The Data Advantage Playbook brings in new perspective this year from suppliers including Epic Group. This company is a privately owned apparel manufacturing and design company with 30,000 employees and garment manufacturing facilities in Bangladesh, Ethiopia & Jordan. Its clients include Walmart, Uniqlo, Tesco and C&A. We interviewed Vidhura Ralapanawe, Executive Vice President Sustainability & Innovation at Epic Group to get his insights on data collection challenges and the current status quo.
“Some [brands] want daily, weekly, monthly or annual data [and the] intent is not the level of precision, [it’s the volume].”
Introduction
Epic Group operates globally with design, sourcing and manufacturing capabilities, and leading digital integration for end-to-end order management and SMART warehousing. The group specialises in cotton-rich garments, and has laundry facilities for cotton and denim.
Vidhura Ralapnawe, Executive Vice President, says brands’ data needs from suppliers fall into two areas:
“Environmental (usually via Higg FEM15) and Social, which is a completely fragmented space because there’s no brand alignment.”
“While environmental data is ‘hard data’, social is qualitative as well as quantitative, is not easily collected, and there are no standards.”
Furthermore, the approaches to gathering and sharing data for both vary:
“[Higg] FEM supports almost all brands’ [needs] for environmental data [and] is the main vehicle for data collection for meeting regulatory requirements right now, plus some additional sources…”
“For Social, every brand has different or preferred platforms – examples include Sedex, Wrap, SLCP (Better Works, or Higg FLM16 version) BCSI, and then there are customer specific versions.”
The social requirements are met through audit-based questionnaires due to the requirement for 3rd party verification, whereas answering the Higg questions (of which there are 600) is done directly in the platform, where 50 of these questions are then verified ‘in-platform’ by a 3rd party.
Changing Data Demands
Despite the breadth of the Higg FEM questions, brands are seeking ever more data outside of these, citing regulatory requirements. A gap is widening between what the tool appears to be providing, and what brands say they need, despite expansion from 180, to 250 and now 600 questions with sub-questions, as explained by Ralapnawe.
“It’s too big and too complicated. And sometimes the important questions are missed or not included..[since answering the 600 questions is not mandatory]”
“Epic fills in the 600 questions, but 80% of suppliers are not us [in terms of size and resources].”
As the data burden continues to increase, Ralapnawe believes that a guideline as to the minimum data package for complying with regulations would help brands to prioritize and focus on the data that is actually needed.
“This would be super important… partly because everybody interprets the regulations in separate ways…and people in factories haven’t read the legislation so they shut up and get on with it…”
The Resource Burden
There are 3 team members per Epic Group factory dedicated to data and compliance and working across various teams.
“Energy and water data sits with the engineering teams, and material data with the production team.”
Social data is managed by Human Resources and Compliance teams:
“HR teams manage and report salary, employment, work hours, age, overtime, social progression, training and development data…”
“The compliance team manages health and safety checks and balances, and audits alongside the HR team.”
“Even small factories would have a minimum of 3 people in sustainability teams working full time, plus other people working to support them.”
Furthermore, there are extended teams in Bangladesh to manage the extra requirements for the International Accord (Accord and RSC) that are not present in other geographies.
Absent Standards, Increased Burden
For Epic Group, there has been an increase in data demand for climate impact assessment.
“Brands might request data for climate reporting to be provided outside of FEM and suppliers must do additional collection… using alternative standards due to the brands’ need for 3rd party verification on the data.”
Regarding data for greenhouse gas reporting, there are particular pitfalls including how companies choose to do greenhouse gas reporting:
“How one must account for Scope 1 and 2 is regulated, but Scope 3 is quite loose in its structure so everybody has created their own rules and methodology for Scope 3 reporting.”
“Brands often don’t use actual supply chain data, they use standard tools and global averages; however some brands use granular, factory level data.”
What’s challenging is that it’s not clear how the data will be used and the consequences for suppliers.
“Brands [often] use standard values, but the problem is that even fibre [data] is not standard (for example, cotton) and all brands are evaluating suppliers differently–some want daily, weekly, monthly or annual data [and the] intent is not the level of precision [it’s the volume].”
Current regulations focus
So far, the focus areas for Epic Group’s clients have been corporate reporting and forced labour regulations:
“Most of the work is around CSRD and CSDDD and UFLPA (for cotton)... nobody has operationalised the ESPR yet.”
“With the [EU] omnibus, we know it’s lowering the ambition so anyone prepared [for it] is covered…”
In addition, Epic Group does voluntary fibre testing:
“For UFLPA compliance we have extensive data audits and documentation processes and we do periodic isotope testing at our own cost. We randomly select a set of cotton samples and test them in addition to the paper [due diligence] mechanism, and we share these results with brands.”
Next Regulation Priorities
Considering data unknowns and methodology gaps, calculating emissions for product-related regulations may be a challenge:
“I would be concerned about EPR and ESPR because of the emissions factors and different standards… What you need to report on in CSRD and CSDDD is clear and we know what forced labour is... those labour requirements, for example, are not going to change…”
“But the rules for things like emissions can upend a company's strategy. For example, one of the biggest fights is the synthetic versus natural fibre debate [and] if you compare cotton vs. polyester in different databases [how they compare] changes.”
This problem may be addressed by the newly approved EU PEFCR for apparel and footwear impact calculation, despite drawing from some of the same databases the Executive Vice President refers to.
Although the data requirements and methods are still evolving, in addition to a minimum data package of required data, Ralapnawe believes suppliers would benefit from ‘best judgement’ guidance on ‘unknowns’.
What’s challenging is that it’s not clear how the data will be used and the consequences for suppliers.
“Where there is space for interpretation, a recommended route…(either location, frequency, type of data) would be helpful.”
