Fashion retail is one of the world’s most important industries that drives a significant part of the global economy. The industry produces more than 100 billion items of clothing per year. Therefore, it is no surprise that fashion is responsible for between 2% to 8% of global carbon emissions. With pressures from consumers and regulators on the rise, the spotlight is on retailers to implement sustainable practices across the clothing production process, from converting raw materials in factories to finished products on the shopfloor.
To alleviate pressure and demonstrate their commitment to supply chain sustainability to help reduce carbon emissions, retailers have been keen to increase transparency by sharing their progress and highlighting sustainable product lines. But as they manage increasingly complex supply chains, retailers can also open themselves up to accusations of greenwashing and regulatory fines if suppliers further down the value chain are not operating sustainably.
On the other hand, retailers who don’t communicate their green practices can be accused of hiding to avoid being placed under a microscope – a term now being described as ‘Greenhushing’.
So how do retailers find the balance?
A crackdown on greenwashing
Large retailers can be dealing with as many as 50,000 suppliers across hundreds of different regions, making it extremely difficult to accurately track their suppliers’ green practices and near impossible to track beyond tier 1 and 2 suppliers. In particular, many struggle to gain visibility into Scope 3 emissions, which on average are responsible for around 75% of an organisation’s total emissions. This leaves retailers wide open to unintentional greenwashing and regulatory fines unless they make a change.
And the heat from regulators is rising. The Competition and Markets Authority (CMA) has developed the Green Claims Code to check that environmental claims within organisations are genuinely green. The code sets out six key points for consumers to look out for when considering purchasing items with supposed green claims. Additionally, the CMA is currently investigating major UK fashion retailers over the eco-friendly and sustainable claims made about their product lines.
Greenwashing lapsing to greenhushing
With retailers being publicly scrutinised for their greenwashing claims, some may lapse into ‘greenhushing’. This occurs when retailers don’t actively report on green initiatives to evade scrutiny. Retailers may decide to remove green claims to protect themselves, reducing the risk of unwanted questioning on the legitimacy of their internal ESG practices. Especially for those without visibility into complex supply chains.
However, this is not a workable approach. Customers want to buy from sustainable brands, so retailers are vulnerable to losing market share if they can’t market truly sustainable goods. Customer trust and loyalty are also at stake: more than 80% of UK customers claim they will boycott apparel brands that do not prioritise ESG by 2025.
Customers’ demand for more sustainable and eco-friendly fashion options is also demonstrated in the rise of fashion ecommerce companies such as Depop and Vinted. Both which recirculate pre-loved clothes back into society.
Retailers must keep up with these rising customer expectations.
The role of supply chain transparency on the path to genuine sustainability
The recent CMA investigation into some of the UK’s leading retail giants is just one example of fashion retailers unintentionally falling foul of regulatory standards.
Retailers need to ensure they can back their green claims up. If they don’t, retailers can unintentionally get caught up in scandals and risk customer boycotts. This kind of reputational damage can incur astronomical costs for retailers, whether it’s through legal battles, loss of customers, or a dip in share price.
To reduce the risk of unintentional greenwashing and regulatory repercussions, retailers need to take a smarter approach to procurement that helps to carefully select suppliers, effectively assess their environmental impact, and identify opportunities to work with suppliers to meet sustainability requirements.
Retailers need granular visibility into their supply chains to ensure they can measure the environmental impact of their suppliers and sub-tier suppliers. Closely monitoring supplier risk and performance, and tying these to actual business decisions is key.
By investing in tools that facilitate strategic collaboration with suppliers, retailers can verify actual product emissions, define improvement plans to reduce emissions, and accurately track and report progress. This will enable retailers to share meaningful progress on their sustainability journeys and avoid accusations of greenwashingand ‘greenhushing’.
What’s more, improved supply chain transparency will also help retailers work more closely with suppliers in the future on sustainable initiatives. All while facilitating long-term cost savings and ensuring that green products don’t eat into thin margins.
