With fashion brands soon being legally required to account for sustainability failings in their supply chains, blockchain adoption is on the rise. But is it the silver bullet?

It’s pretty obvious that very soon fashion brands are going to come under immense pressure about where the goods they sell were made, by whom and in what conditions. It’s also alarmingly obvious that many of the hundreds of thousands of fashion brands that operate within the US, Europe and UK are unable to answer those questions. Not for want of trying but simply because their globalised supply chains are so complex that while they believe they are working with one supplier there is a lack of awareness of the various other supply relationships that supplier has. 

Fast-forward a few years from now, that dynamic could prove problematic.

With legislation like the EU Textiles Strategy coming into play and US fashion packages increasingly scrutinised at Customs and Border Protection (CBP) as a result of the Uyghur Forced Labour Prevention Act (UFLPA), fashion brands and retailers are scrambling to get their supply chains in check to avoid being reprimanded and having their reputations stained.

Cue blockchain

It’s not something new; in fact, it was first established around 2009 but with a use case of the Bitcoin cryptocurrency. Initially, blockchain provided a distributed public ledger to support Bitcoin, so transactions could be recorded without the need for a central authority to establish trust.

Since then it has been used more broadly in various industry applications and in fashion it made its mark around 2017. According to Appinventiv, the concept was applied by Martine Jarlgaard in 2017 who produced the first garments having smart labels on Blockchain. Every step of the manufacturing process was recorded in the label for the owners and the brands to authenticate. 

And it has continued to gain steam, particularly as Western consumers become more sustainability-savvy and want assurances the products they purchase do not contribute to environmental or social harm.

Clare Woodford, global director of impact and engagement at Alpine Group, explains: “Adopting blockchain technology isn’t just about embracing a trend; it’s future-proofing the fashion industry by creating a supply chain that is not only efficient and secure but also accountable and responsible. The industry-wide adoption of blockchain traceability not only fosters collaboration among industry stakeholders, but also provides a storytelling platform for brands to educate consumers on the provenance of their products, from raw material to finished garment. This naturally enhances the brands’ reputation, builds trust with consumers, and attracts new environmentally and socially conscious shoppers.”

While the founder of the Aware traceability platform, Feico van der Veen, explains that over the past decade blockchain tech has evolved from a novel concept to a practical solution with proven applications.

“It has matured in terms of scalability, security, and usability, making it a viable choice for various industries, including fashion.”

There are three primary use cases for harnessing blockchain in the fashion industry. The first and probably – at this moment in time – the most important is centred around sustainability, both environmental and social.

Fashion tracking

As mentioned earlier, one of the biggest barriers to realising sustainability in its truest form in the fashion industry is a lack of awareness of the journey a garment makes from field to shop floor because of sprawling supply chains and the proliferation of sub-contracting within the fashion and textile industry.

Blockchain is incredibly useful in this aspect as it can track physical and digital products through their lifecycle.

Nicklas Nilsson, consultant thematic research, GlobalData, explains the technology “offers a transparent view of product histories.”

“This transparency not only meets customer demands but also aids in ESG reporting, which is becoming crucial for businesses.”

He points out that with upcoming legislation and the potential introduction of digital product passports, more brands are taking the technology more seriously.

“The situation mirrors Walmart’s commitment in 2023 to use blockchain to meet upcoming US Food & Drug Administration regulations on enhanced traceability. As the EU rolls out new sustainability laws, fashion brands are increasingly likely to lean on blockchain for compliance, just as Walmart did. The technology’s ability to provide transparent and immutable records make it well-suited for this purpose.”

Aware’s van der Veen says one of the reasons it has grown in popularity within the fashion and textile sectors is because it enables real-time traceability, ensuring that claims about sustainability and product origin are verifiable.

“Implementation is most impactful when it covers the entire supply chain, from raw materials to end products,” he notes. 

Countering counterfeiting

In the EU alone, counterfeit goods cost the clothing, cosmetics, and toy industries a staggering €16bn in sales and nearly 200,000 jobs each year. 

While the US National Association of Manufacturers estimates that counterfeits sucked $131bn (about $400 per person) from the US economy in 2019.

And it’s not just the money. There is reason to believe counterfeit clothing and footwear pose health and safety risks such as their inability to meet flammability standards. 

Last year, the American Apparel & Footwear Association (AAFA) conducted tests on 47 counterfeit products, including clothing, footwear and accessories, and found that 36.2% of the items failed to comply with US safety standards.

Woodford says counterfeiting is a “persistent challenge” in the industry.

“It threatens our entire ecosystem. Blockchain records the origin and movement of each product to provide an effective solution and significantly reduces the number of counterfeit goods entering the market. This not only protects the integrity of our brands but also safeguards the interests of consumers who deserve authentic and high-quality products.”

Nilsson agrees and says blockchain is particularly useful in supporting a booming resale market. While it cannot physically prevent the creation of counterfeit goods, it can create a secure and immutable record for each product, which makes it easier to verify genuine products and track their origin. 

“Blockchain’s ability to verify ownership and history combats counterfeiting and bolsters brand trust. This aspect is particularly valuable in asserting ownership and tracking transfers,” he states.

However, its effectiveness depends on several factors, including integration with technologies like RFID (Radio Frequency Identification) and NFC (Near Field Communication), which serve as a bridge between the physical product and its digital representation on the blockchain.

He shares the example of purchasing a second-hand handbag from a retailer, adding how each authentic handbag can be equipped with an NFC chip containing a unique identifier linked to the blockchain.

Nilsson points out: “When this NFC chip is scanned at resale, it triggers an update both on the chip and on the blockchain record, effectively registering the change in ownership. If a counterfeit bag with a cloned NFC chip appears on the market, scanning it would reveal inconsistencies, flagging them as potential fakes and prompting further investigation.

“As such, the dynamic interplay between NFC chips and blockchain significantly increases the barrier to create counterfeit goods, enhancing brand protection and consumers in the high-value fashion market.”

Efficiency boosting

The proverb “it takes a village to raise a child” couldn’t be truer for the apparel industry. Between production and distribution, there are several stakeholders and equally, several individual records.

Incorporating blockchain within an operation means the entire supply chain is brought together under a centralised digital platform. Ultimately this means finding information on any part of the supply network happens much faster and it lowers operational costs.

Nilsson notes that it also opens new avenues for community engagement and customer interaction.

“The use of NFTs and digital twins, for example, creates unique opportunities for brands to interact with their audience.

In general, when it comes to the apparel supply chain, there are a multitude of benefits of harnessing blockchain technology.

“In an industry where the journey of a garment from concept to consumer involves numerous stakeholders from raw material suppliers to manufacturers and retailers, transparency is paramount. Blockchain enhances the efficiency of the supply chain with real-time tracking, automated smart contracts and streamlined process for a more agile and responsive system.

“Blockchain’s decentralised and tamper-proof ledger also ensures that every transaction and movement in the supply chain is recorded and accessible to all authorised parties. This allows us as a company to make key, informed decisions about sourcing, production, and distribution. It also allows us to respond quickly to market trends whilst fostering trust amongst consumers by offering them a window into the entire production process,” says Woodford.

But is blockchain being taken seriously by the apparel industry?

While the growth of blockchain adoption within the apparel sector is on the rise, it hasn’t necessarily been at the pace one would expect given legislation requiring brands to be more accountable for failings in their supply chains is around the corner.

According to GlobalData blockchain filings information, there was a steady increase in corporate filing trends from 2018-2022 which saw 178 filings in 2022 alone. 

GlobalData reveals there was a steady increase in corporate filing trends from 2018-2022 which saw 178 filings last year alone. Credit: GlobalData 

Companies in the apparel sector with the most mentions include Reliance, Kering, The Warehouse Group. Carrefour and Farfetch.

In October 2023, Lectra’s blockchain platform TextileGenesis had signed a memorandum of understanding (MoU) with the International Cotton Association (ICA), to increase digital collaboration and promote ethical trade and sustainability within the fashion and textile industry.

While Africa industrial park developer and operator Arise IIP acquired a 17.6% stake in French traceability software firm Crystalchain to tackle climate change concerns and enhance transparency within the region’s supply chain.

Despite big moves such as these, Nilsson argues blockchain isn’t “sweeping through the apparel and textile sector as rapidly as some might think.”

“As with the broader trend in enterprise blockchain adoption, the apparel and textile industry’s initial foray into blockchain was characterised more by experimentation than by widespread implementation. It’s only in the past couple of years that we’ve seen a meaningful shift towards practical applications, particularly in enhancing supply chain transparency, authenticating products, and exploring NFTs.”

He says it is more of a “steady journey than a sprint”.

“The early experimentation phase in the industry, much like in other sectors, revealed key insights. It showed that successful blockchain initiatives often thrive on focused applications, involving fewer, but more committed participants with clear incentives. This contrasts sharply with the initial ambition of overhauling entire sectors overnight. In addition, blockchain can be considered somewhat of a luxury technology, in the sense that it necessitates a robust digital infrastructure as a prerequisite. This requirement means that its adoption is more feasible for organisations that have already established a strong technological foundation. 

Consequently, its effective implementation is often seen in sectors or companies where such infrastructures are a given, rather than in those still grappling with digital transformation challenges.”

Aware’s van der Veen agrees that while the technology is making “significant strides and continues to hold “immense promise”, “it’s fair to say that its adoption is still in the relatively early stages within apparel and footwear.”

Overcoming barriers to adoption

He believes the slow uptake is partly due to the industry’s inherent complexity and the need for collaboration among stakeholders to fully harness its potential.

The main hurdles to adoption include the start-up costs for technology integration, the need for industry-wide standards, and ensuring data privacy and security.

van der Veen says Aware’s seamless and user-friendly blockchain solution is tailored to the fashion industry’s unique needs: “Our goal is to make adoption as straightforward as possible, providing the tools and resources brands need to embark on their blockchain journey.”

Nilsson references Aura Blockchain Consortium, a non-profit organisation offering blockchain-agnostic solutions exclusively to luxury brands, which he says moved its blockchain development in-house, creating a bespoke solution tailored to their specific needs and contexts thus circumventing some of the coordination and standardisation challenges that come with industry-wide collaborations.

But even this, he notes, while providing more control and customisation, is not easy, due to the often fragmented nature and varying levels of digital readiness seen across the fashion industry.

There’s also the cost barrier, particularly true of smaller companies with limited digital infrastructure.

“Blockchain requires a robust technological foundation, which can be a significant investment. Additionally, the intricacy of integrating blockchain into existing systems poses challenges.”

It’s often simpler and more pragmatic for fashion brands to start small with blockchain initiatives and then build up from there, Nilsson says, such as implementing blockchain to trace a single product line or a specific aspect of the supply chain, for example, verifying the ethical sourcing of materials.

“Once this system is established and proves successful, the brand can then expand its blockchain application to include other product lines or additional supply chain elements. This step-by-step approach allows for learning, adaptation, and gradual integration, making the transition to blockchain technology more feasible, especially for companies that may not have extensive digital resources at the outset.”

Though it remains a somewhat immature space within fashion, industry experts are hopeful of its growth soon.

“In essence, while the technology is still in its relative infancy, the approach has matured. The sector is moving away from broad, sweeping transformations towards more practical, well-defined projects. This evolution suggests a more sustainable and impactful future for blockchain in the apparel and textiles industry,” says Nilsson.

Woodford agrees, adding: “Adopting blockchain technology demonstrates a commitment to innovation. Companies that do this collaboratively will spearhead new business models, partnerships and innovations which will benefit the entire fashion eco-system.”