THE NUMBERS DON’T LIE : There are strong economic incentives for businesses to modernize

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With all the talk of the need to increase sustainability, transparency, and digitalization in the sourcing process, it’s a good idea to breakdown why it’s important for businesses to expand in these directions. While the benefits of these three areas may sometimes be difficult to quantify, the costs cannot be ignored and can have a profound impact. Ultimately, it is in the interests of all businesses to make their sourcing operations as modern, ethical, and open as possible.

Sustainability shouldn’t be viewed as a buzzword or public relations tool to satisfy the perceived social leanings of millennial consumers. Crafting a more sustainable supply chain will enable a company to save both time and money. In the global sense, companies in the garment industry have a responsibility to streamline operations due to the large amount of waste and pollution they produce.

For instance, it is estimated that production of a cotton t-shirt requires 2,700 liters of water. That, combined with the fact that the textile industry accounts for 17-20% of industrial water pollution, demonstrates why there is clear incentive for reevaluating how the apparel industry consumes water. While some may be skeptical that cutting water usage can lead to savings, there is evidence that this is in fact the case. Reducing power and water consumption, shrinking the gaps between factory floor and retail space is simply more cost effective.

It is also estimated that the apparel and textiles industry alone accounts for 2% of global carbon production. Predictions state that if current consumption patterns remain unchanged, that figure could skyrocket to a staggering 26% of global carbon production over the next thirty years. The effects of such an increase could be staggering given how climate change has already extracted economic costs across the world with abnormal rains, flooding, and droughts. In a 2017 study, Tufts University cited data projecting that if global pollution rates remain unchanged it could ultimately cost the world around “11-14% of global GDP annually.” If we focus those effects specifically on the apparel industry, it is projected that companies could lose 3% of earnings unless substantial changes are made.

Companies such as H&M and Inditex, as well as Nestlé and Unilever, have embarked on expansive transparency programs in an attempt to set standards across their respective industries. Such moves sit well with large swaths of consumers and could prove lucrative in attracting new ones. Some consumers report being willing to pay more for a brand that is transparent or even switch to a more transparent brand.

Outside of the purely economic payoffs, engaging in a transparent supply chain also helps companies reduce risks and improve conditions. Consumers largely hold brands responsible for any issues or incidents that occur within the supply chain, whether it is pollution, poor working conditions, or risks to the lives and health of workers. One must look no further than the destruction of marine and plant life, as well as an increase in cancer rates reportedly caused by water pollution from the Sateri Chemical Fiber Co., Ltd. in Jiangxi, China, as an example of damaging risks.

A factor that could help in both of the previous areas is increased digitalization. Adopting digital technologies could add an estimated $4.8 trillion in value for the consumer industries while increasing productivity three fold. This is evidenced by the fact that 14 industries saw more than $363 billion in returns from 2015-2016. And, as an added bonus, digitalization could generate roughly “$100 trillion in value to business and society over the next decade.”

Such revelations should not be terribly surprising. An increase in new digital technologies allow for safer, more efficient production that produces less waste and better working conditions. Also, communication across digital platforms reduces the need for air travel for every inspection or showcasing saving time, money, and fuel.

The environmental benefits of digital technology should also not be disregarded. Digital applications for logistics, analytics, and storage processes could cut carbon dioxide production by an estimated 26 billion metric tons over a roughly ten year period. By the year 2030, digitalization efforts, such as 3D printing, irrigation technology, and process management software, could save about 300km3 of water. To put that in perspective, Turkey’s renewable water resources amount to only about 211km3 of water per year. Companies such as Levi Strauss have already attempted to address this issue by altering their manufacturing process to reduce water usage by upwards of 1 billion liters.

While the results of going digital, transparent, and sustainable cannot always be measured in cash figures, the benefits should be quite clear. Businesses in all industries will suffer losses if global pollution, carbon emissions, and water consumption are not reduced. Adjusting operations to address these concerns will have a monetary benefit simply by having companies consume fewer resources. Transparency helps companies mitigate risk and ensure product quality. Digitalization is the linchpin for all of this, helping companies to achieve these changes, while also advancing into the future.

About the Author

Paul Sorrell is a PR & Communications Manager at FOURSOURCE, the digital sourcing platform for the apparel and textile industry. He holds degrees from Florida State University and the American University of Beirut, and specializes in research and content creation.

 

 

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