A new report from Source Fashion has revealed sustainability is moving lower down the list of priorities for companies and as the effects of the Covid pandemic wear off, businesses appear less willing to shift their apparel supply chains out of China and wider Asia.

The State of Sourcing Report by Source Fashion aims to explore what is happening in terms of apparel sourcing and sustainability trends over the next 12-18 months.

It stems from a survey of around 200 UK retailers, both large and small to establish whether retailers are moving forward on sustainability and what some of the barriers they face might be.

Key findings in the State of Sourcing report

• 74% of UK retailers source internationally
• 70% of UK retailers that aren’t sourcing internationally don’t plan to change this in the near term
• 49% of UK retailers source from China; 42% from the UK; 37% from India and 33% from Western Europe
• On sustainability, 78% of UK retailers feel they’ve moved forward in terms of sustainability compared with a year ago
• 31% have a dedicated sustainability department with a a head of sustainability setting the policy and targets
• 31% say their sustainability strategy is managed as a responsibility of another team.

But there are barriers to sustainability with 52% of apparel retailers saying they don’t feel the pressure from consumers to move toward operating more sustainably; 42% said the process is too taxing and costly for a complete transformation. While 35% said the business had other priorities at the time.

On a call to discuss the findings, Suzanne Ellingham, director of Source Events noted sustainability is “moving down the priority list for apparel firms,” adding it was “concerning”.

Meanwhile, Linda Pimmeshofer, a retail advisor believed much of the hesitancy around a true shift to sustainability came from the operations side “not feeling empowered” to take decisions on sustainability.

She added it was difficult for them to pitch ideas on sustainability because, unlike financial targets like revenue, margin and profit, sustainability is difficult to measure.

While Jack Stratten, head of trends at Insider Trends, said businesses are driven to do what consumers “want them to do”.

“Sustainability was such a buzz five years ago. Now not so much – it doesn’t dominate news headlines as much. So it is unsurprising that businesses are deprioritising.”

The greenwashing challenge

There is also the growing issue of greenwashing and the fear around being guilty of it which presents as a barrier, said Stratten.

“It doesn’t have to be these massive claims either, it can be quite low level. A lot of retailers are doing it with reasonably good intentions and are not trying to be cynical or trick their consumers,” he said.

But Ellington warned that until now legislation on greenwashing has allowed an investigation following a tip-off.

“As of March that all changes. If the CME sees consumers are being misled or untrue claims are being made on sustainability, they will fine you without any investigation. And that applies to anyone doing business in the UK. They can be fined up to 10% of revenues. The hope is that this eventually builds trust with consumers that businesses making claims are being truthful and accurate.”

The problem she says, is this is creating an element of fear within businesses doing “some really fantastic things”.

They won’t talk about them at all as they are afraid if they showcase one aspect of the business, fingers will be pointed at other parts.”

Sustainability versus profitability

Ellingham also noted that the primary objective of any business is to be profitable and asked how that can be balanced alongside being sustainable.

“We work on margins and profit but are we being short-sighted? As much as half of what we make never even makes it to the store. We are constantly racing to meet margin pressures when the main focus should be around overproduction.”

Pimmeshofer agreed: “On the one hand we talk about sustainable materials and fibre and production but yes the truth is if we limited our overproduction, we’d likely be in much better shape.”

The three discussed how integrating technology is key to providing visibility into supply chains and producing in accordance to demand. But Stratten noted there is a disparity between technology integration and sustainability uptake within apparel businesses.

“Companies find it really hard to get investment for a sustainability project. But if they say they want the investment for technology, there are about 20 companies lined up and ready. For retail sometimes it is the case where sustainability is concerned, finding tech that can be part of the conversation. Bring tech in the room to attract funding and investment.”

Meanwhile, Ellingham pointed out that many apparel brands and retailers are integrating tech such as AI, digitisation and sustainable methods, but there is a lack of collaboration and “talking” about both the successes and challenges of these.

“If people actually talked about their experiences, there would probably be far fewer problems. Some companies are doing fantastic things but not sharing them. Companies need to collaborate truly rather than for the PR win. And if legislation is not there yet to demand it, then, really, businesses should be leading the way.”

Sourcing destinations and sustainability

Ellingham pointed out that for some time after the pandemic, apparel brands and retailers were doubling down on plans to shift sourcing out of China after hiccups to the supply chain including factory closures and port delays, left them exposed.

According to the latest survey, that no longer appears to be front of mind.

“Many are still sourcing from Asia and few are looking to change that. We heard a lot of talk around derisking and nearshoring to boost speed to market and lower carbon footprint among other things, but the reality is while some has shifted, retail is primarily profit-driven with pressure to deliver on margins and so there’s unlikely to be a shift from Asia if there’s currently no issues there.”

Interestingly, the results indicate that price isn’t the primary decision maker when it comes to sourcing decisions.

35% of large retailers say they choose newness and exploration of new product categories when it comes to sourcing from a specific region and 29% say they are driven by price, although price was a factor for 52% of smaller companies.

32% of larger retailers say they choose to source from specific regions with the intention of derisking sourcing operations while 19% say they are influenced by a desire for more sustainable and carbon-neutral options. This changes to 30% for smaller companies.

Stratten agreed he was seeing the same trends adding that while there was talk around shifting to Europe, many have reverted to the status quo.

“Those conversations flattened quite quickly. And the findings from the report would suggest that it is because it is much harder to shift large parts of the supply chain than was once anticipated.”

He noted that many are aware of the sustainability wins and that nearshoring would create more resilient supply chains.

“But it comes down to the reality of how hard it is to do it in practice. For many, it’s just easier to keep it as it is and not rock the boat.” 

By Just Style