Traceability must be non-negotiable for fashion industry investors

London

Both financial and sustainability performance have never been more important for the textiles industry.

Textile and apparel companies could be missing out on billions of dollars in net profit enhancement from a lack of supply chain traceability, according to Planet Tracker’s latest report, Lifting the Rug.

Traceability, the ability to gain detailed insight into the supply chain, enables companies to better measure and improve their environmental and social impact. The latest research by Planet Tracker has found that companies without traceability systems are missing out on a net profit enhancement of 3 to 7%, the equivalent of approximately US$ 3 to 6 billion per year for the brand and retail apparel sector.

Despite this, only 37% of 52 publicly listed retail companies analysed have proven traceability by publishing a supplier list, of which only 21% have published suppliers beyond Tier 1.

John Willis, Director of Research at Planet Tracker, comments: “The textile and apparel sector is facing heat from all sides regarding its environmental impact, with toxic production practices, degradation of natural resources, massive and growing waste as well as labour injustice. New regulations are on the horizon and consumers are expressing increasing dissent at unethical practices. But still not enough is being done, because not enough is being said about the potential economic benefits.”

Planet Tracker collaborated with Segura, a leading supply chain mapping software company.

“Planet Tracker’s and Segura’s findings prove once and for all that the cost of implementation would be more than offset by the enhanced productivity resulting from traceability. And this is in tandem with the sustainability, social and risk mitigation benefits. Even companies who are fully confident they are doing it right need traceability to protect against accusations of greenwashing, which are rife at the moment, no matter their ethics.”

“Financial institutions funding textile and apparel companies should be taking note.”

“The push towards better traceability is a trend that will continue despite reluctance from suppliers and retailers, with new traceability laws coming into effect in the next five years in key markets around the world. Those left exposed to companies without robust traceability systems will ultimately suffer.”

Willis adds: “Now that the technological tools for companies to have full traceability through their supply chain exist, any lack of disclosure is wilful. This means that, for institutions investing in textile and apparel companies, traceability must be a non-negotiable”.

The report calls on textile companies to: make traceability a core pillar of their sustainability strategy moving forward; implement full traceability in their supply chains to capture cost savings and better monitor and reduce environmental impacts; utilise the knock-on effects of better traceability to invest in better measuring and monitoring of environmental metrics throughout the supply chain; be willing to dig deeper on suppliers unwilling to introduce traceability systems; provide proof of full traceability before promoting sustainability credentials.

Investors should: demand full implementation of traceability through company supply chains to capture cost savings and reduce environmental impacts; demand full transparency from brands and their suppliers, using details in this report to rebut push-back; pressure brands to reinvest a portion of cost savings from better traceability to improve other environmental areas; encourage thought leadership investments in traceability and decarbonization which have longer paybacks beyond hitting next quarter or end of year sales targets.

planet-tracker.org