-By Sandeep Raghuwanshi, CEO and Founder, ESGRobo
ESGRobo is a startup that aims to improve sustainability in the fashion industry’s supply chain. Fashion supply chain is complex and global. The production value chain involves several countries, and outsourcing to finishing factories is common. This model allows the brands, especially fast fashion brands, to offer apparels in a cost effective manner and respond quickly to the changing trends and customer preferences. However, this model results in weak control of brands over their supply chain and exposes them to reputation risk arising from beyond their fences.
Most of the upstream industries are in developing countries with differing levels of sophistication in compliance to globally accepted regulations. There are, on average, two fires per day in garment factories around the world resulting in a grim track record of fatalities. Most of these incidents either escape media attention or are in news only for a short period of time. However, at times there are events like the Rana Plaza disaster that continue to grab worldwide attention for many days.
Reputation risk lurking in the supply chain are hidden land mines
Although most brands are acutely aware of the risks to its reputation emerging from these supply chain blindspots, for these risks to materialize, it is not necessary that the actual actions of the company are irresponsible. When such incidents surface from suppliers’ facilities, consumers do not differentiate whether factories are owned or outsourced. A perception builds that the company lacks ethics and is not properly managed. The company not only suffers from unprecedented loss in sales but also incurs an irreparable dent to its brand perception among consumers. This, in turn, increases concern among financial investors on whether it can sustain its growth.
Responsible behavior is expected behavior
With the increasing sophistication of NGOs and campaigners taking action on supply chain issues such as child labor, unfair pay, inhuman work conditions etc, brands have transitioned to an increasingly proactive attitude towards CSR and Compliance that transitioned from being treated as “necessary evils” or as check-lists to be ticked. Lately these brands have found it in their best interest that they work proactively to ensure mitigation of risks in global supply chains and that responsibility of the supply chain has to sit right at the center of how the brand conducts its business with its suppliers.
Transparency and oversight are proven to deliver results
Post Rana Plaza disaster, a review of Alliance Accord reveals the tremendous headway made. Remediation is close to completion at 767 Accord factories which have completed more than 90% of the amends. More than 1.5 million workers have been trained to protect themselves in case of a fire emergency, and so far there has been zero loss of life due to a structural, electrical, or fire-related accident in a factory where the Alliance has undertaken the remediation.
There are warning signs before disaster strikes
Crisis management experts know that most crisis are preceded by red flags or warning signs, and observation and intelligence can provide valuable early insight into many problems in the supply chain. But clearly the current methods of auditing and certification standards in the apparel industry regarding health and safety do not go far enough. The lack of standardization creates confusion among manufacturers, brands, and retailers. Manufacturers complain of not being rewarded for the standards they follow and see compliance as an additional cost to be incurred to stay in business.
Innovative technological solutions are emerging on the horizon
While the complexity of the global apparel supply chain would make a uniform standard difficult to achieve, alternative innovative solutions are rapidly emerging on the horizon.
One technology to watch out for is blockchain coupled with smart contracts, which when applied together automates a lot of things. Blockchain enables transparency and trust in the data and smart contracts enable automated exchange of complex agreements including that of data. So, if a brand sells to hundreds of wholesale accounts and gets products manufactured from hundreds of factories and all of them have custom contracts, it would be no headache to exchange compliance information between them by introducing blockchain-enabled smart contracts.
There are several blockchain start-ups that are building and offering its blockchains for applications to be built. Some are trying to create its own walled gardens and others are creating open platforms for all to use. A startup Group Project of Los Angeles offers verification of the authenticity of luxury goods through its proprietary mobile app. Singapore-based VeChain has exhibited blockchain applications tied to the fashion industry as early as 2016. Berlin-based Lukso has created a platform for many companies to build blockchain applications on top of, making those projects interoperable and leading to a larger network with greater viability for trust. The power of these platforms can only be realized when both data providers and data users come in large numbers. An average sewing machine costs less than $1000 and workers are paid less than five dollars per day. Making tech work while still not burdening the manufacturers requires innovative models. This is where companies like ESGRobo from India solve the final missing link in the chain. The innovative startup invests in the data infrastructure to collect detailed operational and ambient working environment parameters while letting the data ownership rest with the manufacturers who become partners on a subscription basis.
Ignorance is no more an acceptable excuse
The global fashion industry can no longer rest in denial. In today’s day and age, it is not an acceptable excuse for a brand to claim to be unaware or ignorant of what is transpiring in their supply chain. Consumers do not differentiate brands based on their operating models and evaluate them by applying the same standards. It is great that there is an increasing consciousness towards better work environment at all levels of production and supply and the impetus provided by such social awareness among consumers is a way forward in the right direction and with the means to fill the necessary gaps in the supply chain an acute trend has arisen where brands are implementing data driven technologies to overcome the blindspots and adopt more sustainable business practices.