In the seventh year of this annual event, “Sourcing Journal” promised to go beyond the headlines to focus attendees’ attention on the new fundamentals for today’s sourcing model; presenting the skills, processes and mindsets needed for success according to industry insiders. WRAP representatives attended the event to better understand how the latest trends are influencing social compliance practices.
The apparel, textile, and footwear industries have their fair share of business buzzwords and changing realities. The Sourcing Journal Summit in October 2019 promised to explain how industry changes are redefining sourcing practices. Based on the range of speakers and industry information presented, I would say that the event organizers achieved their goal. The speakers included Jesús Vega formerly a managing director of Zara-Inditex, Victoria Vandagriff, President of D2 Brands, a division of the Delta Galil manufacturing and retail company, Stanley Szeto, Executive Chairman of Lever Style, Inc., a Hong-Kong apparel manufacturing group, and John Thorbeck, Chairman of Chainge Capital that is focused on fashion industry transformation.
One of the most relevant speakers connecting the dots between sustainability and social compliance was Karl Hendrik Magnus, co-lead of McKinsey’s Apparel, Fashion & Luxury practice. Mr. Magnus introduced the just-released McKinsey & Company’s fifth annual Apparel CPO Survey, “Fashion’s New Must Have: Sustainable Sourcing at Scale at the summit. The report shares the perspective of 64 sourcing executives from around the world, analyses of sustainable apparel offerings, interviews with young consumers, and background interviews with sourcing industry experts.
When you read the report, you will find that the companies surveyed placed a greater focus on process improvements with sustainable sourcing. Over 50 percent of those surveyed ranked sustainability and transparency among their top three priorities. The McKinsey reports finds that “greater collaboration and connectivity with fewer suppliers will be needed to deliver greater speed and flexibility, improve sustainability, and improve cost and efficiency across the value chain.” The takeaway for manufacturing facilities is that it is no longer acceptable to just meet the minimum requirements according to social compliance standards and principles, you must now be willing to make production changes that demonstrate your commitment to improvement including practices to reduce your environmental impact and improve social responsibility while increasing your process speed and flexibility.
The report highlights four key areas critical to the apparel industry’s sustainable-sourcing transformation:
Embracing sustainable materials. The majority of those surveyed aspire to source at least half of their products with sustainable materials by 2025.
Driving transparency and traceability. Eighty percent of Chief Purchasing Officers (CPOs) surveyed have ambitious plans to step up transparency by 2025. Sixty percent plan to go further and share information about their suppliers at the point of purchase.
Turning supplier relationships into strategic partnerships. In supplier relationships, social and environmental sustainability is taking on much greater importance:
Two-thirds of purchasing officers surveyed said social and environmental sustainability would likely become a top factor in their supplier ratings. This is encouraging garment manufacturers to invest proactively in environmental sustainability, worker well-being, and fair wages.
In the report, the most frequently mentioned social sustainability initiatives focused on fair or living wages (11 percent of respondents), social responsibility more broadly (8 percent), and decent work (8 percent).
To emphasize this new focus, only 20 percent of respondents named shifting sourcing countries as a top three priority with other respondents placing it near the bottom of the list of their priorities.
Reinventing purchasing practices. Two-thirds of CPOs expect sustainable sourcing to add between 1 and 5 percent to their costs, with most agreeing that this is an investment in building their competitive advantage.
Working together on these priorities, the apparel industry, including production facilities, can define a sustainability agenda that addresses both social and environmental issues. The McKinsey report makes clear that apparel companies will need to deliver this agenda at speed and scale – harnesses the benefits of new technology to achieve financial sustainability, as well. According to another Summit speaker, Edwin Keh, CEO of the Hong Kong Research Institute of Textiles and Apparel, “There is no silver bullet; rather, there will be a combination of a lot of small innovations and a few radical changes.”