In Positive Luxury’s The Future of Sustainable Sourcing, Luxury’s Guide to Collaboration, Innovation & Best Practice, the London-based consultancy outlines the steps for luxury brands and their suppliers to operate a more ethical social and environmental strategy. Building a collaborative relationship between brand and supplier is a pivotal aspect of this, and one that can have lucrative repercussions for these companies’ bottom lines, says the report.
Positive Luxury’s The Future of Sustainable Sourcing report, published earlier this week, points to the numerous benefits for brands of building a greener and more transparent supply chain. “Greening the supply chain is a profitable pursuit; companies that can demonstrate their adherence to ESG* goals grow faster and are valued higher than those that are non-compliant at a rate of 10-20%,” notes Positive Luxury.
The starting point of this journey, argues the consultancy, is for brands to forge veritable partnerships with their suppliers. Indeed, embarking on a more collaborative relationship – which can entail investments in a supplier’s sustainability initiatives or ensuring fair payment terms, for example – rather than maintaining the more traditional client/supplier rapport, can engender positive socio-economic repercussions that benefit both partners. This model can also give brands a more direct innovation pipeline as “manufacturers are often at the front line of innovation, creating products that will improve a company’s bottom line and advance sustainability goals”.
Another strategy that has the potential to “ensure holistic supply chain oversight and mitigate risks,” is for brands to acquire their suppliers outright. While a less common tactic, this can also give brands a clear advantage in the innovation realm.
Transparency with the end consumer should also be a priority. Positive Luxury points out that luxury brands, who value confidentiality, are often wary of communicating the names of their suppliers and, therefore, their consumption and sustainability practices. This is a “significant omission” given that “an average of 90% of brand resource consumption takes place in the supply chain”.
Recent events, such as the Uyghur forced labor camps, have shone a spotlight on suppliers, meaning that their certification status (or lack thereof) is being more closely scrutinized than ever. Yet there is still work to do: a recent report from Fashion Revolution reveals that only 5% of fashion brands publicize the certifications held by their first-tier suppliers. “To tackle blind spots, brands can publish an audit of their suppliers, including location, address and employment statistics for transparency,” notes Positive Luxury. Butterfly Mark, the certification developed by Positive Luxury, analyzes a company’s ESG performance by sector - environmental, social, governance, innovation - rather than simply as a whole, which gives a more detailed level of oversight.
Legislation is becoming more stringent in key markets as companies are held accountable for their action (or inaction), as Positive Luxury pointed out in its 2022 Predictions Report. These include the European Commission Supply Chain Due Diligence, a directive stating that companies are obliged to report “negative global impacts on their supply chain”, such as environmental damage and human rights violations. Adopted in February 2022, this piece of legislation will, according to Positive Luxury, “incentivize companies in the EU and further afield to audit their suppliers [..] and legally enshrine brands to bring their entire supply chain up to ESG standards”. The UK Plastic Packaging Tax, meanwhile, places a tax of £200 per metric ton of plastic on manufacturers or importers that do not include a minimum of 30% recycled content in their plastics.
Last but not least, the report highlights the benefits of operating a more localized supply chain, a trend that has been significantly accelerated by the Covid-19 pandemic, not to mention rising raw material, transport and energy costs.
* Environmental, Social, and Governance