At TrusTrace, we believe that data-driven insights can provide brands with the information they need to improve their supply chains. Understanding what suppliers need to safely and effectively perform their job is crucial for decision-makers, whose actions have a knock-on impact throughout the entire supply chain. Below, read on to discover why collaboration and investment in suppliers is crucial for fashion's sustainable future.
It is critically important that investment in sustainability is used to improve the working conditions and infrastructure in facilities throughout the entire supply chain.
Too often, investment initiatives focus on retail spaces and brand-owned facilities, failing to reach the facilities deeper in the supply chain. There is a difference of opinion in the industry as to whose responsibility it is to fund sustainable transformation in facilities that aren’t owned by brands. Generally, fashion companies believe that facilities should finance their own improvements; however, the tight margins imposed by these brands don’t give facilities enough financial capacity to do so. The inability to find common ground on this core issue creates a stalemate and stalls progress, which can only be resolved through open discussion and collaboration about the challenges in the brand-supplier relationships.
In order to see significant shifts in the industry, Fashion for Good estimates that $20 – $30 billion in financing needs to be invested each year until 2030.
Raw materials and the end-of-use phases make up around 45% of current financing demand, according to Financing the Transformation in the Fashion Industry, published by Fashion for Good and Boston Consulting Group in 2020. 35% of financing demand is needed to support innovation in processing and cut-make-trim, such as waterless dyes and zero-waste manufacturing infrastructure, while the last 20% is split between retail, usage, and other innovations, reads the report.
Specialized funds like Textile Innovation Fund and Good Fashion Fund are working to accelerate investment in sustainable fashion innovation. “Brands and manufacturers have historically not been active in providing financing for the kinds of sustainable disruptive innovation similar to those that we support at Fashion for Good,” says Rogier van Mazijk, investment director at Fashion for Good. “Financing of sustainability is, however, not limited to the financing of disruptive innovation, but also includes other initiatives and the further adoption of already existing solutions.”
"For many investors, the sustainability element in itself is not a major driver, but many traceability/transparency innovators are able to combine positive impact with attractive business models, and therefore financial returns, for investors."
Rogier van Mazijk, Fashion For Good
The Financing the Transformation report identified two categories of technological innovation that are the key drivers of transformation: “soft” and “hard” technology.
Soft technology refers to digital B2C solutions like rental and resale platforms,
as well as B2B solutions like traceability software. Hard tech, on the other hand, is “asset-intensive, physical, science-based technology,” which includes innovations that integrate into existing production systems — such as bio-based dyes and toxic-chemical free solvents — and innovations that require the development of new infrastructure, like chemical recycling, biodegradable yarns, and lab-grown materials.
Hard tech solutions often occur deeper in a brand’s supply chain in facilities that they don’t own. Therefore, facilities are expected to improve infrastructure to be more sustainable but aren’t provided with the financial support to do so. “Hard tech has a number of fundamental properties that may make it unattractive to investors,” says van Mazijk. “But part of the problem is also that investors have traditionally focused on software and therefore there are fewer investors familiar with, and active in, the hard-tech space.”
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