Proper use of blockchain and NFC technologies is key to not waste their use. In a conversation with the providers TrusTrace and Authena, they explain the why and how
Sustainability: an excuse not to stay behind
The use of blockchain technology seems a solution to give stakeholders all the information they are searching for at any moment. The technology is acquiring space within fashion brands’ practices to give foundation to their claims, but is still a practice that needs refining. To declare accountability to the process, a brand is only required to organize data that risk getting piled up without anyone reading them in the end. This data can include all sorts of documents regarding certifications, footprint calculations, percentages of used materials, water waste and other bureaucracy documents that together aid to reach transparency. Middlemen have become a necessity to alleviate the burden of organizing them to allow traceability in real terms. Platforms that help to put in order this data are emerging in different fields of interest, including fashion.
«Fashion brands are under pressure because of three things: transparency, compliance, and sustainability», declares Shameek Ghosh, one of the founders of TrusTrace. «Transparency is being demanded by younger generations that are entering the buying market, and brands need to cater to that need. About compliance, it is being put in practice by governments». Examples include the cotton regulations in the USA, the French and German transparency laws, and even the events related to the COP26, held in Glasgow in November 2021. «In the end, sustainability is what everyone is looking to achieve, not to stay behind».
A solution to this issue: traceability
A brand should know a product’s supply chain, from the source of the raw materials to its finishing, «but we know that no supply chain is perfect. There’s the need to create supplier performance improvement plans, and to keep a track of them», adds Ghosh. To give an example, the demand for materials that respond to sustainability principles is ten times the global production. Material integrity can be an issue, following the emergence of fake certificates (with fake verification codes), which, once discovered, brings the brand to pay a penalty to consumer authorities.
«Only when you have verified certificates and you have a real track of your supply chain, you are in a place to start communicating with your consumers or regulators through transparency», affirms Ghosh. In the past, a brand’s practice had been to dedicate only about fifty or sixty employees to ensure accountability, «but because of transparency, compliance, and sustainability becoming such relevant topics, now they are putting hundreds of people to do it». However, a margin for error from human beings working with data collection can’t be avoided. «Instead, data quality changes when there is a platform collecting all the information, verifying it, and calculating it».
In 2016, Ghosh and three other friends of his, started developing ideas which would lead to creating TrusTrace, a platform that matches the enterprises’ needs for organizing data. They realized back then that there was a lack of traceability software on the market. There were managing softwares (EPR for resource planning, PM for project management) but there wasn’t one that could help brands to keep track of their data related to sustainability. «The idea of TrusTrace was born when a member of our team had to go back to his hometown in India, to help at his parents’ farm. The consequences of climate change and pollution were evident there: there was too much underground water, and the water supplied to the farm was intoxicated by a textile mill nearby». At the time, Ghosh and the other founders were working in IT consulting and IT software development services in Sweden and the UK. They thought of ways they could help their friend’s family. In the beginning, TrusTrace was a hobby project. «We intended to list down the good textile companies that were in India and name a few bad ones, to point them out then to European fashion brands, pushing them to work with the first instead of the second ones», explains Ghosh. «Some of the brands that we contacted, and with which we are collaborating in 2021, said to understand the problem, and exactly for this reason they weren’t outsourcing in Asia. But our point of view was that they should have supported the good businesses there because they were the good actors on the scene. They agreed with us, but it would have been possible only with good quality data, testifying to a good use of the investments».
Differentiating oneself through the business model: Trustrace case
This hobby turned into work. Since none of TrusTrace’s founders came from the fashion world, they needed an expert about the industry and its supply chain. They began collaborations with some Swedish companies, with grants from the Swedish Innovation Ministry. When the COVID pandemic hit in 2020, the need for a platform of the kind of TrusTrace emerged worldwide. «Earlier our focus was Scandinavia: we had a few customers in Germany and France, but then we could see that we started getting a lot of people reaching out to us». The service had to be improved: they obtained investments from Industrifonden and Fairpoint Capital, together with other investors from BackingMinds. They also received support from Fashion for Good. «When we were proposing our Saas platform to fight greenwashing, the feedback from our investors was that this was a complex issue, but they were seeing a value in our work», says Ghosh, explaining how TrusTrace works. «We differ from many of the other capability players due to our business model. Is to say that we charge the brands, not the suppliers, for the service». That’s because brands rely on the suppliers’ certifications to then state their sustainability level. «We made a survey, and it emerged that brands actually check only 2% or 3% of all the documents they receive from their suppliers, trusting the goodness of the other data, and here gets into action TrusTrace». Through artificial intelligence, machine learning, blockchain technology, and bots, the platform has automated the checking process, thus improving data quality. In this way, there’s a deterrent to counterfeiting certification numbers. «Here is where the blockchain consortium comes into play: if a supplier fakes a code, the platform will recognize that and would put a sort of red flag on it to alert future clients». The kind of data that brands share on the platform regard issues related to governance, ethics, society, and the environment. «They don’t imply commercial information. For this reason, there is no competitive advantage or disadvantage in using any one of them, so brands are open in sharing them through the blockchain technology».
Masque Milan use of NFC technology
Another reason why blockchain-related technologies are spreading in the fashion industry, besides transparency and sustainability, is because of counterfeits and frauds. In the fashion and luxury sector, twelve percent of annual sales are lost due to this, causing damage to brands in terms of reputation and financial losses. Italy is fourth worldwide, with its financial losses reaching an amount of 225 million euros. On the podium we can also find, in order, the United States, Germany, and France. The majority of damages happen in perfumes and cosmetics, «the counterfeited ones can be harmful and dangerous to health, posing risks to consumers», says Alessandro Brun, co-founder and creative director of Masque Milano. This Italian brand releases collections of fragrances and perfumes made by artisans, and for them transparency and traceability are key factors that differ them from others. Trying to solve this problem, in 2021 Masque decided to collaborate with a Swiss startup, Authena, a provider of blockchain-based solutions. This provider thought about a solution based on NFC technology, a digital interface that allows producers and consumers to communicate and interact thanks to a tag fixed on every product. In the case of Masque Milano, the seal allows a fragrance to be identified via radio frequency, and then thanks to the app, it is possible to track its production processes and provide information to clients. «Authena creates a digital copy specific to each product, which is stored in the blockchain and cannot be changed. NFC transmitters act as an electronic seal and are more efficient than QR code-based solutions: manufacturers can certify the authenticity of their products and monitor unauthorized movements of their goods in real time. The tag has an ‘anti-peeling’ function and protects against deceptive topping of the items. While consumers can verify the authenticity of products in a ‘contactless’ manner, simply by bringing their smartphone close to it, via a direct NFC connection or an app», says Matteo Panzavolta, founder and CEO of Authena.
What emerges from the solutions taught by TrusTrace and Authena, is that traceability is a way to inform stakeholders about the steps of a brand’s supply chain. At the same time, it sustains the producers involved, giving them recognition for their participation in the process. Besides, it comes out that there’s an interconnection between the fight against counterfeiting and the one against greenwashing, since the second is a consequence of the first. The tool that can help to overthrow the two is blockchain technology. Providers that ease this enactment gain consensus and are making evident the necessity for this kind of practice to become the norm in the fashion industry.
Saas (software as a service) platform for product traceability and supply chain transparency. It helps fashion brands to know the full journey of their products, right from the source of each of the raw materials to the final product.
Provider of blockchain-based solutions, to ensure supply chain tracking and improve end-to-end interactive communications between manufacturers and end users. The company is active in the pharmaceutical, agrochemical, food, industrial and luxury sectors and is at the forefront of the fight against counterfeiting, parallel imports and product diversion globally.