Supply Chain

Creating Sustainable Apparel Value Chains, Part I:
Transforming the Industry

This post first appeared on CSRwire's TalkBack blog on December 17, 2013.The ubiquity of the apparel industry is staggering. Everyone wears clothes. The manufacturing of apparel triggers national development and industrialization, jobs and forms of commerce for the sellers of it, and cover and satisfaction for consumers. At three trillion and counting, the global garment and textile industry is responsible for a great deal of progress throughout the world.

By Dr. Maximilian | Published 10 years ago | About a 6 minute read

This post first appeared on CSRwire's TalkBack blog on December 17, 2013.

The ubiquity of the apparel industry is staggering. Everyone wears clothes. The manufacturing of apparel triggers national development and industrialization, jobs and forms of commerce for the sellers of it, and cover and satisfaction for consumers. At three trillion and counting, the global garment and textile industry is responsible for a great deal of progress throughout the world.

But when the Rana Plaza garment and textile factory collapsed in Bangladesh’s capital Dhaka in April 2013, killing 1,133 people, a level of prolonged scrutiny of the apparel industry commenced. In the months since, its poor working conditions have been exposed once more — the compromises and exploitation that are often made in the name of growth.

Will the global community no longer tolerate sweeping the issues under the rug, and take Rana Plaza as a starting point to get serious about sustainable industry transformation? Time will tell. But we know already that traditional responses have proven insufficient — and that a solution is possible.

New Levels of Productivity Are Possible, But Not Without Pivotal Changes

The sheer size of the apparel industry is impressive but so too is the omnipresent role its products play in our daily lives. Bangladesh is the industry’s number two sourcing hotspot after China, currently accounting for almost 20 percent of the country’s GDP, 80 percent of total export earnings and over four million direct jobs. It absorbs unskilled labor into formal employment, and provides a context where relatively modern technology can be deployed at low investment cost and drive exponential dividends.

Yet this shiny coin of advancement has another side that reflects a tarnished surface marked with poor working conditions and heavy pollution. The Rana Plaza accident was the latest and most high profile tragedy. As the industry grows, there will be more accidents, unless we take social and environmental performance to a completely new level.

The response to the incident has been swift. Major players have stopped purchasing from multi-story buildings like the Rana Plaza factory. Buyers have taken action to improve safety in the textile and garment industry in Bangladesh by joining the European buyer-funded Accord on Fire and Building Safety and the US buyer-led Alliance for Bangladesh Worker Safety. While greater fire and building safety are very important, the problems lie much deeper. The issue is systemic in nature, and the response needs to be as well.

Hence the focus of the new report by Impact Economy — a global impact investment and strategy firm — titled Creating Sustainable Apparel Value Chains, authored by Dr. Maximilian Martin, founder and global managing director of the firm. The report provides an evidence-based assessment of the prospect of sustainable textile and garment value chains and the levers needed for sustainable industry transformation.

Transforming the Industry: Key Levers

Contained in the research is a look into the major buyers and producers of the global industry, the key social and environmental issues facing it, and the changing consumption and production patterns affecting development. More critically though, the report examines the key levers needed for transforming value chains in the apparel industry (and beyond), including:

1. Actors need to look across the entire supply chain to foster total resource productivity and transparency.

Supply chain upgrading is possible. Corporate commitments to sustainable procurement all along the supply chain in other industries — such as the Mars and Cadbury commitments to the World Cocoa Foundation — can have a transformational impact. Manufacturers started cooperating as they discovered that an increase of production volume was beneficial to corporate business growth and helped to improve the reputation of the brand.

2. (Impact) investing can be used to make critically needed upgrades to industry infrastructure.

Products and processes that make heavy use of energy, scarce natural resources and low-skilled labor dominate the industry. The potential for improvement is massive. While mobilizing capital is challenging in the context of high-risk emerging markets with volatile order books, factories and supply chains are really teeming with turnaround opportunities. Given the generally low resource productivity in the industry, there is a win-win opportunity to improve social and environmental conditions while also enabling producers to save money and/or capture a higher margin by entering higher-value added production.

3. A new level of ambition is needed to improve working conditions, with special emphasis on the gender dimension.

A widespread perception is that decent work and competitive enterprises are in conflict with each other. Evidence suggests otherwise — that improving working conditions and achieving efficiency improvements can actually go hand and hand. Workers in the textile and garment industry, of whom eighty percent are women, typically suffer from widespread and insufficient health and safety conditions, violations of labor rights (e.g. wages, child and forced labor), inadequate housing, transport, healthcare and childcare, as well as gender discrimination. The net of these issues is low worker productivity. Any next-generation strategy thus needs to strengthen the position of workers (women in particular), and take into account dimensions that go beyond the traditional “labor” context.

4. There is a lot to be learned from studying and replicating the best practices of leading players.

Imitation is often considered the sincerest form of flattery, and best practices in social and environmental performance and value-added creation are being pioneered and perfected every day. Instead of reinventing the wheel, learn from leading initiatives such as the Responsible and Accountable Garment Sector (RAGS) challenge fund, use what works, and modify to take to the next level.

Creating Sustainable Apparel Value Chains argues that the path towards a sustainable transformation of the apparel industry will need to make the linkage between how higher social and environmental performance can actually drive revenue creation via increased resource productivity and savings — making supply chains transparent, working conditions adequate and environmental footprints optimized.

The issues facing the apparel industry are staggering. The solutions to them now need to be, as well.

Part II: Fostering Total Resource Productivity and (Impact) Investing