The fashion industry’s supply chain is notorious for being opaque, concealing human rights and environmental abuses. With more vocal demands from governments, consumers, NGO’s and other stakeholders, fashion brands face increased pressure to track and communicate supply chain information. Yet most brands still have a path to travel. As the 2020 Fashion Revolution Transparency Index highlights, among 250 brands researched, the average transparency score is just 23% (Fashion Revolution, 2020). This low score clearly exposes how much is still required to increase transparency across the industry.
What is hampering fashion brands from providing supply chain transparency?
Clothing companies around the world have benefited from globalisation to produce their products at ever lower costs, boosting margins and profitability. Today, a garment’s journey from origin to wardrobe goes through dozens of steps, often in multiple countries. Brands will have information on their tier 1 suppliers, the factories where their clothes are sewn and packaged. However, they often have only limited knowledge about where the fabrics are spun and dyed, where buttons, labels and tags came from and/or where the raw materials were grown or extracted.
The recent upheaval around the Xinyang region of China highlights the opaqueness of the industry, and in this particular case, the cotton industry. According to reports, 20% of the world’s cotton is grown in the Xinyang region. Until recently, however, many fashion companies, let alone any consumers, had any knowledge about this region. They were not aware of the controversial labour programmes involving the minority Muslim Uyghur population. Portrayed as glowing examples of the Chinese government assisting millions of poor people into work, more and more evidence is emerging that these workers are in fact forced into these camps whereby next to working in poor conditions they are subject to ideological training to give up their religious practices. Transparency would allow companies to be aware and be able to step away from such practices.
Increased transparency requires products to be fully traceable, with all processes clearly documented and tracked. For traceability to happen in our globalised world, identification and analyses of suppliers across all tiers is vital to ensure sustainability standards are met, managed and enhanced. With the rise of the conscious consumer, there is also an increasing call from the market to start providing the social and environmental footprint of textiles, apparel and footwear. To meet the challenge of transparency, more and more brands are now looking towards new technologies, and specifically blockchain. But how does blockchain work, and how can it help improve transparency?
The blockchain solution to track and trace fashion items
Blockchain is often cited as the solution for many of the world’s problems. The technology is already being used in finance, healthcare, real estate and art. In the fashion industry, it is regularly mentioned as a promising solution to better track and trace activities throughout the value chain. Yet, few companies have yet adopted the technology
So how does it work? Blockchain provides ‘a shared digital ledger which records all the transactions in a public or private peer -to-peer network’. In other words, a blockchain is a group of information blocks which carry digital information related to activities and transactions around a product.
Through a blockchain, each garment can have its own ‘digital passport’ where all information is stored. At each step in the supply chain, a recording is made of the company involved, the materials and processes used, to whom the item was sent on and the transaction date and time. At retail level, information can also be added about consumer purchasing behaviour or other relevant information. Through the technology, it is very difficult to change any of the information once it is recorded as all the details are stored in blocks and hashes, both of which are very secure. These blocks then link up and create a chain – through their own hash and the hash of the previous block. If one block is tampered with, all the following blocks will fail. Blockchains allow companies, and their customers, to track their product, identify the journey it made, and all the processes involved. From point of origin, through processors, manufacturers, shippers to retailers, the blockchain records all this relevant data, which cannot be tampered with. It offers an effective way to trace back where a product came from and the processes involved.
The diverse benefits of blockchain
Blockchains can help increase a brand’s transparency and improve the traceability of its clothing, but what other opportunities might this present for the fashion industry?
The digital passport for each item of clothing offers a number of solutions to transparency problems. It allows companies to:
- Log all essential information in one place. Blockchain is distributed and managed by individuals along the supply chain, helping to keep a track of all the transactions in a secure space. It also allows all stakeholders to view the information in the blockchain, improving the efficiency of information streams.
- Ensure authenticity and prevent counterfeit. Blockchain information is secure and precise, preventing modification of the presented information. This means brands can distinguish themselves from counterfeit goods in the market, raising awareness among consumers.
- Improve accountability. Because all activities and companies can be more easily tracked, companies are under more pressure to ensure that processes and practices within their organisation are fair and environmentally friendly.
- Increase the connection between consumer and product. By providing consumers with more knowledge about a product and its journey, they will have a stronger relationship with the product and an understanding of the processes involved. This increased connection could (theoretically) lead to consumers caring more about their products, seeking repair and re-use options where necessary and thereby extending the use-life of each product.
What stands in the way of blockchain adoption today?
The development of blockchain technology in the fashion industry is still relatively new. Only a small group of companies have adopted the technology, and those that have mainly use it for internal monitoring. The first and main barrier to entry for many is the investment required. Other barriers are:
- Limited scalability and speed. Setting up a whole value chain with blockchain is work intensive, because it involves getting all stakeholders on board. Therefore, while blockchain might work today for smaller projects, it is more complex to realise mid- or high-complexity projects. Additionally, the technology is relatively new in the fashion world and it is slow, taking time for a transaction to be validated.
- Lack of adequate skills. As blockchain is relatively new, there are still few developers comfortable with programming for blockchain or putting in place systems within companies. This means that costs are high, and companies always need to work in partnership with the blockchain development agencies.
- Recording false information. Blockchain technology allows you to ensure information has not been altered, but it cannot ensure the integrity of the information recorded in the first place. If a party along the supply chain enters false information onto a blockchain, it will remain in the digital file. This means that monitoring of the different links in the chain remains important and work-intensive
- Energy use. While, theoretically, blockchain should help monitor energy use and thereby reduce it in the supply chain, today the blockchain systems in themselves use a lot of energy. Recording all the ledgers in safe environments requires a lot of data storage. This means that, for now, the technology is not yet supporting the move to a low-carbon fashion industry.
The tech-driven companies targeting the fashion industry
A few different technology companies have decided to step into the fashion arena, providing different types of services. For blockchain technology to be effective, these companies must work closely with the brand to develop customised solutions. The following companies are claiming the space:
- Arianee: Arianne is a start-up which helps luxury brands authenticate their products digitally. Each luxury item gets its own digital certificate with encrypted records that capture all the products details. These include the acquisition dates, materials, and more. The start-up validates the items for the consumer from brands of the likes of Balenciaga.
- Provenance allows brands to make the sourcing and impact behind their products transparent. Enabling consumers to access and trust in business sustainability through software which gathers and presents information and stories about products and their supply chains. Through connecting this information to goods – in store, on pack and online, everyone is able to access the origin, journey and impact of their products.
- Trust Trace: platform seeks to improve sustainability communication through understanding sustainability preferences of customers and strengthening brand equity. Trust Trace map multi-tier supply chain for full visibility – empowering all stakeholders and ensure compliance to ESG guidelines.
- Aura: A blockchain solution to addressing common issues across the luxury industry, enhancing the overall customer experience. Allowing consumers to access product history and proof of authenticity of luxury goods – from sourcing to sales, all the way to second-hand markets.
Brand adoption in the wild west of blockchain
The significant time- and financial- investments required for blockchain to work at scale has hindered mass adoption. A handful of luxury brands have been the first to step on board to prove authenticity of their products. A number of other large companies have allegedly also started looking at possibilities, including H&M for their Arket and COS brands, though we haven’t been able to find any large-scale consumer facing applications. One of the reasons for this could be that many large fashion companies are reluctant to provide full transparency to their customers, hesitant to lose a competitive edge by divulging the names of their partners, materials or processes.
Small and medium-sized brands focused on sustainability are less hesitant to shed a light on their supply chains, though very few have ventured into the world of blockchain. One brand that has taken the step is Haikure, a denim brand with a mission “to respect the planet and people via the promotion of a new lifestyle where the latest fashion trends and sustainability can coexist”. For each product in their collection, Haikure provides a product passport via a QR code which leads the consumer to an online page, providing information around the product. Through a partnership with blockchain technology company, Provenance, the denim brand is able to publish the journey of the product, including the social and environmental processes in place in each of the factories involved.
Within the fashion industry, blockchain is still in the early stages of development. The luxury brands have been the first to step onboard, clearly seeing the value of the technology to prove authenticity and combat the counterfeit market. The brands exploring blockchain as a tool to improve social and environmental sustainability within their supply chains, however, are largely still holding off. Despite its promise of improving transparency and traceability, the obstacles to putting in place the technology are still high. Moreover, there are few use cases in the market, so it is difficult to assess the added value to companies or consumers.
Nevertheless, blockchain does provide a concrete solution to tracking a product’s journey from raw material to closet, and beyond. It could support companies with better ways to monitor social and environment issues, to collaborate more closely with various stakeholders and to better communicate a product’s story to consumers. As the leaders of the pack work together with blockchain companies to develop customised solutions, more packaged blockchain solutions are likely to be developed that brands can more easily adopt. It is undeniably a space to watch for all those seeking a fairer, more circular and more transparent fashion industry!
As Good Brand Guru, we seek to explore ways to make the fashion industry more social and environmentally sustainable. We do not claim to have the answers. Rather, we seek to enable conversations and knowledge sharing. Do you have thoughts, knowledge and/or opinions about blockchain technology for the fashion industry? Let us know below!
References:
Top image source: https://appinventiv.com/blog/blockchain-in-fashion-and-retail-sector/ [accessed 4 May 2021]
Fashion Revolution. 2020. FASHION TRANSPARENCY INDEX 2020 – Fashion Revolution. [online] Available at: <https://www.fashionrevolution.org/about/transparency/> [Accessed 3 May 2021].
Kelly, A., 2020. ‘Virtually entire’ fashion industry complicit in Uighur forced labour, say rights groups. [online] the Guardian. Available at: <https://www.theguardian.com/global-development/2020/jul/23/virtually-entire-fashion-industry-complicit-in-uighur-forced-labour-say-rights-groups-china> [Accessed 3 May 2021].
Haikure. 2021. Tracking. [online] Available at: <https://haikure.com/pages/tracking> [Accessed 4 May 2021].