The role of supply chains for fashion businesses going green

This year, designer lifestyle brand Tommy Hilfiger launched Make It Possible, a sustainability programme aiming to create fashion that “wastes nothing and welcomes all”. It comprises 24 environmental and social targets, with the main thrust being circularity and inclusivity.

Lisa Morales-Hellebo, GP and co-founder of REFASHIOND Ventures, an early-stage supply chain venture fund which champions companies refashioning supply chains, says that a focus on circular regenerative textiles is a good starting point on the environmental side.

“We’re going to be drowning in our own textile waste in the US,” she warns, noting that last year the industry produced $50bn in dead stock. The status quo of producing fast fashion at rock-bottom prices is not sustainable, she adds.

According to Bill McRaith, chief supply office of Tommy Hilfiger’s parent company PVH Corp., the implications of the new programme are vast.“It all has ramifications on the supply chain—from how we look at sourcing materials to looking at our vendors and how they source materials,” he says.

Supply chains are the main battlefield, according to Ms Morales-Hellebo. “The root of sustainability is primarily supply chain efficiency and the investment choices made by businesses,” she says.

Green gains

Mads Stensen, senior sustainability developer at Maersk, reports that over the past two years a growing number of fashion companies have started investing in sustainable logistics solutions as transparency in this arena has improved and clearer standards have emerged.

Logistics providers will have to play their part by optimising logistics solutions. Maersk, for instance, has supported a major sporting equipment company by transferring cargo from air freight to intercontinental rail. “We reduced logistics costs, offered competitive transit times and at the same time reduced CO2 emissions by 97%,” he says.

Maersk now also offers Maersk ECO Delivery, a carbon- neutral ocean transport solution for customers based on sustainable and certified biofuel. H&M Group have opted for this in order to meet their ambition to become climate positive by 2040.

Mr Stensen expects demand for such solutions to increase significantly going forward. As a member of the Clean Cargo Working Group, Maersk has cut CO2 emissions in half over the past ten years in its container business and aims to decarbonise all its business by 2050. Mr Stensen adds that many fashion firms aim to achieve circularity by 2030 and a carbon-neutral footprint by 2050.

To identify CO2 hotspots and opportunities to cut waste, supply-chain visibility is vital. A transport and logistics provider like Maersk can provide a carbon dashboard to keep track of CO2 emissions.

Another area that is part and parcel of sustainability is labour and human rights. Mr Stensen says Maersk has seen code of conduct requirements increase by more than 30% per year for several years, and expects this to increase further. “We simply need to have this under control in order to qualify for business and to reduce sustainability risks for Maersk and for our customers,” he says.

Digital footprint

A key building block for improving sustainability is digitisation. In Mr McRaith’s eyes this is an opportunity not to be squandered. “We’ll fail if all we do is try to digitise all that’s analogue today,” he says. “It’s an opportunity for the industry to change its ways.”

One promising avenue is to leverage augmented reality to produce garments made to measure as few consumers actually fit standard sizes, Ms Morales-Hellebo points out. “Customisation increases full price conversion by as much as 30%,” she says, adding that this results in a higher degree of customer loyalty and significantly lower return rates.

Returns can be a lost opportunity in logistics. Some shippers use different transport and logistics providers for their outbound and return flows, Mr Stensen observes. “We may transport it and not know it is for the same company,” he says. This may negate some of the benefits gained from efforts to create more flexible and faster supply chains that reduce waste.

For Mr McRaith the holy grail is a supply chain without inventory. “If it’s not in the store for the consumer to purchase, it’s bad inventory,” he says. “I doubt we will lose warehouses and inventory in my lifetime, but everybody’s working hard on this.”

Navigating next

One major shift Mr McRaith sees is the industry reaction to emerging obstacles to globalisation, such as new tariffs and political upheavals like Brexit. This is strengthening interest in near-shoring and on-shoring, both of which could match with fashion companies’ efforts to improve speed to market and consumer responsiveness, he says.

Another major development is the growing realisation that individual players cannot go it alone. Collaboration is the only way for the industry to move to a sustainable platform, argues Ms Morales-Hellebo.

One promising move in this direction is Treadler, a B2B initiative launched this year by the H&M Group that gives other companies access to its global supply chain and even offers assistance with product development—for a price.

Closer alignment would also strengthen the collaboration of fashion brands with their supply chain providers. Mr Stensen is an advocate for this kind of approach. “Transactional business relationships on short-term contracts are no basis for significant change,” he says. “We need longer-term co-operation.”

Fashion brands and logistics firms are also finding common ground on broader sustainability initiatives. A number of global brands—including Nike, Mercedes-Benz, Starbucks, Unilever and Maersk—have committed to sharing best practices for achieving net-zero emissions through the Transform to Net Zero initiative.

The project was launched this past summer in partnership with the Environmental Defense Fund and BSR, a global non-profit organisation dedicated to sustainable business practices. They aim to conclude their work on this initiative in 2025.

The old debate about sustainability versus value may be reaching a tipping point. While surveys indicating that, if given a choice, a majority of consumers will pick sustainable products are often met with much scepticism, some industry leaders are stepping up to the challenge.

According to Mr McRaith, the old dichotomy no longer applies. “Initially, if you used a more sustainable supply chain or materials, there was a trade-off to that,” he says. “I think that has levelled off. It’s no longer a trade-off. We can do both—be profitable and be sustainable.”

We need longer-term co-operation.

Mads Stensen
Senior sustainability developer at Maersk

We can do both— be profitable and be sustainable.

Bill McRaith
Chief supply officer of PVH Corp

Disclaimer:

Produced by (E) BrandConnect, a commercial division of The Economist Group, which operates separately from the editorial staffs of The Economist and The Economist Intelligence Unit. Neither (E) BrandConnect nor its affiliates accept any responsibility or liability for reliance by any party on this content.

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