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Covid-19 Has Emphasised The Importance of Brand Transparency

Fashion Revolution’s Fashion Transparency Index is a tool to hold brands to account as the pandemic tests their commitments to environmental and social practices.

Fashion Revolution, in analysing 250 brands for its Fashion Transparency Index 2020, found that brands are increasingly disclosing their policies and commitments on environmental and social issues, but progress needs to be made in clearly communicating their implementation.

The Index measures fashion brands with annual revenue above $400 million across a total of 55,000 individual data points. Brands receive points, from 0 to a maximum of 250, for how granular their disclosure is of their social and environmental policies, practices and impacts, including supplier disclosure, living wages and waste and recycling, which are then translated to percentage points. This year, the average score across all brands was 23 per cent, an increase of two percentage points over last year, but still a considerably low score.

Fast fashion chains and sportswear brands dominated the top 10, with H&M leading at 73 per cent, followed by Belgian retail chain C&A, Adidas (including Reebok), Esprit and, in a joint position, UK supermarket brand Marks and Spencer and US outerwear brand Patagonia. Fast fashion and sportswear have traditionally performed better in the Index as these sectors have been under harsh public scrutiny since at least the 1990s, forcing them to make their business practices more transparent.

Luxury, on the other hand, is lagging. Aside from Gucci, the highest-scoring at 48 per cent, Kering-owned Balenciaga, Saint Laurent and Bottega Veneta, as well as Hugo Boss, scored below 40 per cent. The sector has traditionally been secretive and protective about its sourcing and manufacturing, on the grounds of guarding such information as a trade secret.

According to Carry Somers, founder of Fashion Revolution, they can’t use that excuse anymore.

The annual Index, which ranks the 250 global brands and retailers according to the level of publicly available information on their approach to social and environmental issues and practices, has an added value this year. As financial difficulties and trade disruptions brought by the pandemic strain brands and retailers, transparency is key for consumers to scrutinise if companies will continue to honour their commitments, both on environmental and social issues. On the other hand, while brands that are reticent to publicly disclose their practices are less vulnerable to judgment, their reservations could read negatively for consumers.

“What people should really look at is the big swath for brands that are not disclosing any information,” pointed out global policy director Sarah Ditty during the press briefing, adding that that could indicate that they are lagging in prioritising social and environmental issues in their businesses. This year, a total of 10 brands, or 4 per cent, scored 0 in the Index, including Tom Ford, Max Mara and Bally.

Spotlighting supply chain relationships

The damage of the Covid-19 pandemic could amount to more than $20 billion worth of orders cancelled in countries like Bangladesh, Cambodia and Vietnam, according to labour rights monitoring organisation Worker Rights Consortium. Brands and retailers around the world have invoked force majeure to withdraw their obligations to their suppliers, but Somers thinks the choice is not always motivated by necessity.

“There is no doubt that they have both the resources and the abilities, notwithstanding the moral imperative, to fulfil obligations to suppliers. It’s a question of priority, the shareholders or the workers,” Somers told journalists during a press conference to announce the release of the Index on Monday.

“A lot of luxury is compiled in Italy, but many components are made in other countries, it might be South East Asia or Eastern Europe. It’s not easy to make these disclosures,” Somers says. A lot more also needs to be done further down the supply chain. According to the Index, 40 per cent of the brands analysed are disclosing their list of first-tier suppliers, up from 35 per cent last year. But only 24 per cent and 7 per cent are transparent about processing facilities and raw material suppliers, respectively. Companies are also reticent in disclosing the numbers of supply chain employees receiving a living wage and measurable roadmaps of how living wage payments across the supply chain are going to be achieved.

Similarly, brands are increasingly transparent about the carbon emission produced by their owned and operated facilities, like head offices and retail stores, but still, only 16 per cent of brands do the same for emissions produced in their supply chain, which is the highest polluting stage in the lifecycle of a garment.

A post-pandemic fashion industry

The current health and economic crisis is exacerbating issues that were already present in the fashion industry, including overproduction and how to dispose of excess inventory as consumer discretionary spending decreases, normal trade conditions are disrupted, and retail stores remain closed. Ditty and Somers are hoping that the need to revisit business models to survive the economic downturn will also drive positive change in the long-term, such as curbing overproduction.

Similarly, more public scrutiny on the relationship between brands and suppliers can push brands to act more responsibly. Reports of retailers cancelling orders and delaying payments to suppliers in the wake of Covid-19 has brought how brands manage their relationships with supply chain partners into the spotlight, pushing many companies, from H&M to Primark, to announce they are going to honour their commitments, but details remain unclear.

“We know that transparency is good for business; we know that it helps to protect the brand reputation ultimately,” says Somers.

While the Index doesn’t rank how sustainable or ethical brands are, only measuring how transparent they are in communicating their policies and approaches to sustainability and social issues, Ditty says there is a link between higher transparency and commitment.

“Brands that are leading the way on transparency are taking significant steps on social and environmental issues,” she says while agreeing that there is still much to do. “They are taking steps to open themselves up to stakeholders for scrutiny, stand up and agree to be held to account for some of the claims that they are making about how they are managing and what their impact is on people’s life and the environment.”

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