Water Risk Strategies And AI Watermarks: Two Essentials For Fashion’s Future

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Survey Report: The State Of Supply Chain & Sourcing Strategies In 2024

At the end of 2023, The Interline and Bamboo Rose set out to survey close to 100 brand and retail businesses, worldwide, to ask big questions about sourcing and supply chain processes and solutions. This week we released the full results, which paint a complex, shifting picture – and which reveal a new mandate for transparency, collaboration, business continuity, and more comprehensive technology adoption throughout the supply chain.

You can read some key findings at The Interline today, and then access the full, ungated report from our friends at Bamboo Rose.

Why is water risk under-represented in sustainability and business continuity strategies?

The tide is coming in on transparency for water management in fashion. This past week, Planet Tracker – a nonprofit financial think tank and a watchdog on corporate behaviour – released a new report called “Exposing Water Risk” which intended to find out how 29 major apparel brands perceive water-related risks.

What came to the surface after analysing 3,900 documents (including sustainability reports, regulatory filings, and investor meeting transcripts) using Natural Language Processing (NLP) was astounding. 90% of the apparel companies examined did not flag water-related risks related to its consumption, pollution, sanitation, scarcity or potential inundation. The majority failed to mention any such risks at all. Further, most disclosures focus on consumption; toxins and contaminants – that affect humans, animals, and fragile ecosystems – were amongst the least discussed subjects.

Looking more loosely at the results: most mentions of water-related risk were by non-luxury brands, followed by luxury brands, but companies analysed who mainly operate as retailers of apparel typically make very few water-related risk disclosures. Most mentions of water-related risk are found in sustainability reports and annual reports, and there was very little mention of water in transcripts from corporate events, suggesting it is not something investors are focused on. More on this later.

This is remarkable because the fashion industry is massively dependent on water. From irrigating fields, to dyeing and finishing fabric, and promoting factory hygiene – water is fundamental to every stage of textile production.

But at the same time, many of fashion’s sourcing and manufacturing regions have high water stress – i.e. an imbalance between the demand and the availability of water.

And when it rains, it pours. Water-related troubles have far-reaching, devastating and disruptive consequences for the fashion industry and beyond. All you have to do is look at the drought in the Panama Canal, which has resulted in massive shipping delays, or the monsoons in 2022 that destroyed a large swathes of Pakistan’s cotton to understand that short-term overloads and prolonged droughts can have a significant impact on fashion’s ability to source, produce, and ship effectively.

So how has water risk fallen so low on fashion’s sustainability and business continuity agenda?

Part of this has to do with fashion being preoccupied with carbon emissions, and a relative lack of knowledge when it comes to water and biodiversity. That being said, fashion is not entirely disregarding water concerns. Based on estimates from Planet Tracker, there has been a notable increase in attention towards water recently, with disclosures rising from approximately 2,000 in 2018 to over 9,000 in 2022. Among the 29 companies examined by the organisation, including Adidas, Gap, H&M Group, Inditex, Kering, Nordstrom, and Zalando, 15 have reported their water usage to the Carbon Disclosure Project (CDP).

Nevertheless, the depth of these disclosures remains limited. As outlined in the report, many of the fashion companies’ objectives are small in scope, with only one or two aspects considered – water efficiency being a common one – and with a focus placed squarely on utilisation rather than risk.  A comprehensive water management strategy would ideally use various metrics spanning a brand’s internal operations and its supply chain, including consumption reduction, water pollution mitigation, recycling and reuse initiatives, as well as efforts in watershed remediation, habitat restoration, and ecosystem preservation. And what’s more, science-based targets will need to be set, along with a system such as the CDP for accurate composition.

Planet Tracker has an interesting suggestion to drive change for brands and retailers: appeal to investors. When the extent of a company’s water risk is pointed out, the conversation starts over about whether their investment has been over-valued – their attention sharpens. Investors could be the ones urging fashion executives to integrate better water management strategies into their day-to-day operations, and encourage public disclosure of their water usage. This could then pave the way for facilitating sector-wide transition plans aimed at mitigating water-related risks.

Of course this is no easy task. But one possible way that is just now being explored in fashion is to do what Bengaluru-headquartered Meesho is doing – bringing together logistics platforms, technology partners and small entrepreneurs to plug gaps in India’s supply chain. This week, the startup launched a network, called Valmo (short for value movement) that is making use of micro-entrepreneurs because they have a strong understanding of local communities and have the capacity to take on additional work.

Planet Tracker emphasises that even modest investments can have transformative results in mitigating the environmental impacts of the textile supply chain. By investing in improved water management practices by working with local communities, there is the possibility for socio-economic development as well as ensuring a tailored approach to mitigating water risk within the specific needs and contexts of each region. Through this approach, sustainable water management practices can be implemented effectively, leading to long-lasting positive impacts on both the environment and the well-being of local populations.

There is also potential in the EU for this type of local solution, given the broader trends in supply chain diversification through nearshoring within the footwear and apparel industry. Some positive strides were recently made by French footwear brand Veja, whose European customers will soon be able to buy exclusive colourways of the brand’s popular V-90 style, manufactured in a newly established facility in Portugal. This is the first instance of Veja products being produced outside of Brazil using a European-centric supply chain, catering specifically to the European market.

More local supply chains could be hugely beneficial for mitigating water risk and for facilitating greater transparency in this area. When production processes are closer to home, brands can more easily monitor and control their water-related practices and their consequences. This enables a few key advantages: to be able to react with speed and agility to address any issues that arise, to be able to improve on the production processes more swiftly, and finally to have visibility into the supply chain for accurate data-capture for eventual public disclosure.

Pixel Protection: Watermarks for AI Generated Images

In a blog post published this week, OpenAI announced that Coalition for Content Provenance and Authenticity (C2PA) watermarks will now appear on images generated on both the ChatGPT website and using the DALL-E 3 API. For mobile users, this will only start on 12 February. Either way, this will come in a visible CR symbol on the top left corner of generated images, as well as the invisible part via the metadata. All this is also currently only limited to images, rather than text generated through ChatGPT in either its web or app interfaces, or via its own API models.

For context, the C2PA (Content Authenticity Initiative) is an open technical standard enabling publishers, companies, and various entities to embed metadata in media to authenticate its origin and associated details. C2PA’s application extends beyond AI-generated images; the standard is also being embraced by camera manufacturers, news organisations, and other stakeholders to validate the source and history (provenance) of media content. People can check the provenance of any image that incorporates C2PA metadata through websites like Content Credentials Verify, and this will soon also apply to any images generated by OpenAI’s platforms.

(Meta also recently announced it will add tags to AI-generated content on its social media platforms.)

But metadata such as C2PA isn’t a panacea for resolving provenance concerns. It’s susceptible to removal, either inadvertently or deliberately. Take, for instance, the common practice of social media platforms stripping metadata from uploaded images, or the simple act of taking a screenshot and cropping it, which can also erase both sets of visible and invisible provenance tracking.

So it’s still very much on the user to exercise judgement when dealing with social media as a whole. And while OpenAI maintains that embracing these methodologies to establish provenance and promoting user awareness around watermarks are fundamental steps toward enhancing the credibility of digital content, the company has also been cautious about over-promising, making it clear that watermarking is not a long-term solution to traceability of AI-created or AI-influenced content.

But what might this mean for fashion? In the immediate term, we could see brands using watermarks on images they have created using their own training data. This will, however, be a delicate balance. On one hand, the watermark should protect their work from being stolen or misrepresented, but shouldn’t be so intrusive that it detracts from the image.

It will also be fascinating to see how brands and retailers will include watermarks – and what verification process will be followed – on creations that are non-static, like AI-generated models or avatars that appear in videos. As AI slowly begins to reshape (or some might say “devour”) the internet, controlling the ownership and use of brand and product images that have been either created or influenced by AI is set to become a new and uncharted frontier of brand protection.

The best from The Interline:

Michael Ferraro explores how a combination of high expectations and a huge unmet demand for digital assets is influencing the way industry and education interact – and what that means for the future of creative design.

We talk to Alison Coddaire of Kalypso about why the next steps in the digital product creation journey should be customised to fit each brand’s strategic direction.