2014 fashion brands sustainable procurement survey

2014 Fashion Brands Sustainable Procurement SurveyOctober 201 4

supported by:

2

Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey Survey design and analysis by the Sustainability-lab Survey Team. Marco Ricchetti (team leader) Aurora Magni Fabio Guenza Alberto Saccavini Sustainability-lab.net is a project by Blumine srl New business models for the fashion and design industry, a new vision engaging sustainability, new ideas, languages and tools. Sustainability-lab.net is a digital platform and a social medium designed by Blumine srl to enable the fashion business community to participate in the development of the culture of sustainability. http://sustainability-lab.net Blumine srl is a consulting firm based in Milano (Italy) providing advice to leading textile, fashion and design businesses for the integration of the culture for sustainability in companies’ vision and strategy. Blumine expertise ranges from stakeholder management, economics, market research, production organization, communication and analysis of consumers culture. http://www.blumine.it [email protected]

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October 2014

In 2013 and 2014 seven

italian textile companies

adopted the DETOX

commitment solution to

free the fashion supply

chain from hazardous

chemicals before 2020

We understand the decision to change our way of life is a challenging step and are committed to make everyone feel safe and to strive for the elimination of all toxic chemicals from our processes. Since "fashion is too good to have to do with dangerous and bad practices".

Emanuele Bertoli, CEO, Berbrand srl.

In our view, a Made in Italy fabric is more than just beautiful, it is the outcome of a production processes respectful of the environment and people. We endorse all the efforts that can stimulate the entire supply chain to make fashion more sustainable.

Mario Riva, CEO, Besani srl.

With the aim to spread

awareness and promote

more action in the textile

supply chain the seven

companies supported

the Sustainability-lab

2014 Fashion Brands

Sustainable Procurement

Survey

For over three years our firm has been concretely engaged in leveraging its industrial process innovation to make fashion more sustainable. With our ecological patents we have changed the way fabrics and garments are produced and in doing so have revolutionized the way the textile and clothing industry works. The results include between 50% and 90% savings in water and energy consumption, a significant reduction in CO2 and the total elimination of pollutants from the production process.

Elisabetta Canepa, President, Canepa spa.

Denim is perhaps the most widely used fabric in the world. Denim manufacturers therefore have a greater responsibility towards the environment and people. We take very seriously the challenge of removing hazardous chemicals from jeans.

Gigi Caccia, Chairman, Italdenim spa.

Miroglio Group has invested in next-generation environmentally friendly printing technologies, achieving dramatic cuts in water and energy use and CO2 emissions. We believe in a serious and responsible commitment to further advances in the sustainability journey.

Giuseppe Miroglio, Chairman, Miroglio Group

The seven companies:

Brebrand

Besani

Canepa

Italdenim

Miroglio Textile

Tessitura A.Imperiali

Zip GFD

Since the XIX century, four generations of our family have been producing top quality fabrics. We invest in new technology that reduce the environmental impact because it is the best way to secure the our children future.

Giovanni Di Gristina, Marketing and Development Director, Tessitura Attilio Imperiali spa.

Our culture rests on the belief that the respect for the environment improves the product. With this vision we developed cutting-edge processes in environmental protection since the '90s. Our commitment is for a new way of dressing tailored at human scale.

Claudio Goffredo, CEO, Zip GFD spa.

Table of Contents

Executive Summary ......................................................................... 6

Foreword ......................................................................................... 7

Brands' sustainable procurement impact on suppliers ..................... 9

Mapping sustainable procurement management models ............... 11

The dimensions of sustainability brands focus on .......................... 18

The value of certification labels ..................................................... 20

Conclusions ................................................................................... 23

Methodological Notes .................................................................... 25

Charts list

Chart 1 Brands CSP management features .................................. 14

Chart 2 The attributes map of CSP management styles ............... 14

Chart 3 CSP management styles by brands market focus ............ 17

Chart 4 CSP management styles by brands size .......................... 17

Chart 5 Sustainability attributes ranked by the 18 brands ............. 19

Chart 6 Main certification labels ranked by the 18 brands ............. 19

Acronyms

CSP Company Sustainable Procurement

CSR Corporate Social Responsibility

CO2 Carbon Dioxide

CPSIA Consumer Product Safety Improvement Act

DETOX Greenpeace Detox Solution Commitment

MCA Multiple Correspondence Analysis

NGO Non Governmental Organization

SusReF Sustainability-lab Reporting Framework

6

Executive Summary

The Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey involved

18 European and American brands accounting for over €50 billion in sales. The Survey

findings fall into four areas addressed in the main four chapters of the report:

Brands' sustainable procurement impact on suppliers

The 18 brands commitment to Company Sustainable Procurement (CSP) has a huge

impact on suppliers, all but one brand has included specific sustainability compliance

requirements in purchasing contracts, a large share of brands’ purchases of fabrics and

accessories is subject to formal sustainability assessment and the adoption of

preferred suppliers Green Lists based on sustainability criteria is widespread.

Organizational models for sustainable procurement

In this field, the one size fits all concept does not hold true. A cluster of larger brands

was found to follow a formalized management style, with the CSR department acting

as watchdog for CSP. These brands established a Green List of preferred suppliers

and assess a high share of fabrics and accessories purchases.

Other brands historically engaged in sustainability, especially in the luxury segment

have adopted a more informal approach, without a clear role for the CSR function.

Finally, a third cluster is still in a phase of organizational evolution with a mix of roles

for the CSR department and expectations for future adoption of formalized

sustainability evaluation tools.

The dimensions of sustainability brands are focusing on

Elimination of hazardous chemicals, traceability and ban of cruel practices towards

animals are the most considered dimensions. These findings witness a higher level of

maturity, beyond what we can define phase one of sustainability management almost

exclusively focused on CO2 emissions cuts. The ranking of sustainability attributes

reveals a close connection with some of the influential high-profile campaigns launched

in recent years by environmental, workers' rights advocacy and animal welfare NGOs.

Citizens through NGOs more than consumers through their wallets appear to be the

driving force pulling fashion brands into the sustainability journey.

The value of certification labels

CSR managers value certification labels, especially when they compare best suppliers.

Just a few of them consider certifications mandatory though. Brands with established

CSP place less value on certifications. Most valued labels are Oeko-Tex100 / 100plus,

GOTS, SA8000 and Bluesign.

7

Foreword

The movement towards a more sustainable fashion has started. The process of change

proceeds quickly and in unexpected directions: from industry to consumers more than

the other way round, from consumers to industry. Supply chain relationships are

changing more rapidly than consumer purchasing behavior and brands’ supply chain

managers and suppliers face the challenge of sustainability even before marketing

departments.

As soon as fashion brands commit to integrate sustainability into brand identity and

marketing strategies, supply chain management issues enter into the game. As a

matter of fact, company’s most significant impacts are often found not in its own

operations, but in the social and environmental impacts of suppliers. Improving the

sustainability performance along the supply chain becomes a key aspect of

sustainability management.

Both the risk of negative impacts on brands’ reputation due to NGOs campaigns and

the need to anticipate consumers' emerging desires for a cleaner and fairer world play

a role in fostering brands activism to make supply chains more sustainable.

The Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey focuses

on some key issues:

- Has the impact of brands sustainable procurement policies become substantial on

fabrics and accessories suppliers?

- Have sustainable sourcing policies found their way into fashion companies

organization? And, if this is the case, what organizational models prevail?

- What dimensions of sustainability fashion brands are focusing on?

- Are certification labels valued by fashion brands to overcome information

asymmetry about suppliers’ sustainability management and performance?

The Survey involved CSR manager from 18 major European and American brands

accounting for over €50 billion in sales. Headquarters of the 18 brands are located in

Germany (5 brands), Italy (5) Sweden (1), UK (4) and US (3). Two selection criteria

have been considered: a) brands are engaged in sustainability and b) are recognized

as leaders in their respective market segments.

We want to thank the managers of the 18 brands who took part in this survey: Armani

Group, Cascade Designs, Mango, Marks & Spencer, Monnalisa, Oberalp Group

(Salewa, Speedo), Puma, Salvatore Ferragamo, Vivienne Westwood, and the others

who asked not to be disclosed in the public report. The European Outdoor Group

provided an invaluable support engaging the associated brands in the participation to

the Survey.

8

A definition of Company Sustainable Procurement

When brands buy goods and services, they take into account conventional attributes of

products such as price, quality, delivery deadlines and terms of payment. With

Company Sustainable Procurement (CSP), brands integrate goods and services

impacts on the environment and social relationships in their purchasing guidelines, at

local, regional and global levels.

According to this principle and drawing from the the BuySmart Network (formerly

known as Sustainability Purchasing Network) definition of sustainable purchasing, CSP

is defined as:

“a management process used to acquire goods and services (“products”) in a way that gives preference to suppliers that generate positive social and environmental outcomes, and that integrates sustainability considerations into product selection so that negative impacts on society and the environment are minimized throughout the full life cycle of the product”. […In practical terms…] “Sustainability purchasing entails looking at what products are made of, where they have come from, who has made them, how they will be ultimately disposed – even considering whether the purchase needs to be made at all.” Sustainability Purchasing Network, “Sustainability Purchasing Trends and

Drivers”, 2008, page 8

From the buyers’ standpoint, CSP is a high profile matter for businesses today.

Understanding environmental and social impacts in the supply chain is critical

and can help to save money, reduce waste, improve competitiveness and build

a business’ reputation, in some contexts it is also a legal requirement.

9

Brands' sustainable procurement impact on suppliers

The Survey explores how brands deliver CSP policies to suppliers and the relevant

potential impact. Potential impact differs from actual impact. Buyers’ CSP practices can

influence the suppliers’ businesses but the impact will change from potential to actual

only if and when either buying prices acknowledge a higher value to sustainability

attributes or sustainable suppliers market shares increase against competitors not

committed to sustainability. Indeed, the evaluation of the actual impact is a much more

complex exercise.

The analysis of the potential impact will focus on four indicators: a) the share of items

subject to sustainability assessment in the overall purchases; b) the evaluation

framework to assess sustainability of purchases; c) the practice of short-listing green

suppliers; d) the enforcement of sustainability features in supply contracts.

Assessing purchases for sustainability

This indicator is a proxy for the potential market size of sustainable fabric and

accessories. A larger share provides suppliers with more opportunities to sell

sustainable items and can result in a market share increase against non-sustainability

committed suppliers.

Under this respect, the Survey revealed the potential market size is huge: almost half

of the brands - 8 out of 18 - claimed over 50% of their purchases are subject to

sustainability assessment The number of brands rises to 12 if the considered threshold

of purchases subject to sustainability assessment is lowered to 25% of the total (chart

1).

Measuring sustainability

A real market can develop only when information about buyers' preferences flows

clearly to suppliers and suppliers’ practices are subject to measurement and evaluation

in relation to buyers’ sustainable procurement objectives. The establishment of a formal

assessment framework by brands has also the very practical consequence to have the

sourcing department delivering coordinate and consistent communications to suppliers.

This is critical if a number of sourcing staff use to communicate with suppliers, e.g. if

the sourcing department is organized by area or Country or by specific product.

The Survey found that only five out of 18 brands assess sustainability on formal criteria

and five other brands adopt unstructured and non-formal assessment criteria. Further

four brands plan to introduce formal assessment criteria in the near future while the

remaining four have currently neither formal sustainability assessment nor plans to

adopt some in the near future.

10

Short-listing green suppliers

According to the Chartered Institute of Purchasing & Supply (CIPS):

“the buyer can consider introducing supplier awards to recognize

progress in aspects of social and environmental performance, for

example through preferred supplier status or similar mechanisms

which direct orders towards better-performing suppliers. In some

contexts the owners or managers of suppliers are under peer pressure

from other managers not to improve conditions. In these cases it

becomes even more crucial that the buyer supports leadership in good

social and environmental performance at production sites.”

Guide to Ethical and Sustainable Procurement (2013)

As part of supply chain management processes, suppliers can be awarded with

different status levels according to their performance and ability to meet or exceed

customer requirements. This status can then be used as a help for informed

purchasing decisions and to encourage continuous improvements. For companies

managing a large supplier base this can present challenges that depend on the way in

which suppliers are assessed. A prerequisite to the establishment of a Green List of

preferred suppliers is a trusted assessment system either formal or informal.

About half of the brands - 8 out of 18 including four large companies - claims to shortlist

suppliers committed to sustainability via a preferred suppliers Green List (chart 3).

Enforcing sustainability aspects in supply contracts

Contracts set the main aspects of business transactions such as price, quality, delivery

deadlines and terms of payment. The same holds true for sustainability related aspects

that brands can enforce in contracts.

Almost all the 18 brands, with just one exception, claim to enforce compliance with

specific sustainability parameters in supply contracts. The favorite framework, reported

by almost all of the 17 enforcing brands, is to include terms and clauses in contracts on

the basis of brands’ own schemes. The content of brands’ own schemes in turn uses to

be based - as some of the respondent acknowledge - on some variant or interpretation

of public standard such as the Greenpeace DETOX, the California's Proposition 65, the

US CPSIA or the Chinese GB 18401-2010 - GB 20400-2006 standards.

According to anecdotal evidence and grass root practice, suppliers suffer the

consequences of the plethora of different contractual clauses and terms each brand

enforces according to its own individual scheme and call for some unified standard.

11

Mapping sustainable procurement management models

CSP has to be initiated, organized and integrated in companies’ management

practices. It does not happen on its own accord, but requires involvement and

contributions of many actors and departments. The integration of sustainability

principles into procurement practices and supply chain management can - and actually

does - proceed according to a range of different paths and models, it is not a single-

minded pass-or-fail process, it is rather a progressive journey.

The analysis of the interaction between the CSR and sourcing departments in

sustainable procurement practices combined with the factors addressed in the previous

section makes possible a mapping of the CSP management models adopted by the 18

brands.

The CSR department role

Literature about CSR role and scope highlights the existence of two separate

dimensions1:

a. an internal dimension, that focuses inside the organization and on issues

such as what can be done internally to improve the well-being of workforce,

safety and productivity;

b. an external dimension, that promotes the pursuit of positive impacts on

society and the natural environment from corporate activities and operations.

In CSP management the distinction becomes blurred. While it is clearly driven by the

relationship with an external stakeholder (the suppliers) it involves critical changes in

the internal organization of the company and influences managers productivity. The

role for the CSR department in the interaction with the sourcing department is thus a

key factor. Five possible alternative CSR department interaction roles are considered in

the Survey:

a. CSR has no role or does not exist in the company;

b. CSR is consulted for advice, with no decision-making power;

c. CSR sets the rules, selection of suppliers is however decided by sourcing

managers;

d. CSR is a watchdog that sets the rules and checks the rules are respected by

sourcing managers;

e. CSR is fully integrated into purchasing activity.

1 KPMG, “Corporate Social Responsibility is more than just donating money” 2011. The internal

vs. external approach to CSR has raised many criticisms among both scholars and practitioners on different grounds, including the real division of the two dimensions.

12

Rule setting with no decision power is the first most widespread role among the 18

brands, scoring eight brands adopting this role, followed by the watchdog role scoring

four brands. Two brands have no CSR department, in two cases CSR just provide

advice and two brands went as far as to fully integrating CSR in purchasing activity.

CSP management styles

The Survey findings confirmed there is no one size fits all management style in CSP,

even within a panel including only truly sustainability committed brands. The analysis of

CSP management styles is based on the answer to four questions from the

questionnaire:

V1 - Which share of Your purchasing of fabrics and accessories goes through a formal

assessment of sustainable attributes?

V2 - Is there an internal system to grade or assess the “sustainability level” of your

products?

V3 - Does Your company have a suppliers "Green List" or "A list" based on

sustainability attributes?

V4 - Which role the CSR department plays in the selection of suppliers?

The four categorical variables - recoded into ordinal scale to reflect the progression

from a development stage to a structured and integrated style of CSP – were input to a

MCA (Multiple Correspondence Analysis) model to find correspondences among the

variables and similarities among companies.

A first output of the MCA model is a biplot showing a map of correspondences among

variables attributes (Chart 2). The map has two orthogonal dimension represented

by axis x (horizontal) and axis y (vertical) that form 4 regions (1 down-left, 2 up-left, 3

up-right, 4 down-right). The horizontal axis can be rendered as a measure of how much

CSP is formally structured in companies, the best discriminating variable on this axis

are V2 (formal system of assessment) and V3 (green list of suppliers). Position on the

vertical axis is mainly influenced by V4 (the role of CSR). Finally V1 (share of

purchasing assessed for sustainability) tend to progress when moving from down-left to

up-right direction.

The four regions map is shown in Chart 2. Each region in the map can be seen as

representing a CSP management style, according to the interpretation of the two axes

explained above. Just three out of the four regions actually are relevant to the analysis

as Region 4 down-right is void. Clockwise the regions and the CSP management styles

can be rendered as follows:

Region 1 – down-left: includes attributes that are common to brands with lower CSP

formalization and a weaker role for CSR management. Brands belonging to this region

13

formally assess no more than 25% of purchases for sustainability attributes (in some

cases less than 10%) and have no formal or structured assessment system (some

claim to have an informal system), CSR managers, when existent in the company,

have just a consulting role in defining procurement policies, with no decision-making

power. Brands in this region did not establish a Green List of preferred sustainable

suppliers, but there are plans to introduce the Green List in the near future.

Region 2 – up-left: includes attributes that are common to brands with lower CSP

formalization and a stronger role for CSR department. Brands belonging to this region

formally assess between 25% and 50% of purchases for sustainability attributes. The

evaluation system is either informal or non-existent with plans to establish one in the

near future. These brands claim either to have the CSR function fully integrated in

purchasing activity (i.e. the purchasing managers have the know-how and the

commitment to select sustainable suppliers) or that sustainable purchasing criteria set

by the CSR department are freely adopted by purchasing managers. No Green List of

preferred sustainable suppliers is established and there are no plans to establish one in

the near future.

Region 3 – up-right, includes attributes that are common to brands with higher CSP

formalization and a stronger role for CSR department. Brands belonging to this region

formally assess more than 50% of purchases for sustainability attributes (in some

cases near to 100%). The brands formally established an evaluation system as well as

a Green List. The CSR department is acting as a watchdog for the actual

implementation of sustainable procurement criteria.

Region 4 – down-right, includes attributes that are common to brands with higher

CSP formalization and a weaker role for CSR department. This region is void.

14

Chart 1 Brands CSP management features

Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey

Chart 2 The attributes map of CSP management styles


<25% PURCHASES

25-50% PURCHASES

50-75% PURCHASES

>75% PURCHASES

NO CSR ROLE

CSR CONSULTED

CSR SET RULES

CSR WATCHDOG

CSR FULLY INTEGRATED

NO GREENLIST

FUTURE GREENLIST

GREENLIST

NO EVAL SYST.

FUTURE EVAL SYST.

INFORMAL EVAL SYST.

FORMAL EVAL SYST.

Region 1

Region 2 Region 3

Region 4

MORE FORMALLY STRUCTURED + HIGHER SHARE OF PURCHASES EVALUATED

LESS FORMALLY STRUCTURED+LOWER SHARE OF PURCHASES

EVALUATED

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15

The CSP management styles of the18 brands

A second output of the MCA model is a map showing the position of brands (Chart 3

and Chart 4) according to the same coordinates used in the variables attributes map.

The 18 brands position on the map can be fuzzy, especially when they are positioned

near Regions boundaries, a case occurring when a brand shares attributes belonging

to two different regions.

As an example of the boundaries fuzziness, the MASS (mass market) company

positioned on the border between Region 1 and Region 2 in Chart 3 can be

considered. The low share of purchases evaluated for sustainability and the consulting

role of CSR department draw the brand towards Region 1. The “Green List” and the

“informal evaluation system” factors on the other hand are more similar to brands

belonging to Region 2. When a brand is very close to the regions boundaries, the

inclusion in either of the regions must be evaluated with caution. With the above

caveat, seven brands are included in Region 1, five in Region 2 and six in Region 3.

Looking at brands market focus (Chart 3)2 some difference in CSP management

style can be detected.

The CSR role tend to be weaker in luxury brands, where the style office, and possibly

the communication department, are very likely to have a dominant role that necessarily

compress the CSRs’. As a general trend, data show that as a luxury brand takes a

more structured approach the role of CSR becomes stronger.

Outdoor brands are the dominant component of Region 2 - four out of five brands in

this region focus on outdoor market - and show a less structured approach, even

though CSR has a significant role. Performance attributes are a key factor for most

item sold by outdoor brands, thus the share of purchases evaluated for sustainability

tend to be lower, possibly sustainability attributes have to be matched with functional

performances of fabrics. Green Lists are less common.

Mass market brands strong presence in Region 3 - four out of six brands in this region

focus on the mass market - can be also relevant to a size factor, as most of mass

market brands are also large size companies.

The analysis by companies’ size (Chart 4),3 provides some further clear-cut

evidence.

Smaller companies concentrate in Region 1 because of the very weak role of CSR

department. Indeed a separate CSR department does not exist in these companies as

2 Market focus was evaluated by the researchers. Note that one of the outdoor brands actually

sells technical products to other brands. 3 Companies size has been evaluated on the basis of sales. Companies with sales exceeding

€1bln are classified as large, and companies below €60mln as small.

16

it can exceed small companies organizational structure. The two exceptions of small

companies located in Region 2 and 3 are not real exception in fact. Both companies do

not have a CSR department either, the former claims the CSR function is fully

embedded in procurement managers activities and duties, the latter is drawn in region

3 by the very high share of purchases submitted to sustainability evaluation.

All of the larger companies do have a CSR department. The two large companies on

the boundary with region 1 are drawn downside by the relatively lower amount of

purchases undergoing sustainability evaluation. None but one of the medium size

companies has adopted a formal system of sustainability evaluation.

17

Chart 3 CSP management styles by brands market focus


Chart 4 CSP management styles by brands size


LUXURY

MASS

MASS

LUXURY

LUXURYOUTDOOR

LUXURY

OUTDOOR

OUTDOOR

OUTDOOR

OUTDOOR

MASS

LUXURY

MASS

MASS

OUTDOOR

OUTDOOR

MASS


LESS FORMALLY STRUCTURED + LOWER SHARE OF PURCHASES

EVALUATED

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Region 1

Region 2 Region 3

Region 4

LARGE

LARGE

LARGE

SMALL

LARGEMEDIUM

SMALL

SMALL

SMALL

MEDIUM

MEDIUM

SMALL

LARGE

LARGE

MEDIUM

LARGE

MEDIUM

LARGE


LESS FORMALLY STRUCTURED + LOWER SHARE OF PURCHASES

EVALUATED

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Region 1

Region 2 Region 3

Region 4

18

The dimensions of sustainability brands focus on

Sustainability is an umbrella concept for an array of attributes of company-wide

behavior and product features. Environmental friendly management, energy and water

savings, safety, diversity, human rights and quality of life, stakeholders engagement

and philanthropic activities are all included in the definition of sustainability. On the

other hand, purchasing managers are looking for specific sustainability attributes of

fabrics and accessories, more than for sustainable items in general. Brands

sustainability requirements are specific and detailed, it is crucial for suppliers to clearly

understand what specific attributes customers are looking for in a specific timeframe.

The Sustainability-lab Reporting Framework (SusReF)4 has been used to break down

sustainability attributes. 13 specific attributes drawn from the SusRef were submitted to

the 18 brands and graded in a four grades scale: "not important", "interesting", "makes

a difference in the choice of supplier", "mandatory feature". The answers "makes a

difference" and "mandatory feature" have been considered as an indicator of special

interest regarding the attributes that are ranked accordingly.

The Free from Hazardous Chemicals attribute ranked first in both the “mandatory” (14

out of 18 brands take it as mandatory) and total interest ranks. It is very likely that the

dominant interest in this attribute reflects the strong impact of the Greenpeace DETOX

campaign started in 2011, even greater when considering that just three out of the 18

brands participating in the Survey have signed the DETOX solution commitment.

Traceability and Cruelty Free/Biodiversity Friendly ranked second ex-aequo. Nine out

of 18 respondents identified both attributes as mandatory, the two factors make the

difference in the supplier selection for six further brands. The interest in Traceability

reflects the need for more transparency in a context of globalized supply chains that

can trigger unsustainable practices, unintended and even unknown by brands. The

interest in the Cruelty Free / Biodiversity Friendly attribute is evenly distributed among

all brands disregarding market focus on luxury, mass or outdoor markets and it is

relevant to the growing consumers sensitivity about the nature in all its forms. It is also

likely that the interest has been amplified by the high profile animal rights campaigns

from NGOs including the Angora Hurts Rabbits by PETA.

Fair trade ranked fourth. Note that fair trade is not intended here as linked to the Fair Trade International label, but as a general compliance to the principle of responsible supply chain management. Interest in this factor is certainly not foreign to the campaigns that followed the Rana Plaza tragedy in 2013.

4 The Sustainability-lab Reporting Framework has been developed since 2012 and

experimented in four editions of the Sustainable Fabrics and Accessories’ Catalogue published in cooperation with the fabrics and accessories’ MilanoUnica trade exhibition. See the Glossary of sustainability attributes included in the Catalogue available online at http://bit.ly/1d4hxMY [last accessed 21-10.2014].

19

Chart 5 Sustainability attributes ranked by the 18 brands


Chart 6 Main certification labels ranked by the 18 brands


20

The value of certification labels

“Despite their importance, suppliers’ management practices remain quite

difficult for buyers to observe, which presents an information asymmetry

problem”

M.Toffel, Resolving Information Asymmetries in Markets: The Role of Certified

Management Programs, HBR, 2006

Compliance to independent and voluntary certification standards and labels are a

widespread and valued tool among CSP managers to evaluate suppliers, their

processes, products or even the supply chain. In most cases, independent auditing

bodies accredited with the label issuing organization are in charge of the certification

and labels award.

In the well known Zadek’s Five stages model5 of the path to corporate sustainability,

Compliance comes second, just after the Deny Responsibility defensive stage (Zadek

2004). Compliance monitoring has been the first answer to the need for a sustainable

supply chain management strategy and still is the most widespread approach in the

fashion business. Compliance monitoring definitely helped in illuminating social issues,

- working conditions and violations - and environmental issues - hazardous chemicals

discharge, forest and biodiversity destruction - but is open to pitfalls and spurred

unintended consequences.

A first unintended consequence is that the number of certification labels has been

growing rapidly in the fashion business as well as in other industries, and has led to

what Jucker calls the labyrinth of labels and certifications6. The labyrinth makes the

facts behind the certification labels obscure to consumers and the compliance a

mission (almost) impossible for suppliers.

Secondly, some recent failure of certification compliance systems has also drawn

criticism in terms of both principles and practical effectiveness7. A striking

demonstration came in 2012 from Pakistan when the fire at the garment maker Ali

Enterprises caused 250 deaths because of improper fire safety measures, just one

month after a SA8000 certificate was awarded to the company by a third party audit

body. Duplicative and burdensome audits, tend to generate bribery and phony records,

and a pass/fail mentality that drives problems underground especially in Countries with

5 Zadek, S., The Path to Corporate Responsibility. Harvard Business Review, 82(12), pp.125–

132, 2004 6 Jucker, L., 2012. The labyrinth of labels and certificates. In The Beautiful and the Good. A

view from Italy on Sustainable Fashion. Venezia: Marsilio Editori, pp. 145–158. 7 See e.g. Labowitz, S. & Baumann-Pauly, Business as Usual Is Not an Option: Supply Chains

& Sourcing after Rana Plaza. New York University, Stern Center for Business and Human Rights, 2014

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a weak legal framework8. These pitfalls question the effectiveness of audit bodies that

face the challenges of combating bribery and difficulties in auditing unreliable

information and data. The pass/fail compliance monitoring approach can become an

incentive in low-cost-weak-legal-framework Countries to drive problems underground

more than to develop management systems that sustain compliance and encourage

improvement over time.

Third, suppliers servicing many brands face a plethora of different individual

certification standards simultaneously. Demonstrating compliance to a growing number

of different standards, adds to costs (e.g. chemical tests, formal documents etc.) and

even to staffing needs that can be an unbearable price to entry into a sustainable

supply chain for small enterprises.

The Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey provides

the opportunity to measure the confidence in the system of certification labels. A first

general and filter question was asked to the 18 participating brands: Do You value

certification labels awarded to suppliers?

An affirmative answer to the question has come from 16 out of the 18 brands,

demonstrating that notwithstanding pitfalls and criticisms, compliance to certification

standards and labels remains a key factor in brands CSP. It is nonetheless interesting

to observe that one of two brands that have responded negatively is considered one of

the world most advanced in terms of sustainability management.

The 16 brands responding affirmatively to the filter question were asked to detail which

certification labels they value most and to grade them in a four grades scale. As in the

sustainability attributes section of the questionnaire, the grading scale includes: "not

important", "interesting", "makes a difference in the choice of supplier ", "mandatory

feature."

Just four out of the 16 brands that declared to value certification consider as mandatory

one or more certifications labels: three are in the outdoor market (of which one sells

technical products to other brands), and one in luxury, the latter is listed on the stock

market, a feature that can explain the need for mandatory compliance certifications.

The role of certification emerges as crucial when brands compare suppliers: 15 brands

out of 16 classified one or more certification labels as making a difference when

selecting a supplier.

One of the biggest global sportswear brands, a pioneer and a global benchmark in the

field of sustainability, declared to give value to the certification but did not classify any

of the certifications as mandatory or “making the difference” in the choice of supplier.

8 Sisco, C., 2012. Supply Chain Sustainability: Four Lessons From the Past and Four Ideas for

the Futuret. Available at: http://www.bsr.org/en/our-insights/bsr-insight-article/supply-chain-sustainability-four-lessons-from-the-past-and-four-ideas-for-t [Accessed June 11, 2014]

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This anecdotal evidence leaves perhaps unanswered the question about what can be

the expected future developments in the certification labels labyrinth.

Next step in the analysis has been to rank main certification labels by interest. The

procedure again mirrored the approach followed in ranking the sustainability attributes:

the answers “mandatory” and "makes a difference" have been considered as an

indicator of special interest regarding the labels that are ranked accordingly (Chart 6).

Oeko-Tex100/100plus and GOTS ranked first, both mentioned by 10 brands. Oeko-

Tex100/100plus also gets two mentions as a mandatory label by two outdoor brands

(of which one sells technical products to other brands), GOTS also gets a mention as

mandatory by an outdoor brand.

SA8000 and Bluesign rank third ex-aequo, with 9 mentions including one as

mandatory. The “mandatory” mention was by a luxury brand for SA8000 and by an

outdoor brand for Blusign.

Other labels that received at least one mention as mandatory are ISO14000, Global

Recycled Standard, and Ecolabel, all by luxury brands, and Fair Wear Foundation, by

an outdoor brand.

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Conclusions

Brands' sustainable sourcing impact on suppliers

The brands commitment to CSP has a substantial impact on suppliers. The survey

revealed a huge potential market size for sustainable fabrics and accessories. Almost

all the 18 brands, with just one exception, claim to enforce compliance with specific

sustainability parameters in supply contracts. Almost half of the brands claimed over

50% of their purchase are subject to sustainability assessment and claims to short-list

preferred sustainable suppliers via a Green List.

According to anecdotal evidence and grass root practice, suppliers suffer the

consequences of the plethora of contractual clause and terms each brand enforces

according own individual schemes and call for some unified standard.

Organizational models of sustainable procurement

management

In this field, the one size fits all concept does not hold true. Rule setting with no

decision power is the first most widespread role for the CSR department among the 18

brands followed by the watchdog role. Two brands have no CSR department, in two

cases CSR just provide advice and two brands went as far as to fully integrating CSR

in purchasing activity.

Formal systems of sustainability evaluation are not widespread, only a few brands base

sustainability assessment on formal criteria. Some other brands adopt unstructured

and non-formal assessment criteria. A cluster of larger brands was found to follow a

formalized management style, with the CSR department acting as watchdog for CSP.

These brands established a Green List of preferred suppliers and a formal evaluation

system widely used to assess purchases.

Other brands historically engaged in sustainability, especially in the luxury segment,

have instead adopted a more informal approach to CSP, without a clear role for the

CSR function. Finally, a third cluster is still in a phase of organizational evolution with a

mix of roles for the CSR and expectations for future adoption of formalized

sustainability evaluation tools.

The dimensions of sustainability and their influence on CSP

The Sustainability Reporting Framework developed by Sustainability-lab (SusReF)

provides a tool to break down the set of specific fabrics and accessories sustainability

attributes. A set of different attributes from the SusRef has been submitted to the 18

Brands for assessment.

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Free from Hazardous Chemicals, Traceability and Cruelty Free / Biodiversity Friendly

attributes rank at the highest level in the consideration in Brands’ CSP. The answers

witness a higher level of maturity, beyond what we can define Phase one of

sustainability management that was almost exclusively focused on CO2 emissions cuts.

This ranking reveals also a close connection with some of the influential high-profile

campaigns launched in recent years by environmental, workers' rights advocacy and

animal welfare NGOs. Citizens more than consumers appear to be pulling fashion

brands into the sustainability journey.

The role of certification labels

Compliance to voluntary certification standards and labels are a widespread and

valued tool among CSP managers to evaluate suppliers, their processes, products or

even the supply chain and to overcome information asymmetries about suppliers’

management practices.

An affirmative answer to the question “Do You value certification labels awarded to

suppliers?” has come from most brands, demonstrating that notwithstanding pitfalls

and criticisms, compliance to certification standards and labels remains a key factor in

brands CSP, although just few brands consider certifications mandatory and brands

with established CSP place less value on certifications. The role of certification

emerges as crucial when brands compare suppliers. Answers from some leading

brands however, still leaves open the issue of what can be the expected future

developments in the certification labels labyrinth. Most valued labels are Oeko-Tex100

/ 100plus, GOTS, SA8000 and Bluesign.

Finally, the Survey findings were consistent with some more general conclusions:

1. the movement towards a more sustainable fashion has already started and goes

full steam. Sustainable fashion is already among us, it is not matter of future or

expected developments: it is now;

2. the process of change proceeds in unexpected directions: from industry to

consumers more than the other way round, from consumers to industry. Supply

chain relationships are changing more rapidly than consumer purchasing behavior.

At the current development stage of the market, the consumer as citizen through

the NGOs campaign, more than the consumer through its own wallet that is driving

the movement towards a more sustainable fashion.

3. the pressure on the supply chain to adapt to the movement is very strong and

relies on very practical and compelling aspects of the buyer–supplier relationship;

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Methodological Notes

Sustainability-lab invited to participate in the Survey CSR managers and/or managers

with different business function that influence the selection of fabrics and accessories

from 18 major European and American brands. Headquarters of the 18 brands are

located in Germany (5 brands), Italy (5) Sweden (1), UK (4) and US (3). Two selection

criteria have been considered: a) brands are active on the various fronts of

sustainability and b) are recognized as leaders in their respective market segments.

The Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey

questionnaire was delivered online to the 18 brands in July 2014 and non-disclosure of

individual answers granted to the respondents. Some brand asked to keep non-public

the participation in the Survey.

The analysis of CSP management styles was implemented by means of a MCA

(Multiple Correspondence Analysis) model to find correspondences among variables

and similarities among companies. Four answers to questionnaire items have been the

basis for the MCA, the answers have been recoded according to an ordinal scale

metric, to reflect the progression from a first development stage to a structured and

integrated style of CSP.

The MCA approach followed Version 1.0 of the methodology set in “Data Theory

Scaling System Group (DTSS) Faculty of Social and Behavioral Sciences Leiden

University”. Data were processed with IBM SPSS 19 software.

The results of the MCA have been checked and confirmed by a hierarchical cluster

model in which the distances are measured using the Manhattan City Block method.

Variance accounted for by the MCA model is 52,9% of variables total variance.

The Sustainability-lab Reporting Framework (SusReF)

Sustainability-lab has been working on the definition of a Reporting Framework for textiles and

accessories manufacturers sustainable behavior since 2012. The effort is driven by the need for a

practical way to implement the 6 principles of clarity, accuracy, relevance, coherence, reliability

and comparability in a quick and easy to read tool aimed at fashion buyers and designers attending

textiles trade exhibitions.

In cooperation with MilanoUnica, the largest textile trade exhibition held in Italy, the Framework has

been developed and tested in four editions of the Sustainable Fabrics and Accessories’ Catalogue.

We are now heading for the 5th edition with further refinements.

SusReF is based on a self-reporting system, information is gathered trough questionnaires

delivered on-line to companies. Answers are checked first for accuracy, relevance, and reliability,

the next step is information processing to organize them in a clear and comparable way.

The final outcome is summarized through a set of 18 icons, according to the Glossary below.

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[email protected]

@SustLab

2014 fashion brands sustainable procurement survey

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