James Schaffer, chief strategy officer, Worldly
Without proper mitigation efforts, the fashion industry’s carbon emissions are expected to increase from 1.025Gt to 1.588Gt (54%) by 2030, warns the Roadmap to Net Zero report by the World Resources Institute (WRI) in partnership with the Apparel Impact Institute (AII).
Fashion companies need actionable insights into their supply chains to effectively mitigate climate change, and to operate responsibly in the new market and legislative landscape as shoppers demand action and global sustainability regulations emerge. Until industry leaders grasp the critical importance of primary data from facilities and manufacturers’ suppliers on their environmental impact, they cannot make properly informed decisions to meet these new regulatory requirements.
Specifically, if the industry is to reduce its climate impact to aid in limiting global warming to 1.5oC, there needs to be an absolute reduction of emissions by 45%, the WRI report states. Therefore, companies throughout the industry value chain need to leverage technology such as the Higg Index suite of tools to accurately collect and analyse primary data at scale.
The urgency of primary data collection
There is no time to waste. The smartest businesses are those already investing in processes and tools for robust primary data collection into tiers deep within the supply chain.
First, businesses need to comply with new and upcoming regulations, such as the European Union’s Corporate Sustainability Reporting Directive and California’s Climate Corporate Data Accountability Act, by prioritising primary data collection.
Much of the fashion industry relies on estimates to understand many supply chain impacts, making it hard to measure the effect of improvements to product design, materials or manufacturing processes. When up to as much as 90% of a company’s carbon emissions are made at the scope 3 level – indirect emissions that are the result of activities from assets not owned or controlled by the business itself, but that occur in its value chain – as the WRI estimates, fashion brands and retailers must be able to identify and quantify their magnitude. At Worldly, we believe that if the fashion industry is to reduce its emissions by 54% by 2030, there is a critical need for accountable self-regulation and reliable primary data.
Sustainability insights and measurement platform Worldly
Regulatory landscape
Legislation is coming. Europe’s new Corporate Sustainability Reporting Directive is a seismic shift that requires companies to report on their environmental and social impacts, as well as improvements. In the US, there is increasing emphasis on comprehensive sustainability reporting within state and federal legislations, with a particular focus on implications for supply chains. Important examples include the Climate Corporate Data Accountability Act and Climate-Related Financial Risk Disclosure Act in California, which will require businesses to report greenhouse gas emissions for the first time.
Despite these impending obligations, 45% of global supply chain leaders say that they either have no visibility into upstream supply chain operations, or that they can see only as far as first-tier supplier, McKinsey & Co’s Taking the Pulse of Shifting Supply Chains report found. Primary data from suppliers’ suppliers – notably from tier 2 and beyond, where most of a business’s social and environmental impact lies – will be the linchpin that offers the comprehensive view that is key to unlocking sustainability improvements across the value chain.
We believe that these regulatory mandates should be seen as more than an obligation, but rather an opportunity for supply chain leaders to drive a culture of sustainability.
Overcoming challenges in visibility
There is currently a significant data gap in the fashion industry, making it difficult to evaluate which efforts impact carbon emissions directly. Historically, deep supply chain visibility has been challenging due to unreliable, non-standardised and infrequent primary-facility data collection, while reliance on estimates hampers the measurement of the impact of sustainability improvements.
It is imperative for companies to not only collect, but also verify primary data frequently to present the clearest possible picture of supply chain performance. Moving beyond compliance, and into due diligence and responsible business practices, requires setting ambitious improvement targets, and meticulously tracking impact metrics across various facets of the supply chain. Fortunately, there are tools available that help establish a baseline, quantify data, and serve as inputs to developing goals over medium- and long-term time horizons.
Transparency, technology and compliance
To make smarter improvement decisions, reduce global emissions and treat workers across the supply chain equitably – as well as comply with emerging regulations – businesses need tools that enable them to gather accurate, reliable and actionable primary data within the value chain at scale.
Technology not only enhances the efficiency of the data collection, but also mitigates the risk of human error inherent in manual data gathering methods, ensuring accuracy and reliability in supply chain reporting.
Strategic investment in these tools, coupled with proactive leadership, are imperative for embracing the new regulations – not merely as a compliance mandate but as a catalyst for meaningful and enduring sustainability practices. Incorporating technology and data analysis platforms also empowers companies to strategically invest in supply chain efficiencies that yield the most impactful and lasting results.
Sustainability insights and measurement platform Worldly
The Worldly platform’s holistic approach does not just focus on a single impact area – for example, just carbon or chemicals. The platform features a large source of primary facility data and widely accepted self-assessments, enabling users to better understand their products, sourcing and footprint. The level of resolution brands need to report will continue to increase in time, which is why Worldly is developing tools based on comprehensive manufacturing data gathered more frequently, and with greater resolution and accuracy.
Businesses need this holistic view to prioritise and make decisions by weighing how any change will affect other impact areas. Worldly solutions provide this view of supply chain impact areas, from carbon to water and labour practices, offering brands and suppliers a comprehensive picture of their performance – from material inputs and logistics, to retail and people practices – so they can identify where to make improvements in one area without disregarding the effect changes will have on another.
We believe that the strategic use of technology and data will empower companies to navigate the changing regulatory landscape, making sustainability reporting a catalyst for enduring practices.
