Fashion supply chains are notoriously complex. This is due to their composition of multi-layered processes which include – but aren’t limited to – sourcing of raw materials, transportation to factories where materials are assembled into garments or accessories, and distribution for delivery to consumers. Complicating matters further, it is common for raw materials to be grown, processed and sold in different locations. The past two decades have seen an acceleration in the demand for high speed, high volume and cheap consumption – intensifying the burdens on the supply chain more than ever. Recently, pressure has been mounting from consumers when it comes to scrutinising the sustainability and ethics of brands’ practices. Without true transparency, supply chains have the potential to include exploitative and unsafe working conditions and cause significant environmental damage.
Transparency, in this context, can be defined as companies sharing details of each component of their supply chains when it comes to how they treat workers and their overall environmental impact. And the bigger the brand, the bigger the possible scale of damage. Thus, major brands have a special responsibility towards supply chain transparency. The question that arises is: how exactly can this be achieved?
One modern solution has been to use blockchain technology. Along with building consumer trust and confidence, a blockchain may also be used in the fight against counterfeiting – an unrelenting concern for luxury brands – as blockchain records are difficult to alter. However, it may all sound too good to be true. To what extent can we expect a widespread uptake of the blockchain movement by the fashion industry?
Understanding blockchain’s main selling point: ‘immutability’
At this point, it is worth revisiting how blockchain works to appreciate why this technology can make claims of immutability. At the heart of most blockchains is cryptography and a prime example is the SHA-256 encryption algorithm. SHA-256, published by the United States National Security Agency in 2001, beats inside the chest of Bitcoin and many other blockchain applications. The algorithm takes any length of text or numbers as an input and outputs a series of 64 characters. If any part of the input is changed, the output will be entirely different. These 64-character series are known as ‘hashes’ and each block has one for itself and one for the block that came before it. The hash has an additional benefit, being a condensed form of information. Dr Karin Lorez, blockchain lecturer at the University of Zurich and senior legal advisor, points out “one does not have to store all the data on the blockchain itself – only the hash.”
A blockchain-enabled supply chain can be visualised as having one block containing information regarding materials, one block for manufacturing, one block for transport and one for distribution. These are added through time, and each time a block is added it locks in the previous information by hashing it. It takes an instant to calculate the SHA-256 encryption. However, if one imposes certain restrictions on this seemingly random sequence of characters (such as that the first few characters must be zeros) and then generates the hash each time changing the input slightly, it can take a long time to compute. Combining this selective hashing with storing the data in several, decentralised locations can make it impractical to alter details of past blocks. Lorez also mentions that the decentralisation of storage, while contributing to immutability, has drawbacks. “It becomes a question of who is responsible for storage, where is the data stored, and what happens if the storage provider ceases to exist.”
Current levels of transparency in the fashion supply chain
The demand for greater transparency in fashion supply chains has been growing for years, fuelled by public outcry due to several major disasters. Between 2011 and 2013, the industry saw events such as factory fires in Pakistan’s Ali Enterprises and Bangladesh’s Tazreen Fashions, as well as the Rana Plaza building collapse. The last of these resulted in over 1,100 factory employees killed and thousands more injured. Until then, almost no public information was available regarding the companies that were utilising the factories involved. Some brands themselves had no idea that their own labels were found among the wreckage, due to their limited oversight of their suppliers and who these suppliers were subcontracting.
Since these events, the incentives around transparency are gradually inverting. Where before, brands kept details around their supply chains confidential, either for protecting trade secrets or not wanting to expose their business practices. Today, however, disclosing one’s sustainability and ethics can place a brand ahead of its competitors. 43% of Gen-Z say they intentionally buy from companies that have a robust sustainability reputation, according to the 2022 State of Fashion report by McKinsey & Company and the Business of Fashion. Disclosing supply chain information also builds the trust of employees, labour and environmental advocates, and investors.
A leading measure for transparency in the global supply chain is the Transparency Index, created in 2016 by non-profit organisation Fashion Revolution. The 2021 Transparency Index found that there was a lack of public disclosure across all major brands with regards to reporting on items such as living wages for supply chain workers, purchasing practices, waste volumes, and carbon emissions in the supply chain. Among the lowest scorers were Max Mara and Tory Burch. Encouragingly, global brand H&M scored in the top 10, showcasing that scale does not preclude transparency.
Adopters of blockchain for supply chain transparency and traceability
As mentioned, two of the goals of using blockchain in the supply chain are as follows: first, to provide transparency by enabling consumers to inspect the sustainability and ethical claims of a product, and secondly, to provide traceability by enabling the verification of a product’s authenticity and ownership.
One of the first instances of using blockchain for transparency in fashion supply chains was in 2017, where designer Martine Jarlgaard partnered with blockchain technology company Provenance for a pilot programme that tracked raw materials through the supply chain to the completed garment. Each item of clothing was allocated a unique digital token, allowing for the verification of every step of its production. Customers can access the information on the Provenance application, after scanning the item’s QR code or Near Field Communication (NFC)-enabled label. Another designer, Sarah Regensburger, uses blockchain platform VeChain for her sustainable fashion label. Her motivation for doing so was to ensure her customers could access information about how to care for the clothing, sizing, certificates, information about the design and construction process, and where the organic materials were sourced. VeChain also supports Arket, a subsidiary of H&M, to verify the organic manufacturing process of their wool beanies.
VeChain also has consumer-facing projects which help to provide traceability, notably working with Givenchy to supply NFC chips for its leather products and sneakers to verify authenticity. Other high-end products to use consumer-facing blockchain technology include watchmakers Vacheron Constantin, Breitling and Audemars Piguet. The brands began working with Arianee, a Paris-based company that describes its offerings as “end-to-end web3 solutions for brands.” Using Arianee’s blockchain solution, each Breitling watch produced after the 13th of October 2020 includes a digital passport that allows owners to assert the authenticity of their products and the validity of their ownership.
A major recent breakthrough in the traceability space occurred with the creation of the Aura Blockchain Consortium – whose members include LVMH, the Prada Group and Richemont (owner of Cartier). The Consortium operates as a non-profit, luxury-specific blockchain technology platform with the goal of developing passports to ensure authenticity and traceability of the brand’s products. The passports offer lifecycle tracking, proof of origin, and protection of intellectual property after being given a unique digital identity based on a non-fungible token (NFT).
This is a major step in the direction of promoting circular fashion. “The future of supply chain traceability is not cradle-to-grave, but rather cradle-to-cradle,” says Luca Barneschi, a fashion consultant with over 35 years of experience specialising in the supply chain for ready-to-wear and luxury goods. “The younger generation has changed the way in which we consume. There is an emphasis on borrowing, reusing and upcycling quality products, rather than just buying and owning them for a short period of time.” Barneschi believes that herein lies the next significant challenge, but also the next opportunity. “The opportunity is for brands to not only sell products, but to sell a service in line with the notion of use, reuse, repair, recycle and return. Being able to trace the product journey with the consumer from beginning to end will be imperative.” Given the recent enthusiasm for blockchain, Barneschi does see its value but recognises that, in the end, it is more important that it happens rather than how it happens. “There are more initiatives and technologies than ever to support this new system. Blockchain is just one possible option.”
Outlook for blockchain – is it the best solution?
Current traceability frameworks are, to an extent, still paper-based and often utilise assorted, unconnected systems to manage the supply chain. Thus, the uptake of blockchain in this area is a welcome development, especially by groups such as the Aura Blockchain Consortium and sustainable fashion innovation platform, Fashion for Good. James Crowley of Fashion for Good suggests that while cloud-based solutions and the internet of things (IoT) may be adequate for gathering and storing data regarding the supply chain, forward-looking blockchain technology has the potential to be particularly useful for traceability. “There is a place for fibre-forwards blockchain solutions where a digital twin is created of the particular fibres, yarn, fabric roll and final product and are tracked in parallel as they move through the supply chain,” Crowley says.
The pioneering Organic Cotton Traceability Pilot run by Fashion for Good, the Laudes Foundation and the Organic Cotton Accelerator (OCA) did exactly this. Supported by C&A, Kering, PVH Corp. and Zalando, the project focuses on tracing organic cotton from farm to retail, both digitally and physically, combining blockchain with on-product markers. Crowley adds: “It is becoming essential to have real-time visibility of supply chain journeys to understand the environmental impact of a product, as it happens.”
Amid the beneficial advancements of blockchain, attention must still be paid by the conscious consumer. This is even after a brand mentions that it is using blockchain technology. It is true that blockchain does not allow for individual blocks to be altered, without invalidating the chain of hashes. However, changing the hashes of all subsequent blocks after an altered block is a way of circumventing this issue. Hence, the true envoys of transparency will most likely be decentralised, public blockchains (as opposed to private ones) as it is impractical to rewrite the blockchain if copies of it exist in different locations, on computers owned by different parties. Arianee does just this: operating a decentralised blockchain and using open-source protocols. This means that the code is published, and anyone can contribute and build on it. Customers are also able to see every event in a product’s lifecycle and these events cannot feasibly be altered after the fact.
To keep in mind: the unalterable nature of data on the blockchain means there is an incentive for the information to be accurate and complete, but not a guarantee. If a brand enters data on the blockchain and this is later exposed to be false or even accidentally incorrect, the brand can be held accountable. How the appropriate data from each stage of the supply chain is collected and placed on the blockchain is a separate issue.
Ultimately, the consumer holds the most power. By demanding communication and transparency in the supply chain from all brands, the cultural shift towards sustainability and socially sound practices will continue to propel forward, making it the only viable game in town.
