Retailers are following through on their pledges to take ESG seriously, but a lack of sustainable suppliers and an influx of verification challenges are proving to be a stopgap.
One particular claims label on products sold by retailers and brands has become synonymous with a strong stance on environmental, social, and governance (ESG) initiatives: “organic.”
“This product contains independently certified organic cotton grown without chemical pesticides, chemical fertilizers and genetically modified seeds,” the label reads.
This is the justification for charging more for organic and recycled cotton and polyester clothing, which comes at a markup of well over $20 at most retailers compared to conventional clothing.
This practice is becoming increasingly common in the fashion industry, which is attempting to be more sustainable in response to pressure from regulators and consumers. While sustainable materials do cost more, more than a third of consumers are happy to pay extra to support the shift to a more environmentally-friendly retail marketplace.
Unfortunately, according to the New York Times, a lot of this organic cotton may not actually be organic. And the suppliers that do grow genuinely organic cotton are being underpaid and overlooked in the midst of widespread fraud.
Workers in India who source, process, and grow organic cotton say that the reported boom in organic cotton production – which allegedly jumped 48% in the last year – is fake.
A lack of transparency into the certification system which labels these suppliers as organic is largely to blame. Local inspection agencies file reports that serve as the basis for stamps of approval from outside organizations, but these inspections only happen once a year at facilities and on a few random occasions at farms. What’s more, the documentation for these inspections is still managed with physical, paper documentation instead of a digital file that’s more resilient to manipulation.
Other issues in the cotton industry are specifically harming the suppliers who actually do grow organic cotton. Organic cotton growers harvest 28% lower yields than those who use fossil-fuel fertilizer and pesticides, and the seeds produce lower quality, shorter fibers.
Retailers are unfairly negotiating these organic suppliers down based on the “lower quality” of their cotton, thereby making it unprofitable to grow truly organic cotton at all. Without a business case for genuine organic cotton, it’s hard to convince suppliers to make the switch away from pesticides.
In November, the European Union voted to no longer accept Indian organic exports certified by companies responsible for organic cotton, including Control Union, EcoCert, and OneCert. This essentially stripped these inspection agencies of all credibility.
The Times interviewed Crispin Argento, who spearheads and serves as the managing director of Sourcery, a consulting firm that helps brands source organic cotton. According to Argento, it has been difficult to enlist organic cotton suppliers because they frequently cut off contact once he asks for proof of authenticity.
By his estimate, at least half of what is being sold as organic cotton does not actually meet the requirements to back such a claim.
Across the pond, British retailers have canceled a whopping 7.1 billion pounds in contracts with suppliers in the last 12 months due to issues related to ethics and the environment, according to a Barclays report.
Indeed, a fifth of the UK’s largest retailers terminated contracts with suppliers on the basis of failure to meet ESG standards. Companies cited myriad reasons for ending supplier contracts, among them sustainability concerns, poor working conditions, and poor pay.
Furthermore – similar to Argento’s experience – many retailers are finding that their suppliers are reluctant to join trade bodies or work with sustainability certification schemes to prove their compliance.
With 52 percent of a total of 2,002 interviewed UK adults stating that ESG compliance is a crucial factor they consider when choosing where to purchase goods, it’s key that retailers find ways to identify and engage with suppliers that can genuinely meet their expectations related to sustainability and ethical treatment of workers.
Having the data and analytics in place to accurately assess supplier performance against a range of ESG criteria positions retailers to choose the right supplier partners to support initiatives related to sustainability and ethics.
The Bamboo Rose Multi-Enterprise Platform (MEP) gives retailers and their supplier partners the tools to drive community ESG compliance, incorporate sustainability metrics and materials into product development, and measure the impact of supply chain operations and disposal processes on their carbon footprint, material waste, and water usage.
The Supplier Recommendation capability enables retailers to compare supplier offers and select the ideal partners based on a range of configurable business criteria, including ESG performance.
This feature ensures retailers can back claims related to sustainability on their products, significantly reducing the risk of ESG-related fraud.
For more information on how to succeed on ESG initiatives, check out our on-demand webinar and our joint white paper with Treadler.
Ready to build a more resilient, traceable supply chain end-to-end? Try the Bamboo Rose platform today.