With 2025 climate commitments looming, fashion is under pressure to clean up its supply chains. Barriers persist, but incoming legislation, investment in technology and a gradual shift in brand-supplier power dynamics could propel the industry towards its targets.
While “traceability” became somewhat of a buzzword in 2023, global supply chains faced an onslaught of challenges, from cost increases to living wage protests in manufacturing hubs like Bangladesh and China, as well as extreme weather events. “People in power fail to understand how dynamic and alive supply chains are,” says Dr Hakan Karaosman, academic and chair of the Union of Concerned Researchers in Fashion. “Supply chains are not just static landscapes — they are dynamic social and ecological domains.”
Three core trends will define the supply chain in 2024, according to Anja Sadock, head of marketing at supply chain transparency and traceability platform Trustrace: greater industry collaboration through knowledge sharing; better understanding of the need to gather primary data at product level (rather than making assumptions on impact); and the uptake of digital product labelling.
New legislation is expected to have a significant impact this year. Urska Trunk, campaign manager at Changing Markets Foundation, points to the EU’s Corporate Sustainability Reporting Directive, the Waste Framework Directive and the Ecodesign Criteria for Consumer Textiles as three key frameworks that will significantly impact the industry in 2024, when their mandatory reporting requirements begin to roll out. “It should act as a wake-up call for fashion companies that they need to embrace change proactively,” she says.
Brands dragging their heels on compliance only have to look to the US, where the Uyghur Forced Labour Protection Act has been enforced for the last 18 months. In this time, $46 million worth of apparel and footwear has been detained by the US Customs Border Protection (CBP), according to data released at the end of last year. The CBP secured $64 million in additional enforcement budget in 2023, and US lawmakers are looking to strengthen the law by closing existing loopholes.
Despite regulations, pressure from activist organisations and increased dialogue around overproduction, major brands still refuse to disclose basic information like production volumes. “We should just be honest about the volumes and we should talk about them,” says Karaosman, who says that scientists need this information to cast accurate projections about fashion’s carbon reduction strategies. “Fashion brands have to learn how to adopt operational strategies that would not only help them sustain economic viability but also empower their supply chain partners to thrive.”
Brand-supplier power dynamics
The pandemic upended global supply chains, exposing their unfair buying practices and the systemic power imbalance between brands and suppliers. “The lessons that have been taken forward, particularly from the pandemic, are the need to have greater visibility into supply chains, and to embrace a more resilient supply chain,” says Dan Viederman, managing director of Working Capital Fund, a venture capital firm investing in supply chain innovators like data analytics company Altana and traceability platform Provenance. “I think inherently [a more resilient supply chain] means a more visible one with stronger and more strategic partners, rather than simply a highly variable, traditional outsourced model.”
Involving more actors from the supply chain in decision-making is the key to unlocking solutions in 2024. “To become serious about technical decarbonisation and transitions, we should bring those suppliers and manufacturers to the frontline,” says Karaosman. “We should learn from them rather than creating top-down, assumption-based agendas.”
Karaosman says that, in an effort to rebalance the power dynamic, some tier two suppliers of higher-end denim, wool and cashmere have begun to boycott brands that don’t agree to price increases or respect their payment terms. It’s unlikely that power dynamics are changing across the industry, at least not yet — the ongoing unrest in Bangladesh over basic living wages in many cases suggests brands are still in the driver’s seat. But it is possible that the luxury sector, where standards of quality are predominantly at the core of a brand’s identity, could be adjusting to this new reality. “This narrative that fashion brands are the power source is no longer valid,” says Karaosman.
As droughts and floods impact the availability of some materials, suppliers are increasingly prioritising brand partners that provide consistent orders, investment and business guarantees. “Manufacturers are telling me that they will circumvent brands that don’t cooperate… Everything from chemicals to energy and water is more expensive now. So if [brands] ask for the same price, or even discounts, this is delusional,” says Karaosman.
Suppliers will also be increasingly impacted by compliance requirements in 2024. “Everybody has circularity goals for 2025 and 2030 that are coming due,” says Edwin Keh, CEO of the Hong Kong Research Institute of Textiles and Apparel. “This means that there will be significant investments that need to be made in things like reverse logistics, post-consumer material processing and the integration of recycled content into apparel, which will only be coming from larger suppliers.”
This, he anticipates, will push out smaller businesses. “The smaller brand manufacturers will become less and less competitive,” he says. “Large transactional manufacturing organisations will dominate the smaller ones, unless they have some competitive niche that makes them irreplaceable.”
Technology: Overcoming the barriers to investment
Experts say adoption of supply chain solutions is lagging, despite increasing availability. Implementing any new technology requires substantial financial investment, but Working Capital’s Viederman argues that the cost is negligible when weighed against the long-term benefits. “What we’re seeing is the cost of not doing something going up.”
First-movers face greater risks, and Changing Markets Foundation’s Trunk thinks many players are taking a wait-and-see approach to regulation: holding back from proactively investing in solutions that enable brands to carry out due diligence on their supply chains when the consequences for non-compliance aren’t entirely clear yet. “There is already so much technology out there,” she says. “What’s missing is legislative incentive.” In the coming year, the global wave of legislation will become impossible to avoid, Trunk says. “This is the very first time that this industry will be regulated. I think the whole value chain is feeling the heat.”
In the face of uncertainty, data-driven businesses will be more agile and responsive to unforeseen disruptions. On the soft technology front, AI is enabling businesses to collect and make sense of vast amounts of data both quickly and reliably. “Fundamentally, AI enables data sets to be understood more effectively and for relatively small amounts of data to become predictive in a more accurate way,” says Viederman. “We see companies that are creating pictures of global supply chains that build on information that is verified and verifiable.”
Working Capital is investing in supplier compliance platforms like Ulula and ContingentAI to increase visibility of risks like wage theft and gender-based violence through tech. “No longer does that all need to be viewed through the lens of a social audit,” says Viederman. “No longer does that need to be such an expensive proposition that companies can’t afford it. It’s now facilitated by technology in a way that the companies can position themselves pretty well to know ahead of time what regulators might be concerned about.”
Suppliers in more established manufacturing hubs like China, meanwhile, are focused on utilising emerging hard technology such as robotics to automate previously labour-intensive processes. “The industry is going from a labour-intensive to a more technology-intensive business,” says Keh. “There are a lot more semi-automated manufacturing processes that I’ve seen down on the production floors in the last year or so as hardware prices come down.”
Labour-reliant manufacturing regions will feel the biggest impact from this transition. “Smaller economies as well as the smaller businesses will suffer,” Keh says. “There will be periods in which there are concerns about employment and then there will be jobs that require more engineering skill rather than semi-skilled labour. And the training and the education systems [in some countries] haven’t caught up.”
Economic, geopolitical and climate instabilities will continue to impact the global sourcing landscape in 2024. Within a brand’s control is how it prepares for relevant legislation, invests in technology to enable visibility and uncover risks, and develops meaningful working relationships with suppliers.
“In 2024, what we should be talking about is how suppliers and workers can help us drive these conversations forward. I am done listening to the brands. I am done seeing pledges or shadows of incomplete progress reports,” says Karaosman. “I am hopeful because the power is changing hands. Communities and suppliers are becoming more powerful, and we need to give voices to those people. Change isn’t about what brands think should happen; it’s about what we — as a collective — want.”
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