[DISCLAIMER: From a legal perspective, this article focuses on Europe. It includes perspectives from three lawyers based in the UK, Romania, and Norway, but none of their comments should be regarded as legal advice.]
In 2017, an industry debate was sparked when the Changing Markets Foundation exposed the unsustainability of viscose production through their ‘Dirty Fashion’ report. The popular cellulose-based textile was also just the tip of the iceberg when it came to uncovering how opaque and fragmented our fashion supply chains were. Not knowing where your materials come from – or how sustainable the processes of their construction are – is still, today, a supply chain faux pas in an industry with ever smarter consumers.
According to Fashion Revolution, no one is publishing a list of raw material suppliers, and only 10 out of the top 250 apparel brands can identify the tier 4 (raw materials) fibre supplier for their products. TextileGenesis™, who offer a cutting-edge traceability solution, found through their own research that less than 5% of the top 100 global apparel brands can in fact track their garment collections back to the fibre. If you want to substantiate your green claims, this evidently marks a problem. Thus, knowing your tier 4 (raw materials) and tier 5 (farms) sources appears to be essential elements of substantiating any green claim.
Hence, the next move for retailers is to implement strategies that are data-driven, traceable and transparent. Not only will this cater to consumers’ demands, but it is also crucial for the greater good of our industry in holding everyone accountable. Evidently, there is already a trend in this direction, as retailers are “pouring investment into digital technologies” to communicate clearly with their customers their product and supply chain information and substantiate their green claims.
To put it bluntly, brands are running out of excuses not to know where their products come from, and they are passing these expectations on to their suppliers. But while many suppliers pride themselves on their ethical and environmental credentials, the idea of full, open-book transparency represents a tricky area, where the desire for disclosure could conflict with commercially sensitive data.
Protecting Your IP
Transparency can be a double-edged sword. Where some see opportunities, others see major threats, and where brands see hidden information waiting to be uncovered, suppliers might see open doors through which their intellectual property could escape. Transparency, traceability, and trade secrets are not necessarily a match made in heaven. In particular next-gen material companies, such as those developing lab-grown leather, might not necessarily be open to disclosing their secret ingredients and recipes. Neither are their investors – who are betting on 7-10x ROIs from backing standout innovations, and whose objectives will not be well-served by allowing those innovations to be shared and duplicated.
This is where the shoe pinches. To commercialise your textile(s), you need to provide information about its journey and its composition, but on the other hand you have your intellectual property (IP) to protect.
This begs the question: how do I, as a supplier, continue?
Let’s first dive into why it will become ever more challenging to get away with opacity, or worse, greenwashing.
With 40% of green claims made online being vague or even deceptive, the Competition and Markets Authority (CMA) in the UK has published certain guidelines – and more recently its “Green Claims Code” – to help companies communicate their sustainability efforts without misleading consumers by properly describing the impact of a product, brand, business or service, with evidence to back it up.
However, in a study conducted in 2021, the Changing Markets Foundation found that 96% of H&M’s claims, 89% of ASOS’ and 88% of M&S’ flouted the CMA guidelines in some way. This is where data can play a critical role in substantiating green claims, underlining the importance of information when it comes to making confident sustainability disclosures.
Transparency, then, is the cornerstone of credibility. Data-driven strategies are necessary to prove transparency at various levels, and as regulations and consumer expectations evolve, that data will be in increasing demand. And it goes beyond the materials themselves: transparency extends across environment and ethics. Fair trade, living wages, good working conditions, and environmental sustainability are among the top requirements. It’s at those levels that data needs to be collected, analysed, and communicated in order to for brands to substantiate their claims.
According to Geraint Lloyd-Taylor, partner at Lewis Silkin law firm (named the Next Generation Partner for Brand Management in the Legal 500 2019 Rankings), “data is vital because you have to base all your green claims on either very specific claims or, if you’re going to make very broad claims, you need even more data to show that cradle to grave, your products, your brands and your company are providing a net positive to the environment.”
For a brand, another key point to consider before making green claims is ensuring your messaging is clear and unambiguous. This could mean staying away from solely using rather generic terms such as ‘sustainable’ or ‘eco-friendly’, which could be understood differently by consumers. To this point, Geraint adds “I think what will happen over time is we’ll have better clarity on what consumers understand those terms to mean and then, hopefully, they can be used in a way that is meaningful and supported by evidence”.
Our industry must slow down – a shift away from producing more to producing better. Data-driven supply chains can empower product development and efficient production, yet this still involves human hands. Well crafted garments start with craftsmanship, which lies in the hands of skilled artisans. One could argue that working with artisans does not work in modern supply chains, yet the opposite is true. According to Bota-Moisin, sustainable practices that come from indigenous knowledge are often the best ones as they’ve stood the test of time. Their centuries old know-hows that have been passed down from generation to generation are recipes for success to craft high quality products. Including these artisans in the modern supply chain – and modelling industrial practices after them – could hence lead to a more sustainable system, where there is no need to reinvent the wheel. Important to note here however is that these practices are often exploited by high end fashion brands and that brings us to understanding transparency in the sense of origin of work.
A new IP movement is on the rise, advocating for Cultural Intellectual Property Rights Protection. While the current IP system has tools such as copyright, patents, trademarks and trade secrets, these do not yet protect, for example, culturally embedded ways of craft.
We spoke with the creator of this initiative, Monica Bota-Moisin. When asked what role cultural IP can play in substantiating green claims, she told us: “Cultural IP to me would be the field of law to protect indigenous knowledge, traditional knowledge, and traditional cultural expressions, including know-how that has to do with environmental sustainability, circularity, biodiversity, ecosystem nurturing and protection. Practices that are not new and innovative. On the contrary, practices that have been so good throughout time that they are maintained and transmitted from generation to generation”.
This system of law does not yet exist, but her organisation, the Cultural Intellectual Property Rights Initiative (CIPRI) is pioneering a framework called the 3Cs: Rule: Consent. Credit. Compensation©. It’s, as the name suggests, a three-step format to: 1) seek consent from the maker, 2) give credit to the original maker, and 3) compensate the original maker financially with the revenue earned from the inspiration.
Blockchain To The Rescue?
Being transparent while protecting your recipe can be a delicate matter. Would blockchain technology, that doesn’t require to make all details publicly available, be the solution?
Back to the issue of where the shoe pinches for IP holding suppliers. How to be transparent to effect positive change in the industry, without giving your hard-earned knowledge away, is the million dollar question we are trying to answer. When it comes to working with next gen material suppliers, thorough investigations by potential clients could pose a threat to their intellectual property, in the form of trade secrets disclosure. For trade secrets to be identified as such, they must meet the following requirements: 1) the information cannot be generally known or readily accessible to the people that deal with such information, 2) it must be of commercial value, and, 3) the trade secret holder has to take reasonable steps to keep the information secret.
This made us wonder whether blockchain and trade secrets could ever work together.
Could blockchain be an attainable solution for them to prove their claims, and what are the implications to their IP?
Distributed Ledger Technology, or blockchain, offers a way to prove in real time that a product is made in the supply chain that is claimed as sustainable. The decentralised character that makes this technology a likely fool-proof way to being transparent also comes with its own challenges. How much of the data is safe to share, one might wonder. Moreover, from the standpoint of being an innovative material supplier, how does one keep its IP protected, in particular trade secrets?
IP Law & Blockchain
Are blockchain and trade secrets a match made in heaven? Sindre Dyrhovden, a Norwegian IP lawyer specialised in data protection, chose that very sentence as the title for his thesis. When it comes to transparency, in particular of tier 4 (raw materials) suppliers, trade secrets would forcefully be exposed and hence disadvantage the IP owner’s commercial interests.
We asked Dyrhovden his own question: whether blockchain and trade secrets are a match made in heaven, to which he replied: “I don’t think there’s a clear answer. What is important is proof of ownership to the idea and that’s very hard to prove with trade secrets.” He continues to explain that not every step of a textile’s journey needs to be visible on the blockchain, just date stamps to prove that something was created as claimed. It’s a highly complex issue but the takeaway is that trade secrets and the blockchain could be a match made in heaven, though, as he jokes how the standard lawyer’s answer goes: “it depends…”
Supply Chain Transparency – An Opportunity or a Threat? This is the question we’ve set out to answer, but we conclude that it’s a complicated matter. There is a delicate balance to be struck between the transparency and protecting your IP rights, meaning there is potentially no such thing as 100% transparency. Fashion needs to embrace innovations like blockchain technology to make transparency more attainable, yet blockchain is not a silver bullet.
A mutual understanding from all stakeholders is required regarding the extent to which transparency is realistically viable, while the IP rights of the suppliers are protected and consumers’ demand for transparency is met.
From the suppliers point of view, it is key to know exactly what and how much information to share in order to first, attract more brands with their green credentials and offering the great selling point of having a transparent supply chain, and second, to protect their own trade secrets and IP rights. From the brands point of view, they must know exactly how much information to require from suppliers to have in order to back up their green claims, and deliver on their consumers’ demand for transparency. Lastly, it is also crucial that consumers have an understanding of the degree of transparency they must require from brands, in order to hold them accountable for their actions and claims, but also respecting theirs and the suppliers IP rights that must be protected.