Gen-Z has spurred the movement towards value-driven companies that prioritize people and the planet. But a lack of regulation regarding disclosure leaves room for interpretation
The rise of e-tailers
The last few years has seen a shift in consumer attitudes to prioritize eco-consumerism. Recent research by Changing Markets and the Clean Clothes Campaign reveals a mere 18% of consumers would trust sustainability information provided directly by brands themselves.
The internet has become filled with step-by-step guides with actions; ranging from buy less, recycle more and critically, buy from more responsible brands. Yet, how are these honest and reliable brands identified amongst a sea of greenwashing? A wave of eco-friendly and ethical brands have sprung up; with missions devoted to reducing fashion’s carbon footprint, waste problem and wage discrepancies.
Names such as Everlane, Reformation and Alohas might be the first to spring to mind. However, further research reveals a lack of disclosure on policies and more importantly, outcomes. For years, the ‘sustainable’ label was an unregulated term that is only now beginning to achieve legal protection. Liv Simpliciano, Policy and Research Manager at not-for-profit organization Fashion Revolution, shares her expertise on industry advancement on transparency.
The Fashion Transparency Index
Fashion Revolution is a key advocacy organization within the fashion industry, targeting environmental and human rights issues. The Fashion Transparency Index is a published report annually. It reviews and ranks 250 of the world’s largest brands and retailers. Scoring is based upon the level of information disclosed on their human rights and environmental policies, procedures, outcomes and impacts.
It targets those with the greatest share of the market and therefore, the greatest negative impact and responsibility to improve. These bigger companies have the resources at their disposal to investigate their entire supply chain and conduct comprehensive due diligence on human rights and environmental impacts.
The Index empowers stakeholders to scrutinize brands for their disclosure and hold them to account. For example, in the 2021 Index, the multinational clothing retailer OVS disclosed that 0% of their workers were receiving a living wage.
By disclosing this, OVS has pressures from organizations and citizens to set a clear strategy; to remedy this in the future and held accountable for living wage disclosure. «With the FTI, we just look for the information that is there. Transparency is the first necessary and critical step to enable scrutiny, which leads to accountability and change».
Transparency in smaller brands and retailers
However, if smaller to medium sized brands and retailers are excluded from the Index; how are we to hold them accountable? Further, with the proliferation of smaller companies with bold claims on responsible and ethical practices. How can we protect citizens from greenwashing?
Footwear and apparel brand Alohas, is an up and coming brand that offers an on-demand business model. They aim to reduce unnecessary overproduction; through a pre-order system that allows customers to purchase in advance with a discount incentive.
Despite this mission, Australian ethical ratings directory Good on You scores them a three out of five in the categories of people, planet and animals. The score is primarily due to a lack of disclosure on policies concerning wastewater; sustainable packaging and living wages in the supply chain.
Everlane, another popular ‘sustainable’ brand, saw peak popularity in 2019 for its commitment to transparency. They have faced several allegations since 2020 for a toxic and discriminatory work culture; as well as interfering with union policy.
Good on You scores them at only two out of five for lack of evidence. To demonstrate policies on textile waste; the reduction of carbon and greenhouse gas emissions; the elimination of hazardous chemicals; worker empowerment initiatives; living wages in the supply chain, or a formal animal welfare policy.
In comparison, one of the industry’s biggest fast fashion brands; H&M, scored 68% on the 2021 FTI. «Transparency exposes a brands’ shortcomings and allows greenwashing. It also holds brands like H&M accountable because once a light is shown on these practices, we can pressurize them for improvement».
Brands disclosing datas
If H&M publicly discloses the facilities they manufacture in, stakeholders are able to clearly identify and call out arising issues within the supply chain. Just last week, the company publicly announced plans to expand its textile supply chain traceability programme.
These discrepancies however prompt the question, how are consumers to make responsible choices in a landscape lacking transparency and clarity? And, why does the Index place more emphasis on larger brands and not smaller ones?
Ms. Simpliciano explains that part of the key issue of transparency is the complex nature of supply chain traceability for fashion companies. «Thus, the Index focuses on putting the pressure on larger brands. Because they have the most responsibility to improve. Generally speaking, small brands have smaller supply chains. This reduced network often results in closer relationships built upon trust and knowledge exchange. In addition, for smaller to medium sized brands, their customer base is often value-driven. Therefore, more likely to speak out when there is misalignment between policies and outcomes».
Further, without formal industry standards of transparency, smaller brands may not even know they are missing key policies. However, this does not mean that they don’t have systems in place, it is only that they have failed to disclose as such.
Tools for accountability in the fashion supply chain
The 2021 FTI referenced the Open Apparel Registry (OAR). A free and open source map that identifies garment manufacturing facilities worldwide. «The OAR takes public supplier lists. Those shared directly by brands, and uses a unique algorithm to look for commonalities across address names; assigning a unique OAR facility ID to each».
As of now, there is no global standard on how addresses are formatted and the usage of international character sets. The OAR unique ID provides an innovative solution to these transliteration inconsistencies which can cause confusion.
The OAR also advocates for alignment with the Open Data Standard for the Apparel Sector; understanding that brands’ supplier lists on their websites are in different, incompatible and non-machine-readable formats.
The case of Reformation
«This means that labor rights organizations and other impacted stakeholders need to trawl through complex datasets to locate information. Due to the ways in which we find information it makes it difficult to compare and analyze datasets without a unique identifier. This again underlines the value of the OAR facility ID».
The FTI 2022, expected for publishing in July 2022, now includes an indicator asking whether or not the brand publicly discloses that they actively contribute their data to the OAR. Reformation is one such brand and OAR participant that prioritizes supply chain transparency.
Nearly all garments are made at their Los Angeles factory and all other Tier One. Ssuppliers with direct relationship to the buyer. International partner factories are listed on their website with their OAR identification number. That’s why it’s key to advocate for this standard within the industry; whether it be legislation, monetary repercussions or responsible private investment.
The significance of legislations in the fashion industry
This year has seen a global movement towards increased legislation regarding transparency in the fashion industry. In the United States in late 2021, the Garment Worker Protection Act (or SB62) was passed in California. The bill holds fashion companies directly accountable for the fair pay of garment workers in their supply chain. Outlining specific repercussions for failure to comply. In the EU, there are a series of proposed legislation, such as the Strategy for Sustainable and Circular Textiles and the Corporate Sustainability Due Diligence directive (CSDD).
The CSDD in particular, would require brands to conduct human rights and environmental due diligence in their supply chain and disclose the outcomes publicly. Up to now, fashion has faced a limited amount of legislation; despite the heavy regulations that exist across other sectors, such as the food industry.
Fashion Revolution is launching the European Citizens Initiative
Ultimately, the significance of legislation like the CSDD would be in its ability to hold brands accountable for their human rights and environmental impacts. Fashion Revolution is launching the European Citizens Initiative – a commission advocacy mechanism – to launch the ‘Good Clothes, Fair Pay’ campaign.
This campaign aligns with existing legislation and demands living wage due diligence for any company in the garment, textile and footwear sector trading in the EU, irrespective of where their supply chain is. «The campaign firstly, calls on brands and retailers to implement, monitor, and publicly disclose a time and target-bound plan to close the gap between actual and living wages. Secondly, it puts a particular emphasis on requiring brands to identify risk groups particularly hard hit by low wages, such as women and migrant workers. The proposal includes measures such as the companies’ pricing, costing and overall purchasing practices, ensuring that workers do not have to rely on excessive overtime to meet their basic needs».
They will start collecting signatures this summer and require at least one million signatures from EU citizens for the discussion of this legal proposal at EU level.
Impact of the FTI
However, with the recent results of the IPCC report requiring carbon emissions to peak by 2025; the Index remains a key tool for immediate change within the private sector. The Index has seen a clear impact in results with 47% of 250 brands now disclosing their first tier manufacturing lists, compared to 32% of 100 brands in 2017.
Luxury brands have additionally joined in, which marks a massive shift in transparency within the highly competitive market. «Gucci (who has participated in the Index since 2017) represents one of luxury’s first power players to disclose their supplier list. Where luxury brands once hid behind claims of commercial sensitivity, and transparent disclosure of production sites was believed to be a pipe dream».
The brand participation rate for the FTI has increased year-on-year. For 2021, 55% of brands actively participated in the process, meaning that they provided feedback to the Fashion Revolution team and shared information of gaps. In other words, it is a capacity building exercise whereby Fashion Revolution highlights brands’ areas of needed improvement.
Since its publication in 2021, people read the Index over 116,000 times with on average three to four hundred reads a day. «Brands are more and more using it as a tool to identify their own gaps in disclosure and investors use it as a source to identify risks in their portfolio». Fashion Revolution has shared that some companies have disclosed they use it as a way to evaluate prospective business partners.
Changing priorities and responsibilities of individuals
The needs of modern consumers are changing, «9 out of 10 Gen Z consumers believe brands should detail their stances on environmental and social issues» (BoF and McKinsey’s State of Fashion 2021). However, the 2021 Index found an average transparency score of only 23% among its 250 brands.
From 2020 to 2021, the methodology was updated to halve the weighting of policies and increase the weighting of the ‘Know, Show and Fix’ Section, a.k.a the human rights and environmental due diligence section.
Despite halving points available in the policies and commitments section, brands still scored the highest on average in this section for 2021. «What this means is that brands do not actively check (or do but choose not to disclose) if these policies are upheld in their supply chains».
In any case, these scores reveal that greenwashing continues to be a relevant issue. Citizens are looking to make responsible choices based on these commitments, yet these brands are often failing to disclose information to prove they are living up to it.
Fashion Transparency Index to inform readers
«The FTI was created to highlight gaps in disclosure. Transparency leads to scrutiny, whereby citizens and other concerned stakeholders are empowered to question brands and demand greater visibility into their practices».
Though, there is still potential for misleading claims at any level of the fashion sector. In the case of Reformation, whilst they are transparent in publishing the audit ratings of their vendors on their website, they disclose that 4% of their facilities are in the category of orange or red.
This means either ongoing standard or major health, safety or labor violations. However, the FTI can also help to inform readers on their activism and how they can call on these smaller brands to be equally transparent in policy and outcome.
Ultimately, it comes down to the actual level of transparency and the accountability that individuals, organizations and governments demand. Your voice as a consumer and global citizen can be your most valuable contribution to the fashion system.
About Fashion Revolution
Fashion Revolution is a global organization that campaigns for a clean, safe, fair, transparent and accountable fashion industry. Founded in 2013 in response to the Rana Plaza tragedy which killed over a thousand workers due to preventable factors. Fashion Revolution aims to identify and remediate issues before they escalate to such dangerous levels, and one of its tools is the Fashion Transparency Index (FTI).
The Fashion Transparency Index (FTI)
The index ranks 250 of the world’s largest fashion brands and retailers on their levels of transparency in order to incentivise positive change through competition and stakeholder pressure. Fashion Revolution believes that this disclosure is the first step in initiating accountability and gradual change to improve standards in human and environmental rights.