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Tuesday, June 25, 2024

Supply chain traceability and transparency have emerged as a critical issue in the fashion industry

Supply chain traceability and transparency have emerged as a critical issue in the fashion industry’s sustainability transformation. Traceability is the process of identifying the origins of a product.

Traceability involves a series of interconnected stages along the supply chain, including the sourcing of raw materials, processing, production, transportation and distribution. Ethical and sustainable practices have become significant factors influencing purchasing decisions. Brands that can demonstrate transparency and responsible sourcing practices are more likely to gain consumer trust and loyalty.

Governments and regulatory bodies are imposing ever-stricter regulations and non-financial information disclosure requirements on businesses. For example, the EU cooperative sustainability due diligence directive (CSDDD) asks companies to identify and address potential and actual adverse human rights and environmental impacts across their operations, subsidiaries and value chain.

But due to the complexity and globalized nature of fashion industry supply chains, brands and retailers often need help seeing their complete value chain. This lack of visibility leads to inefficiencies and challenges in tracking a product’s journey. Brands may struggle to verify the origin of a particular material, ensure compliance with labor standards or accurately assess the environmental impacts of their products.

Short production cycles and frequent product launches make it difficult for brands to prioritize traceability initiatives and invest in robust monitoring systems. The increased use of preferred materials, such as recycled or bio-based fibers, amplifies the demands placed on sourcing raw materials.

The EU deforestation-free product regulation, which entered into force in 2023, makes the demand that goods such as timber, leather and rubber must not originate from areas of deforestation or forest degradation. These regulations prioritize the need for traceability since non-compliance may lead to legal sanctions, reputational damage and financial losses.

Traceability allows companies to evaluate supplier performance, identify and address financial and operational risks proactively, and weed out inefficiencies. In addition, traceability initiatives enable brands to improve their corporate image by showcasing a commitment to ethical sourcing, sustainable production and social responsibility.

To enhance supply chain traceability in the fashion industry, brands can work closely with suppliers to map the entire supply chain, identify potential risks and establish corresponding monitoring mechanisms. Conducting regular audits and inspections of suppliers’ facilities is essential for ensuring compliance with labor standards, environmental regulations and ethical practices. Using robust monitoring systems will also help companies track a supplier’s performance, allowing them to promptly address any deviations from established criteria. Brands can also apply and promote innovative digital methods, such as blockchain technology, to enhance the collection, management and analysis of supply chain data.

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