Ask any consumer how to be more environmentally conscious when buying apparel, and he or she will almost certainly tell you to buy products made of recycled or organic materials from reputable fashion brands that share a commitment to the planet.
But according to global sourcing giant Li & Fung, the $13 billion Hong Kong-based company that manages supply chains for thousands of the top apparel brands and retailers around the world, there is far more to the story than that. The company builds and manages customized, end-to-end supply chains for over 2,000 customers and 7,400 factories in 50 countries around the world. At Li & Fung and all Fung Group companies, sustainability performance is ensured via numerous compliance, measurement, tracking and improvement programs, and has become a key pillar of the company’s business.
We caught up with the Group’s top sustainability and compliance executives as they prepared to join other industry leaders at last month’s World Economic Forum in Davos, Switzerland. As it turns out, the stakes could not be higher.
The earth, and those living on it, seem to be under siege. A summer of record-breaking heat in Europe made life miserable for millions. Rising tide levels in Venice damaged billions of dollars’ worth of art and architecture and even threatened the very future of the Italian city. Droughts caused wildfires that devastated the Amazon rainforest and inflicted unthinkable damage in Australia. To underscore the importance of this subject, last month Time magazine named Swedish teen climate change activist Greta Thunberg as Person of the Year.
The amount of clothing equivalent to 87 percent of what is produced in a year, or one garbage truck’s worth every second, is dumped in landfills or incinerated annually, releasing methane and other greenhouse gases into the atmosphere as it decomposes.
The apparel industry has come under heavy criticism for contributing to climate change. According to the 2020 Global Fashion CEO Agenda launched at Davos, 10% of the world’s greenhouse gas emissions, or 1-2 billion tons each year, is released by textile and apparel producers. This amounts to more than the emissions of international flights and maritime shipping combined. If left unchecked, according to current forecasts, which predict an 80% increase in production volume, the emissions figure will increase by 60 percent by 2030.
Patrick Ho, Managing Director, Fung Group and Harsh Saini, EVP, Fung Group Sustainability and Government and Public Affairs, joined industry leaders in Davos to discuss ways to create sustainable growth within planetary boundaries.
“It’s incredibly alarming when you think of all the textile waste that’s generated before a garment even hits the retail shelves. All of our companies have embraced 3D Virtual Design technology to eliminate the need for physical samples, an effective solution to material waste,” said Ho.
Clothing dumped in landfills or incinerated at the end of its life cycle is also a major contributor to climate change. The Ellen MacArthur Foundation estimates that an amount of clothing equivalent to 87 percent of what is produced in a year, or one garbage truck’s worth every second, is dumped in landfills or incinerated annually, releasing methane and other greenhouse gases into the atmosphere as it decomposes, further contributing to climate change. Some of the waste ends up in one of the great seabound garbage gyres, or as microplastics inside fish, which then makes its way up the food chain.
“Fashion plays a major role in the global economy but comes at a high environmental cost, said Saini. “The industry must urgently transform into a sustainable model that supports economic growth while preserving our natural resources. Together we must design for longevity by adopting circular business models that have the potential to scale.”
Li & Fung asserts that in order to produce textiles and apparel in a way that protects people and the planet, the industry must take dramatic steps to reduce its use of water, energy and chemicals. It must also cut down on the amount of waste it generates and produce higher quality products that will enjoy a longer life cycle. To do all of this, the industry needs to use all the technology, data and analytical tools available to drive efficiency in the use of resources and to avoid producing items that won’t be sold or that consumers won’t want to buy. Li & Fung is leading the charge to secure the commitment of as many supply chain companies as possible to invest, self-monitor, communicate and improve.
Tech-enabled Traceability and Accountability
“We are rethinking the whole approach to sustainability in the value chain,” said Pamela Mar, Executive Vice President for Supply Chain Futures inside the Fung Group innovation and learning unit, the Fung Academy. She feels the focus must not just be on the raw materials, but also on the traceability of the product through its entire process from ingredients to point-of-sale. “We realized it’s not enough to look at a facility and determine if it meets a certain standard. Leading brands are focusing on the product, so we have to go deeper and trace the product through the life cycle. This is a change for the industry, but it’s where technology is going to help us string together all the tiers,” Pamela explains.
We’re not just trying to shave off 10 percent here and 20 percent there, we are trying to radically change how the fashion industry operates.
After several years in sustainability management at the group, Mar has experienced first-hand the efforts to certify and track factories for compliance, and realizes that to go to the next level, a transformation and mindset change will be required: “We’re not just trying to shave off 10 percent here and 20 percent there, we are trying to radically change how the fashion industry operates. And the key is how you use tech to collect and use data from every part of the supply chain. No more just managing the one entity you have a commercial relationship with. We have to leverage all the relationships. At Li & Fung we operate offices, which are low impact, so we must take that commitment and help the whole operation and community build toward a low carbon future. Some companies make very respectable targets for supply chain impact. Our approach is more capability related, involving training, pilots, showing suppliers how to do it inside their operations.”
The company gets help from other global stakeholders. “In China, where so much production is taking place, the government helps, because they set big targets, and say if you don’t do this you’ll be shut down, out of business. The regulation sets the pace for change. In some markets, you don’t have strong government actions, so you have to build the business case.”
One of the most confounding aspects of all this is knowing what certification to seek and how to measure progress. Li & Fung is connecting its factories to HIGG Facility Environmental Module, or Higg FEM, a certification widely used in apparel that measures the impact on the environment. It shows water use, what percent of energy use is renewable, and much more.
Leanne Melnyk, Vice President of the Fung Group Sustainability Team, said that the Higg FEM will give a marked improvement in transparency. “Li & Fung, in additional to many other apparel companies, is connecting a growing number of factories and mills it works with to this system. Eventually this will help build a massive online database of standardized metrics that will allow measurement and tracking that was previously impossible. It can also lead to supplier benchmarking and more informed sourcing decisions.”
Communication and education are important tools to clear up some of the misinformation around sustainability. According to Melnyk, it all goes back to the need to look at and understand the whole life cycle of a product and the wider environment in which it sits.
“Packaging, for instance, can be a confusing area to navigate. Most garment polybags are made from polyethylene (PE), which is a fossil fuel-based product. As brands and retailers commit to moving away from single-use-plastics, they are searching for alternatives but are not always certain which alternatives are actually better. When devising answers it’s important to look at a variety of sustainability impacts and to really do your homework. Fung Group is working with industry partners to invest in more research on packaging so that companies can gain a fuller picture to make more informed choices in the supply chain.”
Key Brands Setting the Bar
Companies have begun to come to terms with the fact that sustainability isn’t just a nice-to-have, it’s a business imperative to integrate environmental, social and governance (ESG) best practices into operations. Adidas, for example, has announced that it will discontinue its use of virgin polyester by the year 2024. Levi Strauss & Co. released plans to reduce greenhouse gas emissions by 40 percent throughout its global supply chain by 2025.
Melnyk pointed out that some unlikely industry leaders are also making big statements: “H&M has invested in the environmental side and has also been one of the few that’s looked at human welfare within its own business model. They’re taking a holistic approach to tackle all the big subjects.”
Mar observed: “What those big retailers can do is raise the floor for everyone. Make everyone adhere to a higher standard. Have a bigger impact, influence many other brands to step up. And they’re influencing the factories to not only build out capabilities to meet a standard, but also go further. They are pacesetters for their own industry.”
Planet and People: Inextricably Linked
When asked where concern for people fits into the effort toward stewardship of the planet, Melnyk was unequivocal: “Humans and the environment are very intricately related. You have to treat people with dignity, and if you’re not educating them and engaging with them, how will they be able to look after their environment and take ownership of it? How wastewater is being handled outside a facility to ensure people have access to clean water, and implementing worker training about handling toxic chemicals are both intertwined with the quality of life.”
The Role of Consumers
Who is driving this need for more sustainability and compliance? According to Mar, it depends on the market: “In the U.S., it’s definitely the consumer. Brands are positioning themselves to make an emotional connection. That’s very American, to put the consumer at the center. When Everlane shows videos of the factories, it’s very powerful and brings awareness of the realities of the supply chain to consumers.”
The fashion industry is one of the worst polluters in the world, and is responsible for high carbon emissions, wastewater production, and large amounts of landfill waste.
Other markets, however, are relying on governments to set the pace. “Europe is actually moving very quickly towards Pan-European regulation. They’ve got their experiments in environmental footprinting, labeling, circular economy, the plastics directive. The European Commission has taken on the task of trying to get the big European brands to do the right thing. In China, the government is the key driver, as it tries to clean up the environment and enforce good practices in manufacturing. They’re super serious. Any Chinese supplier that has significant emissions or wastewater generation will need to upgrade to clean production.”
Melnyk points out that it’s misleading to look at consumers as a homogeneous population. “They’re very divided. You can’t say all millennials care about sustainability, because they don’t all care. And for the ones that do, it’s not necessarily going to translate to the same purchasing practices across the board. There isn’t the same education focus on sustainability in all countries. It’s going to take some time before the global consumer will be a powerful lever in the whole sustainability discussion.”
For Mar, the ultimate issue is a global one: “The fashion industry is one of the worst polluters in the world, and is responsible for high carbon emissions, wastewater production, and large amounts of landfill waste. That’s not acceptable and we have to do better. The real question is how do we get to zero emissions.”