Closing the transparency gap in global fashion
In this year’s edition of Fashion Revolution’s, Fashion Transparency Index, the top 250 brands and retailers achieved an average transparency score of 24% – a mere 1% increase on last year1. This underlines the stark reality that progress towards full transparency is not moving at the pace and scale required.. So why should the fashion industry accelerate its adoption of best practices around transparency, and what are the key drivers for more disclosure?
Fashion’s value chain needs to change, to ensure the welfare of workers and their communities, and mitigate the socio-economic effects of its climate impact.
One important step fashion leaders can take to prevent human rights and environmental harms is to learn more about their complex supply chains and identify key issues. Such commitment to transparency helps brands – and their suppliers and manufacturer business partners – respond to gaps and improve practices.
Knowledge is power
Our partners have built several invaluable tools to help businesses arm themselves with critical knowledge on their supply chains. We see several brands proactively adopt these into their processes and report significant progress in their transparency and traceability goals having done so.
These include the Open Apparel Registry, a free and open data tool mapping garment facilities worldwide; Mapped in Bangladesh, a database of ready-made garment (RMG) factories directly or indirectly exporting from Bangladesh; Transparency in Action, a free resource to help fashion brands understand the role of transparency in enhancing performance, improve their own disclosures and adapt to emerging legislation; and last but not least the Transparency Pledge, urging fashion and footwear brands to take an important first step towards more meaningful corporate accountability.
A business advantage
Transparency is not just about ethics. Companies that have fully mapped supply chains have often uncovered business benefits as well. For example, organisations that disclose their supplier lists have acknowledged being surprised by the number of suppliers they are using – in many cases using individual suppliers just once a season. Reducing this number can create operational efficiencies and reduce risk. And in today’s world, we also know companies that are committed to transparency are more trusted and therefore more investible.
While many brands have embraced the benefits of transparency, others have been fearful of the risk that disclosure may expose them to. This is where regulatory mechanisms have the potential to speed up the transition.
A rule for engagement
In February this year, the European Commission adopted a proposal for a Directive on corporate sustainability due diligence which is ambitious in its goal to transform corporate behaviour and encourage a sustainable future by requiring both EU and non-EU companies to identify and address human rights, environmental and climate change impacts in their global value chains.2
The crux of this new legislation lies with transparency. European companies will need to know much more about their supply chains and take action to prevent poor human rights and environmental practices, or face penalties for violations.
Progressive brands are on the front foot, taking action to prepare for the directive’s implementation, and embracing transparency as a means to accelerate the pace of organisational change.
While increased disclosure can seem challenging to some, it is important to acknowledge that due diligence, by its very definition, helps companies identify risks of significant negative impacts in their own operations and their business relationships throughout the value chains4, and in turn provides an opportunity improve. It cannot be said enough, knowledge is a powerful tool.
A participatory process
Stakeholder consultation is a key component of effective transparency and disclosure. While many brands already meet with community groups on an ad-hoc basis, the due diligence directive will be explicit about consultations with civil society and trade unions.5
This renewed commitment to participatory processes provides another lever for companies to embrace transparency.
For example company staff will want the full facts about their supply chains when engaging with stakeholders. They will want to know if workers in their supply chains are paying recruitment fees for instance, and if so, how much is being paid. Unfortunately, we still see in the Fashion Transparency Index that most brands (94%) do not disclose the number of workers in their supply chains who are paying recruitment fees. It is possible that brands are unaware of the extent to which recruitment fees are paid, increasing the risk of unknowingly indulging in poor recruitment and employment practices.
While this year’s Fashion Transparency Index highlights the work that still needs to be done, it is important to acknowledge we have come a long way.
When Laudes Foundation first supported the index at its launch in 2016, transparency as a term was met with limited interest or awareness. At that time, only five out of 40 major brands (12.5%) disclosed their first-tier suppliers.
Seven years later, this number has grown to 121 out of 250 (48%). There is clearly an increasing understanding of the power of knowledge, as well as the practice and behaviours of transparency to protect reputation and earn trust among customers and stakeholders alike.
Upcoming legislation is a critical accelerator in ensuring a commitment to transparency is internalised and the fruits of business are shared more equitably with workers across the globe. We look forward to changes stimulated by the legislation being reflected in future editions of the Fashion Transparency Index.