Climate Change’s Impact On The Supply Chain Lands Closer To Home

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In the last few weeks, large areas of Tuscany have experienced severe flooding – a consequence of relentless heavy winds and rainfall in central Italy. In fashion, the region is known for being a high-end manufacturing and sourcing base, home to suppliers of cotton, viscose, and wool fibres and fabrics, leatherworkers and artisans, centuries-old craft businesses, and heavily regionalised expertise, and the most recent flooding (linked to Storm Ciarán) has had serious repercussions for those vital links in the luxury supply chain. 

These floods mark the most recent occurrence in a series of extreme weather events in Italy – a country particularly vulnerable to climate risks. In 2022 alone, the country experienced collapsing glaciers and landslides, extreme heat, and wildfires. And while Italy was by no means the only European country experiencing these climatic crises, this will be especially alarming to fashion because it brings the spectre of climate-linked supply chain disruption much closer to home.

Incidents like this serve as a poignant indicator of climate change’s growing influence on fashion’s supply chain. We are already witnessing climate change’s negative impact on the fashion sourcing and manufacturing base in Asia, concentrated in countries like Bangladesh, Vietnam, China, Cambodia and Pakistan. According to a study by Cornell University’s Global Labor Institute and finance group Schroders, the fashion sector could see a 22% decrease (equivalent to US$65.6 billion) in export earnings by 2030, directly attributable to the adverse impacts of heat stress and flooding. And the earnings shortfall could soar to 69% by the year 2050, with the mentioned manufacturing hubs potentially shedding 8 or 9 million jobs between them. Jobs that those countries can ill-afford to lose, since apparel manufacturing and textiles are cornerstones of their economies.

And the knock-on effects are also already tangible. Apparel and textile imports to the US declined by 4.5% in September this year compared to last year, according to the Office of Textiles and Apparel of the U.S. Department of Commerce (OTEXA). This year’s import/export statistics demonstrate the volatility of the market: with countries like China, Turkey, and Malaysia exporting more, but others including India, Mexico, and Vietnam seeing a significant decline. Some of that variability can be accounted for and normalised based on established economic forces; some can only be laid at the doorstep of human-influenced shifts in global and regional climates. 

This uncertainty is bad news for brands and retailers based in the US, UK, and Europe who may have quietly held the assumption that in the event of overseas manufacturing challenges, they could potentially relocate production closer to home to avoid the worst impacts of climate change. Geographic proximity may still offer sourcing benefits in other ways – speed of logistics, and that aforementioned concentration of expertise – but irrespective of location, there is the same serious business continuity risk, and domestic factories can still face damage to equipment, fabric, and completed products, as well as localised environmental crises jeopardising employee safety and wellbeing. Nearshoring is not, necessarily, safe-shoring.

Here’s a reminder of how that risk calculus often plays out with offshore production: once risk reaches a certain threshold, where it’s deemed materially likely to delay or threaten delivery, brands with tight production schedules panic and withdraw from the factory or the entire region. This, in turn, intensifies the difficulties faced by the impacted factories, mills, weavers, farmers and so on – especially if there is damage to fabric, finished product, or raw fibre. Entire livelihoods can be lost in an instant. And this kind of damage usually leaves little room for recovery, as well as potentially falling outside the scope of insurance coverage because it was caused by an extraordinary event. And while machinery and equipment is insurable, the time required for such processes can be extensive, leaving no option for fashion businesses with time constraints.

In the background of that equation, until now, has always been the idea that sourcing and manufacturing could – in extreme circumstances – be brought closer to home. But recent events are demonstrating that that notion is built on shaky foundations.

And the troubles affecting supply chain workers aren’t in some far-off future: there are real templates, on display today, for how garment sector employees’ health, productivity, and even their lives are being directly affected by climate change. At the time of writing, diminished productivity resulting from excessive heat is causing an escalation in labour costs, a situation compounded by buyers advocating for reduced prices from manufacturers and even seeking discounts on finalised orders. This forces factories into the realm of uncompetitiveness, potentially giving rise to wage theft, other violations – or a combination of all three. The repercussions aren’t a forecast for 2030; they are unfolding in the present moment. 

There is a lot that will need to change in order to account for all this, and the most effective way to navigate forward is through a unified approach by brands and suppliers. We already know that brands hold a lot of power when it comes to influencing manufacturers and the conditions they operate in and under. And influencing this for the better starts with the order size and goes all the way through the labour practices and the type of equipment and technology used on site. 

But distance diminishes transparency and control, and the more removed a brand is, the greater the opacity. Going forward, manufacturers must proactively provide visibility for brands and retailers; going as far as sharing details about suppliers that they outsource to, the resources they consume, and other essential metrics. This is a high bar for the industry as a whole to clear, and the timeline for change is right. But by doing this, brands can assess manufacturers’ sustainability capabilities, and where needed, provide the necessary funds to assist in both reducing their environmental impact and, at the same time, shielding them from the environment’s reciprocations – especially at a time where extreme weather events are flooding factories and affecting employee safety and access to income. 

Providing this kind of assistance, whether it’s far offshore or much closer to consumption markets, might mean that brands support upgrading the physical infrastructure of the supplier’s factory, or make sure that employees are able to work at a safe temperature (in both warmer and colder climates). This also means making sure that fabrics and other valuable pieces of technology are out of harm’s way should a natural disaster happen, and that redundancies, contingencies, and backups become concepts that apply to physical production as much as they do to data security. 

What will need to be avoided above all is that the burden of costs falls squarely on manufacturers and, more directly, on their workers. Because the fundamental difference between nearshore and offshore relationships in this respect is the existence and robustness of social safety nets in the regions.

This new relationship between brands and suppliers may go even further and change the way that brands design their collections around the limitations of the raw materials. This goes particularly for luxury brands who are not used to any stops in place. In the realm of luxury, the designer traditionally holds a visionary role, and the subsequent task involves sourcing all the necessary components to bring that vision to life. In this context, the supply chain typically serves the designer rather than in a partnership dynamic. The next step in the journey towards suitability in fashion could be that manufacturers may have increased influence, compelling designers to adopt more sustainable practices due to resource constraints.

As Cornell University’s Global Labor Institute study points out, “adaptation to climate breakdown is not part of the global fashion industry’s plan”. As climate issues persist, the fashion industry is going to need new strategies that can support supply chain workers, as well as funding for responsible practices. The certainty of more climate-related calamities looms, and the necessity for the global fashion industry to proactively adjust to the prospect of climate breakdown has never been more important. 

Last Chance To Complete Our Survey: The State Of Supply Chain And Sourcing Strategies

Our anonymous survey on the state of supply chain and sourcing strategies will be closing imminently; this is the last chance to make your voice heard. We’re looking to build an objective benchmark of how the objectives of sourcing teams are evolving at a time of disruption, and how technology is – and isn’t – supporting them.

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