question as being unsuited to the true demands of sustainability strategies that incorporate both planet and people – as well as being possibly unfit for the regulatory demands of institutional investors and governments who believe that fashion’s opportunity for self-regulation has passed.
In this context, the requirement for objective, proven standards is clear – and the business case for adopting technology solutions that facilitate the implementation of those standards is perhaps even clearer. By leveraging benchmarks, processes and systems such as GSDCost brands and their supply chain partners can switch from estimating time, cost, and compensation and instead begin to work from scientific, accurate data that supports everything from predictive product costing to a fully transparent account of the labour component of any individual operation.
As fashion’s requirement to move from ethical rhetoric to real action becomes even stronger, the partnership between Coats Digital and the Fair Wage Network will allow brands to rapidly benchmark the cost of any garment against both the minimum wage and the fair living wage in any particular country – adding instant credence to costing decisions, consumer-facing commitments, and regulatory disclosures.
“The disruption caused by COVID-19 has been felt across the fashion value chain, but the impact of the pandemic has been especially devastating to static supply chains that have adhered to traditional, rather than leveraging the visibility, transparency and actionable insights that technology-enabled agility provides,” explains Akash Shah, Managing Director of Coats Digital. “As pressure was applied by the closure of downstream retail channels during lockdowns, that pressure then shifted into the global sourcing and manufacturing base, with long-established relationships breaking down, and both parties facing significant gaps in their financial situation that quickly translated into serious uncertainty. That “VUCA” context is the way in which fashion now operates, and as both brands and suppliers work to secure business continuity in a changed environment – whether that means meeting consumer demand or nurturing skills on the shop floor – the industry has a clear opportunity to make measurable progress that reflects the importance of people to not only sustainability strategies, but the recovery and resilience of the industry as a whole.”
Redesigning supply chain relationships for sustainability
As we have covered in our previous collaborations, both Coats Digital and The Interline believe strongly in both the principle of extending the definition of sustainability to properly encompass people. The disruption of the last eighteen months has provided both a unique test of the fairness of current supply chain practices – a watermark that the industry is currently falling short of – and a singular opportunity to redesign those practices around universally-recognised standards that will allow brands and their suppliers to set a current benchmark in the payment of fair wages, and to subsequently measure progress towards it.
This is, in effect, fashion’s latest and best chance to add the missing piece of the sustainability puzzle.
However, this is not an opportunity that brands alone can seize. And neither is it one that consumers or regulators will accept brands passing sole responsibility for onto their supply chain partners – however much supply bases evolve to respond to the immediate disruption of COVID-19. Instead, as our past features have explained, the critical step the industry must now take is towards mutual data sharing, improved connectivity, and a shared understanding of both the potential and the constraints of manufacturing.
Crucially, this collaborative approach to design, development, and production is one that can only be enhanced through the adoption of a common language – a structure and a set of tools that enables both brand and supplier to make allowances for the true cost of manufacturing, whether it’s being paid by the planet, or paid, fairly, to the people at the sewing stations.
Because not only does this more complete model allow brands to substantiate their sustainability strategies, and manufacturers to secure and retain preferred vendor status without the spectre of exploitation, but it enables fashion as a whole to take clear, quantifiable action towards the large-scale, systemic shift that true sustainability now requires.
About our partner: Coats Digital is the leading digital transformation partner for the fashion supply chain, powering sustainable processes and high value insights through connected technologies. Our intelligent, connected, business critical software solutions are embedded with deep industry expertise, proven in enabling fashion brands and manufacturers to digitally transform key processes across design, development, costing, sourcing, production planning and manufacture. With Coats Digital, you can achieve a more agile, resilient, efficient, transparent and sustainable fashion supply chain.
Coats Digital is the software business of Coats Group, the world’s leading industrial thread company and a trusted industry player. Our apparel, footwear and textile specific solutions harness industry best practice and the latest technology to improve agility, speed to market, efficiency, transparency and sustainability, and are trusted by brands and manufacturers around the world.