Fashion Retailers Need to Commit to Sustainable Sourcing

Each new sustainability concern brings with it a gamut of regulations, adding complexity to an already intricate supply chain landscape. Here's what to consider.

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The fashion industry is still struggling to meet the expectations of a consumer base that has become increasingly conscious of the environmental and social impact of their clothing choices. In the U.S., 80% of consumers indicate that sustainability is a crucial factor when selecting a fashion brand, and younger shoppers in particular have shown that they’re increasingly willing to pay more for clothing that aligns with their values. 73% of millennials say they would spend more for sustainable brands and three quarters of Gen Z consumers cite sustainability as more important to them than brand name.

Fashion brands and retailers are under immense pressure to meet these evolving demands. Sourcing managers are confronted with the intertwined challenges of identifying cost-effective suppliers while ensuring adherence to increasingly rigorous standards of social and environmental sustainability and doing so transparently for more demanding consumers. The industry's push toward resilience and circularity—where resources are reused and recycled, extending the lifecycle of products—adds additional layers of complexity to sourcing strategies. In tandem to these challenges, fashion brands are also diversifying their supply chains across multiple countries to mitigate risks from political, economic, or weather-related factors.

This strategy enhances resilience but also complicates sustainability validation, making the ability to rapidly assess new sourcing models for their environmental and social impact essential. Without robust digitalized processes, it's nearly impossible to achieve this validation in a timely and scalable manner, especially given the decentralization and complexity of modern sourcing models.

Meanwhile, as governments intensify the rollout of new due diligence laws across the globe, the fashion industry is in a race against time to adapt. In light of new regulations such as the United States’ Uyghur Forced Labor Prevention Act (UFLPA), there is an added imperative to shift sourcing operations away from higher-risk countries like China, where there are growing concerns about human rights violations. Outdated, manual supply chain management processes are no longer enough to manage all these mounting considerations.

To make informed and sustainable decisions, fashion brands and retailers require a comprehensive, 360-degree view of their supply chain, but that’s impossible given the siloed nature of traditional supply chain systems. These dynamics reinforce the imperative for fashion retailers to invest in robust digital solutions geared toward efficiency and sustainability. Digitalization introduces the visibility that businesses need to constantly monitor, analyze, and improve the sustainability performance of their supply chains down to the Nth tier, including water and energy consumption and Scope 3 carbon emissions.

This visibility, in conjunction with cloud-based collaboration tools, allows retail businesses to better align with their suppliers on sustainability goals, something that’s proven to be a challenge for the industry. Recent studies have repeatedly found that in matters of sustainability, many global suppliers lag behind the soaring expectations of brands, consumers, and regulators.

The success of ESG initiatives hinges on businesses synchronizing with these suppliers. Every stakeholder, from the raw material provider to the final logistics partner, must have a clear understanding of the company’s expectations. Through digitalization with a multi-enterprise platform, brands and retailers can enforce their sustainability standards and monitor suppliers’ progress while fostering the collaboration and communication necessary to work toward these goals together. This collective alignment also enables accurate, transparent reporting on corrective action plans and the sustainability performance of suppliers down to the Nth tier.

Building Sustainability into Every Process

Brands and retailers can only accomplish so much with a fragmented view of their supply chain operations. Sustainability touches nearly all supply chain processes, and companies need an integrated perspective that captures the specificities of both environmental and social sustainability. From the outset, where product developers conceptualize eco-friendly designs, to the end, where logistic teams consolidate shipments to minimize their environmental footprint, sustainability impacts every decision made during the product lifecycle. Product designers, for instance, must balance innovative designs with low-impact materials.

From the drawing board, they should embed circularity into their designs so that each garment is conceived with its entire lifecycle in mind. Sourcing teams, meanwhile, need to carefully vet suppliers on their social sustainability performances. Order and procurement teams must emphasize bulk ordering or optimized procurement cycles to reduce transportation footprints.

Every department plays its part: A product design team might choose biodegradable materials, but if the sourcing team procures from a high-risk supplier, the chain breaks. This is another area where multi-enterprise platforms excel by offering data-driven insights that help predict and manage risks, thereby maintaining efficiency in the complex world of sustainable fashion sourcing. Only a comprehensive multi-enterprise platform creates a panoramic, real-time view that is essential for guaranteeing all stakeholders and departments live up to their shared responsibility.

Cloud-based platforms aid companies in tracing products back to their source and tracking chain of custody but also play a crucial role in risk mitigation, alerting businesses to missing or incomplete information and outdated certifications. Applied AI enables an instant assessment of potential non-compliance risks across a vendor's entire value chain, thus preventing problems before they occur. This technology allows businesses to verify that all their products come from sustainable and ethical origins, while also helping companies qualify and manage suppliers based on their ESG performance. Multi-enterprise supply chain platforms go significantly beyond traditional PLMs, offering a rigorous, multi-tier supplier verification process and ensuring that suppliers meet the company’s specific sustainability standards.

Today’s best practices will be inadequate five years from now. Emerging challenges around wastewater management, deforestation and circular economies are rapidly gaining prominence, and each new sustainability concern brings with it a gamut of regulations, adding complexity to an already intricate supply chain landscape. Brands are grappling with not just adhering to these regulations but integrating them seamlessly into their operations to maintain a competitive edge. This dynamic reinforces the criticality of digitalization. By adopting a multi-enterprise platform, retail businesses can ensure they remain ahead of global regulations and consumers’ expectations today and into the future.