2014 Fashion Brands Sustainable Procurement Survey

2014 Fashion Brands Sustainable Procurement Survey O ctober 2 0 1 4

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Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey Survey design and analysis by the Sustainability-lab Survey Team.

Marco Ricchetti (team leader) Aurora Magni Fabio Guenza Alberto Saccavini

Sustainability-lab.net is a project by Blumine srl

New business models for the fashion and design industry, a new vision engaging sustainability, new ideas, languages and tools. Sustainability-lab.net is a digital platform and a social medium designed by Blumine srl to enable the fashion business community to participate in the development of the culture of sustainability. http://sustainability-lab.net Blumine srl is a consulting firm based in Milano (Italy) providing advice to leading textile, fashion and design businesses for the integration of the culture for sustainability in companies’ vision and strategy. Blumine expertise ranges from stakeholder management, economics, market research, production organization, communication and analysis of consumers culture. http://www.blumine.it contact@blumine.it

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October 2014

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  We understand the decision to change our way of life is a challenging step and are committed to make everyone feel safe and to strive for the elimination of all toxic chemicals from our processes.

Since "fashion is too good to have to do with dangerous and bad practices".

In 2013 and 2014 seven italian textile companies adopted the DETOX

Emanuele Bertoli, CEO, Berbrand srl.

commitment solution to free the fashion supply

 In our view, a Made in Italy fabric is more than just beautiful, it is the outcome of a production processes respectful of the environment and people.

We endorse all the efforts that can stimulate the entire supply chain to make fashion more sustainable.

chain from hazardous chemicals before 2020

Mario Riva, CEO, Besani srl.



With the aim to spread awareness and promote more action in the textile

Elisabetta Canepa, President, Canepa spa.

 Denim is perhaps the most widely used fabric in the world. Denim manufacturers therefore have a greater responsibility towards the environment and people.

We take very seriously the challenge of removing hazardous chemicals from jeans.

supply chain the seven companies supported the Sustainability-lab

Gigi Caccia, Chairman, Italdenim spa.

2014 Fashion Brands Sustainable Procurement

For over three years our firm has been concretely engaged in leveraging its industrial process innovation to make fashion more sustainable. With our ecological patents we have changed the way fabrics and garments are produced and in doing so have revolutionized the way the textile and clothing industry works. The results include between 50% and 90% savings in water and energy consumption, a significant reduction in CO2 and the total elimination of pollutants from the production process.

 Miroglio Group has invested in next-generation environmentally friendly printing technologies, achieving dramatic cuts in water and energy use and CO2 emissions. We believe in a serious and responsible commitment to further advances in the sustainability journey.

Survey

Giuseppe Miroglio, Chairman, Miroglio Group



The seven companies: Brebrand

Giovanni Di Gristina, Marketing and Development Director, Tessitura Attilio Imperiali spa.

Besani Canepa Italdenim Miroglio Textile Tessitura A.Imperiali Zip GFD

Since the XIX century, four generations of our family have been producing top quality fabrics. We invest in new technology that reduce the environmental impact because it is the best way to secure the our children future.

 Our culture rests on the belief that the respect for the environment improves the product. With this vision we developed cutting-edge processes in environmental protection since the '90s. Our commitment is for a new way of dressing tailored at human scale.

Claudio Goffredo, CEO, Zip GFD spa.

Table of Contents Executive Summary......................................................................... 6 Foreword ......................................................................................... 7 Brands' sustainable procurement impact on suppliers ..................... 9 Mapping sustainable procurement management models ............... 11 The dimensions of sustainability brands focus on .......................... 18 The value of certification labels ..................................................... 20 Conclusions ................................................................................... 23 Methodological Notes .................................................................... 25

Charts list Chart 1 Brands CSP management features .................................. 14 Chart 2 The attributes map of CSP management styles ............... 14 Chart 3 CSP management styles by brands market focus ............ 17 Chart 4 CSP management styles by brands size .......................... 17 Chart 5 Sustainability attributes ranked by the 18 brands ............. 19 Chart 6 Main certification labels ranked by the 18 brands ............. 19

Acronyms CSP

Company Sustainable Procurement

CSR

Corporate Social Responsibility

CO2

Carbon Dioxide

CPSIA

Consumer Product Safety Improvement Act

DETOX

Greenpeace Detox Solution Commitment

MCA

Multiple Correspondence Analysis

NGO

Non Governmental Organization

SusReF

Sustainability-lab Reporting Framework

Executive Summary The Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey involved 18 European and American brands accounting for over â‚Ź50 billion in sales. The Survey findings fall into four areas addressed in the main four chapters of the report:

Brands' sustainable procurement impact on suppliers The 18 brands commitment to Company Sustainable Procurement (CSP) has a huge impact on suppliers, all but one brand has included specific sustainability compliance requirements in purchasing contracts, a large share of brands’ purchases of fabrics and accessories is subject to formal sustainability assessment and the adoption of preferred suppliers Green Lists based on sustainability criteria is widespread.

Organizational models for sustainable procurement In this field, the one size fits all concept does not hold true. A cluster of larger brands was found to follow a formalized management style, with the CSR department acting as watchdog for CSP. These brands established a Green List of preferred suppliers and assess a high share of fabrics and accessories purchases.

Other brands historically engaged in sustainability, especially in the luxury segment have adopted a more informal approach, without a clear role for the CSR function.

Finally, a third cluster is still in a phase of organizational evolution with a mix of roles for the CSR department and expectations for future adoption of formalized sustainability evaluation tools.

The dimensions of sustainability brands are focusing on Elimination of hazardous chemicals, traceability and ban of cruel practices towards animals are the most considered dimensions. These findings witness a higher level of maturity, beyond what we can define phase one of sustainability management almost exclusively focused on CO2 emissions cuts. The ranking of sustainability attributes reveals a close connection with some of the influential high-profile campaigns launched in recent years by environmental, workers' rights advocacy and animal welfare NGOs. Citizens through NGOs more than consumers through their wallets appear to be the driving force pulling fashion brands into the sustainability journey.

The value of certification labels CSR managers value certification labels, especially when they compare best suppliers.

Just a few of them consider certifications mandatory though. Brands with established CSP place less value on certifications. Most valued labels are Oeko-Tex100 / 100plus, GOTS, SA8000 and Bluesign.

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Foreword The movement towards a more sustainable fashion has started. The process of change proceeds quickly and in unexpected directions: from industry to consumers more than the other way round, from consumers to industry. Supply chain relationships are changing more rapidly than consumer purchasing behavior and brands’ supply chain managers and suppliers face the challenge of sustainability even before marketing departments.

As soon as fashion brands commit to integrate sustainability into brand identity and marketing strategies, supply chain management issues enter into the game. As a matter of fact, company’s most significant impacts are often found not in its own operations, but in the social and environmental impacts of suppliers. Improving the sustainability performance along the supply chain becomes a key aspect of sustainability management.

Both the risk of negative impacts on brands’ reputation due to NGOs campaigns and the need to anticipate consumers' emerging desires for a cleaner and fairer world play a role in fostering brands activism to make supply chains more sustainable.

The Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey focuses on some key issues: -

Has the impact of brands sustainable procurement policies become substantial on fabrics and accessories suppliers?

Have sustainable sourcing policies found their way into fashion companies organization? And, if this is the case, what organizational models prevail?

What dimensions of sustainability fashion brands are focusing on?

Are certification labels valued by fashion brands to overcome information asymmetry about suppliers’ sustainability management and performance?

The Survey involved CSR manager from 18 major European and American brands accounting for over €50 billion in sales. Headquarters of the 18 brands are located in Germany (5 brands), Italy (5) Sweden (1), UK (4) and US (3). Two selection criteria have been considered: a) brands are engaged in sustainability and b) are recognized as leaders in their respective market segments.

We want to thank the managers of the 18 brands who took part in this survey: Armani Group, Cascade Designs, Mango, Marks & Spencer, Monnalisa, Oberalp Group (Salewa, Speedo), Puma, Salvatore Ferragamo, Vivienne Westwood, and the others who asked not to be disclosed in the public report. The European Outdoor Group provided an invaluable support engaging the associated brands in the participation to the Survey.

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A definition of Company Sustainable Procurement When brands buy goods and services, they take into account conventional attributes of products such as price, quality, delivery deadlines and terms of payment. With Company Sustainable Procurement (CSP), brands integrate goods and services impacts on the environment and social relationships in their purchasing guidelines, at local, regional and global levels.

According to this principle and drawing from the the BuySmart Network (formerly known as Sustainability Purchasing Network) definition of sustainable purchasing, CSP is defined as: “a management process used to acquire goods and services (“products”) in a way that gives preference to suppliers that generate positive social and environmental outcomes, and that integrates sustainability considerations into product selection so that negative impacts on society and the environment are minimized throughout the full life cycle of the product”. […In practical terms…] “Sustainability purchasing entails looking at what products are made of, where they have come from, who has made them, how they will be ultimately disposed – even considering whether the purchase needs to be made at all.”

Sustainability Purchasing Network, “Sustainability Purchasing Trends and Drivers”, 2008, page 8

From the buyers’ standpoint, CSP is a high profile matter for businesses today.

Understanding environmental and social impacts in the supply chain is critical and can help to save money, reduce waste, improve competitiveness and build a business’ reputation, in some contexts it is also a legal requirement.

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Brands' sustainable procurement impact on suppliers The Survey explores how brands deliver CSP policies to suppliers and the relevant potential impact. Potential impact differs from actual impact. Buyers’ CSP practices can influence the suppliers’ businesses but the impact will change from potential to actual only if and when either buying prices acknowledge a higher value to sustainability attributes or sustainable suppliers market shares increase against competitors not committed to sustainability. Indeed, the evaluation of the actual impact is a much more complex exercise.

The analysis of the potential impact will focus on four indicators: a) the share of items subject to sustainability assessment in the overall purchases; b) the evaluation framework to assess sustainability of purchases; c) the practice of short-listing green suppliers; d) the enforcement of sustainability features in supply contracts.

Assessing purchases for sustainability This indicator is a proxy for the potential market size of sustainable fabric and accessories. A larger share provides suppliers with more opportunities to sell sustainable items and can result in a market share increase against non-sustainability committed suppliers.

Under this respect, the Survey revealed the potential market size is huge: almost half of the brands - 8 out of 18 - claimed over 50% of their purchases are subject to sustainability assessment The number of brands rises to 12 if the considered threshold of purchases subject to sustainability assessment is lowered to 25% of the total (chart 1).

Measuring sustainability A real market can develop only when information about buyers' preferences flows clearly to suppliers and suppliers’ practices are subject to measurement and evaluation in relation to buyers’ sustainable procurement objectives. The establishment of a formal assessment framework by brands has also the very practical consequence to have the sourcing department delivering coordinate and consistent communications to suppliers.

This is critical if a number of sourcing staff use to communicate with suppliers, e.g. if the sourcing department is organized by area or Country or by specific product.

The Survey found that only five out of 18 brands assess sustainability on formal criteria and five other brands adopt unstructured and non-formal assessment criteria. Further four brands plan to introduce formal assessment criteria in the near future while the remaining four have currently neither formal sustainability assessment nor plans to adopt some in the near future.

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Short-listing green suppliers According to the Chartered Institute of Purchasing & Supply (CIPS): “the buyer can consider introducing supplier awards to recognize progress in aspects of social and environmental performance, for example through preferred supplier status or similar mechanisms which direct orders towards better-performing suppliers. In some contexts the owners or managers of suppliers are under peer pressure from other managers not to improve conditions. In these cases it becomes even more crucial that the buyer supports leadership in good social and environmental performance at production sites.”

Guide to Ethical and Sustainable Procurement (2013) As part of supply chain management processes, suppliers can be awarded with different status levels according to their performance and ability to meet or exceed customer requirements. This status can then be used as a help for informed purchasing decisions and to encourage continuous improvements. For companies managing a large supplier base this can present challenges that depend on the way in which suppliers are assessed. A prerequisite to the establishment of a Green List of preferred suppliers is a trusted assessment system either formal or informal.

About half of the brands - 8 out of 18 including four large companies - claims to shortlist suppliers committed to sustainability via a preferred suppliers Green List (chart 3).

Enforcing sustainability aspects in supply contracts Contracts set the main aspects of business transactions such as price, quality, delivery deadlines and terms of payment. The same holds true for sustainability related aspects that brands can enforce in contracts.

Almost all the 18 brands, with just one exception, claim to enforce compliance with specific sustainability parameters in supply contracts. The favorite framework, reported by almost all of the 17 enforcing brands, is to include terms and clauses in contracts on the basis of brands’ own schemes. The content of brands’ own schemes in turn uses to be based - as some of the respondent acknowledge - on some variant or interpretation of public standard such as the Greenpeace DETOX, the California's Proposition 65, the US CPSIA or the Chinese GB 18401-2010 - GB 20400-2006 standards.

According to anecdotal evidence and grass root practice, suppliers suffer the consequences of the plethora of different contractual clauses and terms each brand enforces according to its own individual scheme and call for some unified standard.

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Mapping sustainable procurement management models CSP has to be initiated, organized and integrated in companies’ management practices. It does not happen on its own accord, but requires involvement and contributions of many actors and departments. The integration of sustainability principles into procurement practices and supply chain management can - and actually does - proceed according to a range of different paths and models, it is not a singleminded pass-or-fail process, it is rather a progressive journey.

The analysis of the interaction between the CSR and sourcing departments in sustainable procurement practices combined with the factors addressed in the previous section makes possible a mapping of the CSP management models adopted by the 18 brands.

The CSR department role Literature about CSR role and scope highlights the existence of two separate dimensions1: an internal dimension, that focuses inside the organization and on issues such as what can be done internally to improve the well-being of workforce, safety and productivity; b. an external dimension, that promotes the pursuit of positive impacts on society and the natural environment from corporate activities and operations. a.

In CSP management the distinction becomes blurred. While it is clearly driven by the relationship with an external stakeholder (the suppliers) it involves critical changes in the internal organization of the company and influences managers productivity. The role for the CSR department in the interaction with the sourcing department is thus a key factor. Five possible alternative CSR department interaction roles are considered in the Survey: a. b. c. d. e.

CSR has no role or does not exist in the company; CSR is consulted for advice, with no decision-making power; CSR sets the rules, selection of suppliers is however decided by sourcing managers; CSR is a watchdog that sets the rules and checks the rules are respected by sourcing managers; CSR is fully integrated into purchasing activity.

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KPMG, “Corporate Social Responsibility is more than just donating money� 2011. The internal vs. external approach to CSR has raised many criticisms among both scholars and practitioners on different grounds, including the real division of the two dimensions.

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Rule setting with no decision power is the first most widespread role among the 18 brands, scoring eight brands adopting this role, followed by the watchdog role scoring four brands. Two brands have no CSR department, in two cases CSR just provide advice and two brands went as far as to fully integrating CSR in purchasing activity.

CSP management styles The Survey findings confirmed there is no one size fits all management style in CSP, even within a panel including only truly sustainability committed brands. The analysis of CSP management styles is based on the answer to four questions from the questionnaire: V1 - Which share of Your purchasing of fabrics and accessories goes through a formal assessment of sustainable attributes?

V2 - Is there an internal system to grade or assess the “sustainability level” of your products?

V3 - Does Your company have a suppliers "Green List" or "A list" based on sustainability attributes?

V4 - Which role the CSR department plays in the selection of suppliers?

The four categorical variables - recoded into ordinal scale to reflect the progression from a development stage to a structured and integrated style of CSP – were input to a MCA (Multiple Correspondence Analysis) model to find correspondences among the variables and similarities among companies.

A first output of the MCA model is a biplot showing a map of correspondences among variables attributes (Chart 2). The map has two orthogonal dimension represented by axis x (horizontal) and axis y (vertical) that form 4 regions (1 down-left, 2 up-left, 3 up-right, 4 down-right). The horizontal axis can be rendered as a measure of how much CSP is formally structured in companies, the best discriminating variable on this axis are V2 (formal system of assessment) and V3 (green list of suppliers). Position on the vertical axis is mainly influenced by V4 (the role of CSR). Finally V1 (share of purchasing assessed for sustainability) tend to progress when moving from down-left to up-right direction.

The four regions map is shown in Chart 2. Each region in the map can be seen as representing a CSP management style, according to the interpretation of the two axes explained above. Just three out of the four regions actually are relevant to the analysis as Region 4 down-right is void. Clockwise the regions and the CSP management styles can be rendered as follows: Region 1 – down-left: includes attributes that are common to brands with lower CSP formalization and a weaker role for CSR management. Brands belonging to this region

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formally assess no more than 25% of purchases for sustainability attributes (in some cases less than 10%) and have no formal or structured assessment system (some claim to have an informal system), CSR managers, when existent in the company, have just a consulting role in defining procurement policies, with no decision-making power. Brands in this region did not establish a Green List of preferred sustainable suppliers, but there are plans to introduce the Green List in the near future.

Region 2 – up-left: includes attributes that are common to brands with lower CSP formalization and a stronger role for CSR department. Brands belonging to this region formally assess between 25% and 50% of purchases for sustainability attributes. The evaluation system is either informal or non-existent with plans to establish one in the near future. These brands claim either to have the CSR function fully integrated in purchasing activity (i.e. the purchasing managers have the know-how and the commitment to select sustainable suppliers) or that sustainable purchasing criteria set by the CSR department are freely adopted by purchasing managers. No Green List of preferred sustainable suppliers is established and there are no plans to establish one in the near future.

Region 3 – up-right, includes attributes that are common to brands with higher CSP formalization and a stronger role for CSR department. Brands belonging to this region formally assess more than 50% of purchases for sustainability attributes (in some cases near to 100%). The brands formally established an evaluation system as well as a Green List. The CSR department is acting as a watchdog for the actual implementation of sustainable procurement criteria.

Region 4 – down-right, includes attributes that are common to brands with higher CSP formalization and a weaker role for CSR department. This region is void.

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Chart 1 Brands CSP management features

Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey

Chart 2 The attributes map of CSP management styles

CSR FULLY INTEGRATED

25-50% PURCHASES

WEAKER ROLE OF CSR DEPT +LOWER SHARE OF PURCHASES EVALUATED.

STRONGER ROLE OF CSR DEPT + HIGHER SHARE OF PURCHASES EVALUATED

FUTURE EVAL SYST.

Region 2

Region 3

NO GREENLIST >75% PURCHASES CSR SET RULES

GREENLIST CSR WATCHDOG FORMAL EVAL SYST. INFORMAL EVAL SYST.

50-75% PURCHASES

NO EVAL SYST. FUTURE GREENLIST

Region 1

Region 4

<25% PURCHASES NO CSR ROLE CSR CONSULTED

LESS FORMALLY STRUCTURED +LOWER SHARE OF PURCHASES EVALUATED

MORE FORMALLY STRUCTURED + HIGHER SHARE OF PURCHASES EVALUATED

Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey

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The CSP management styles of the18 brands A second output of the MCA model is a map showing the position of brands (Chart 3 and Chart 4) according to the same coordinates used in the variables attributes map.

The 18 brands position on the map can be fuzzy, especially when they are positioned near Regions boundaries, a case occurring when a brand shares attributes belonging to two different regions.

As an example of the boundaries fuzziness, the MASS (mass market) company positioned on the border between Region 1 and Region 2 in Chart 3 can be considered. The low share of purchases evaluated for sustainability and the consulting role of CSR department draw the brand towards Region 1. The “Green List” and the “informal evaluation system” factors on the other hand are more similar to brands belonging to Region 2. When a brand is very close to the regions boundaries, the inclusion in either of the regions must be evaluated with caution. With the above caveat, seven brands are included in Region 1, five in Region 2 and six in Region 3.

Looking at brands market focus (Chart 3)2 some difference in CSP management style can be detected.

The CSR role tend to be weaker in luxury brands, where the style office, and possibly the communication department, are very likely to have a dominant role that necessarily compress the CSRs’. As a general trend, data show that as a luxury brand takes a more structured approach the role of CSR becomes stronger.

Outdoor brands are the dominant component of Region 2 - four out of five brands in this region focus on outdoor market - and show a less structured approach, even though CSR has a significant role. Performance attributes are a key factor for most item sold by outdoor brands, thus the share of purchases evaluated for sustainability tend to be lower, possibly sustainability attributes have to be matched with functional performances of fabrics. Green Lists are less common.

Mass market brands strong presence in Region 3 - four out of six brands in this region focus on the mass market - can be also relevant to a size factor, as most of mass market brands are also large size companies.

The analysis by companies’ size (Chart evidence.

4),3 provides some further clear-cut

Smaller companies concentrate in Region 1 because of the very weak role of CSR department. Indeed a separate CSR department does not exist in these companies as 2

Market focus was evaluated by the researchers. Note that one of the outdoor brands actually sells technical products to other brands.

3 Companies size has been evaluated on the basis of sales. Companies with sales exceeding €1bln are classified as large, and companies below €60mln as small.

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it can exceed small companies organizational structure. The two exceptions of small companies located in Region 2 and 3 are not real exception in fact. Both companies do not have a CSR department either, the former claims the CSR function is fully embedded in procurement managers activities and duties, the latter is drawn in region 3 by the very high share of purchases submitted to sustainability evaluation.

All of the larger companies do have a CSR department. The two large companies on the boundary with region 1 are drawn downside by the relatively lower amount of purchases undergoing sustainability evaluation. None but one of the medium size companies has adopted a formal system of sustainability evaluation.

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Chart 3 CSP management styles by brands market focus OUTDOOR

Region 2

STRONGER ROLE OF CSR DEPT + HIGHER SHARE OF PURCHASES EVALUATED

LUXURY

Region 3 MASS

OUTDOOR OUTDOOR

OUTDOOR

LUXURY

OUTDOOR MASS

LUXURY

MASS

MASS

WEAKER ROLE OF CSR DEPT+ LOWER SHARE OF PURCHASES EVALUATED.

MASS MASS

LUXURY

OUTDOOR

LUXURY

Region 1

Region 4

OUTDOOR

LESS FORMALLY STRUCTURED + LOWER SHARE OF PURCHASES EVALUATED

MORE FORMALLY STRUCTURED + HIGHER SHARE OF PURCHASES EVALUATED

Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey

Chart 4 CSP management styles by brands size

STRONGER ROLE OF CSR DEPT + HIGHER SHARE OF PURCHASES EVALUATED

SMALL

Region 2

LARGE

Region 3 LARGE

MEDIUM MEDIUM

LARGE

LARGE

MEDIUM LARGE

LARGE

SMALL

LARGE

WEAKER ROLE OF CSR DEPT+ LOWER SHARE OF PURCHASES EVALUATED.

LARGE SMALL

MEDIUM

SMALL

SMALL

Region 1

Region 4

MEDIUM

LESS FORMALLY STRUCTURED + LOWER SHARE OF PURCHASES EVALUATED

MORE FORMALLY STRUCTURED + HIGHER SHARE OF PURCHASES EVALUATED

Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey

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The dimensions of sustainability brands focus on Sustainability is an umbrella concept for an array of attributes of company-wide behavior and product features. Environmental friendly management, energy and water savings, safety, diversity, human rights and quality of life, stakeholders engagement and philanthropic activities are all included in the definition of sustainability. On the other hand, purchasing managers are looking for specific sustainability attributes of fabrics and accessories, more than for sustainable items in general. Brands sustainability requirements are specific and detailed, it is crucial for suppliers to clearly understand what specific attributes customers are looking for in a specific timeframe.

The Sustainability-lab Reporting Framework (SusReF)4 has been used to break down sustainability attributes. 13 specific attributes drawn from the SusRef were submitted to the 18 brands and graded in a four grades scale: "not important", "interesting", "makes a difference in the choice of supplier", "mandatory feature". The answers "makes a difference" and "mandatory feature" have been considered as an indicator of special interest regarding the attributes that are ranked accordingly.

The Free from Hazardous Chemicals attribute ranked first in both the “mandatory” (14 out of 18 brands take it as mandatory) and total interest ranks. It is very likely that the dominant interest in this attribute reflects the strong impact of the Greenpeace DETOX campaign started in 2011, even greater when considering that just three out of the 18 brands participating in the Survey have signed the DETOX solution commitment.

Traceability and Cruelty Free/Biodiversity Friendly ranked second ex-aequo. Nine out of 18 respondents identified both attributes as mandatory, the two factors make the difference in the supplier selection for six further brands. The interest in Traceability reflects the need for more transparency in a context of globalized supply chains that can trigger unsustainable practices, unintended and even unknown by brands. The interest in the Cruelty Free / Biodiversity Friendly attribute is evenly distributed among all brands disregarding market focus on luxury, mass or outdoor markets and it is relevant to the growing consumers sensitivity about the nature in all its forms. It is also likely that the interest has been amplified by the high profile animal rights campaigns from NGOs including the Angora Hurts Rabbits by PETA. Fair trade ranked fourth. Note that fair trade is not intended here as linked to the Fair Trade International label, but as a general compliance to the principle of responsible supply chain management. Interest in this factor is certainly not foreign to the campaigns that followed the Rana Plaza tragedy in 2013.

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The Sustainability-lab Reporting Framework has been developed since 2012 and experimented in four editions of the Sustainable Fabrics and Accessories’ Catalogue published in cooperation with the fabrics and accessories’ MilanoUnica trade exhibition. See the Glossary of sustainability attributes included in the Catalogue available online at http://bit.ly/1d4hxMY [last accessed 21-10.2014].

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Chart 5 Sustainability attributes ranked by the 18 brands

Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey

Chart 6 Main certification labels ranked by the 18 brands

Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey

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The value of certification labels “Despite their importance, suppliers’ management practices remain quite difficult for buyers to observe, which presents an information asymmetry problem” M.Toffel, Resolving Information Asymmetries in Markets: The Role of Certified Management Programs, HBR, 2006

Compliance to independent and voluntary certification standards and labels are a widespread and valued tool among CSP managers to evaluate suppliers, their processes, products or even the supply chain. In most cases, independent auditing bodies accredited with the label issuing organization are in charge of the certification and labels award.

In the well known Zadek’s Five stages model5 of the path to corporate sustainability, Compliance comes second, just after the Deny Responsibility defensive stage (Zadek 2004). Compliance monitoring has been the first answer to the need for a sustainable supply chain management strategy and still is the most widespread approach in the fashion business. Compliance monitoring definitely helped in illuminating social issues, - working conditions and violations - and environmental issues - hazardous chemicals discharge, forest and biodiversity destruction - but is open to pitfalls and spurred unintended consequences.

A first unintended consequence is that the number of certification labels has been growing rapidly in the fashion business as well as in other industries, and has led to what Jucker calls the labyrinth of labels and certifications6. The labyrinth makes the facts behind the certification labels obscure to consumers and the compliance a mission (almost) impossible for suppliers.

Secondly, some recent failure of certification compliance systems has also drawn criticism in terms of both principles and practical effectiveness7. A striking demonstration came in 2012 from Pakistan when the fire at the garment maker Ali Enterprises caused 250 deaths because of improper fire safety measures, just one month after a SA8000 certificate was awarded to the company by a third party audit body. Duplicative and burdensome audits, tend to generate bribery and phony records, and a pass/fail mentality that drives problems underground especially in Countries with

5

Zadek, S., The Path to Corporate Responsibility. Harvard Business Review, 82(12), pp.125– 132, 2004 6 Jucker, L., 2012. The labyrinth of labels and certificates. In The Beautiful and the Good. A view from Italy on Sustainable Fashion. Venezia: Marsilio Editori, pp. 145–158.

7 See e.g. Labowitz, S. & Baumann-Pauly, Business as Usual Is Not an Option: Supply Chains & Sourcing after Rana Plaza. New York University, Stern Center for Business and Human Rights, 2014

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a weak legal framework8. These pitfalls question the effectiveness of audit bodies that face the challenges of combating bribery and difficulties in auditing unreliable information and data. The pass/fail compliance monitoring approach can become an incentive in low-cost-weak-legal-framework Countries to drive problems underground more than to develop management systems that sustain compliance and encourage improvement over time.

Third, suppliers servicing many brands face a plethora of different individual certification standards simultaneously. Demonstrating compliance to a growing number of different standards, adds to costs (e.g. chemical tests, formal documents etc.) and even to staffing needs that can be an unbearable price to entry into a sustainable supply chain for small enterprises.

The Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey provides the opportunity to measure the confidence in the system of certification labels. A first general and filter question was asked to the 18 participating brands: Do You value certification labels awarded to suppliers?

An affirmative answer to the question has come from 16 out of the 18 brands, demonstrating that notwithstanding pitfalls and criticisms, compliance to certification standards and labels remains a key factor in brands CSP. It is nonetheless interesting to observe that one of two brands that have responded negatively is considered one of the world most advanced in terms of sustainability management.

The 16 brands responding affirmatively to the filter question were asked to detail which certification labels they value most and to grade them in a four grades scale. As in the sustainability attributes section of the questionnaire, the grading scale includes: "not important", "interesting", "makes a difference in the choice of supplier ", "mandatory feature."

Just four out of the 16 brands that declared to value certification consider as mandatory one or more certifications labels: three are in the outdoor market (of which one sells technical products to other brands), and one in luxury, the latter is listed on the stock market, a feature that can explain the need for mandatory compliance certifications.

The role of certification emerges as crucial when brands compare suppliers: 15 brands out of 16 classified one or more certification labels as making a difference when selecting a supplier.

One of the biggest global sportswear brands, a pioneer and a global benchmark in the field of sustainability, declared to give value to the certification but did not classify any of the certifications as mandatory or â&#x20AC;&#x153;making the differenceâ&#x20AC;? in the choice of supplier.

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Sisco, C., 2012. Supply Chain Sustainability: Four Lessons From the Past and Four Ideas for the Futuret. Available at: http://www.bsr.org/en/our-insights/bsr-insight-article/supply-chainsustainability-four-lessons-from-the-past-and-four-ideas-for-t [Accessed June 11, 2014]

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This anecdotal evidence leaves perhaps unanswered the question about what can be the expected future developments in the certification labels labyrinth.

Next step in the analysis has been to rank main certification labels by interest. The procedure again mirrored the approach followed in ranking the sustainability attributes: the answers “mandatory” and "makes a difference" have been considered as an indicator of special interest regarding the labels that are ranked accordingly (Chart 6).

Oeko-Tex100/100plus and GOTS ranked first, both mentioned by 10 brands. OekoTex100/100plus also gets two mentions as a mandatory label by two outdoor brands (of which one sells technical products to other brands), GOTS also gets a mention as mandatory by an outdoor brand.

SA8000 and Bluesign rank third ex-aequo, with 9 mentions including one as mandatory. The “mandatory” mention was by a luxury brand for SA8000 and by an outdoor brand for Blusign.

Other labels that received at least one mention as mandatory are ISO14000, Global Recycled Standard, and Ecolabel, all by luxury brands, and Fair Wear Foundation, by an outdoor brand.

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Conclusions Brands' sustainable sourcing impact on suppliers The brands commitment to CSP has a substantial impact on suppliers. The survey revealed a huge potential market size for sustainable fabrics and accessories. Almost all the 18 brands, with just one exception, claim to enforce compliance with specific sustainability parameters in supply contracts. Almost half of the brands claimed over 50% of their purchase are subject to sustainability assessment and claims to short-list preferred sustainable suppliers via a Green List.

According to anecdotal evidence and grass root practice, suppliers suffer the consequences of the plethora of contractual clause and terms each brand enforces according own individual schemes and call for some unified standard.

Organizational management

models

of

sustainable

procurement

In this field, the one size fits all concept does not hold true. Rule setting with no decision power is the first most widespread role for the CSR department among the 18 brands followed by the watchdog role. Two brands have no CSR department, in two cases CSR just provide advice and two brands went as far as to fully integrating CSR in purchasing activity.

Formal systems of sustainability evaluation are not widespread, only a few brands base sustainability assessment on formal criteria. Some other brands adopt unstructured and non-formal assessment criteria. A cluster of larger brands was found to follow a formalized management style, with the CSR department acting as watchdog for CSP. These brands established a Green List of preferred suppliers and a formal evaluation system widely used to assess purchases.

Other brands historically engaged in sustainability, especially in the luxury segment, have instead adopted a more informal approach to CSP, without a clear role for the CSR function. Finally, a third cluster is still in a phase of organizational evolution with a mix of roles for the CSR and expectations for future adoption of formalized sustainability evaluation tools.

The dimensions of sustainability and their influence on CSP The Sustainability Reporting Framework developed by Sustainability-lab (SusReF) provides a tool to break down the set of specific fabrics and accessories sustainability attributes. A set of different attributes from the SusRef has been submitted to the 18 Brands for assessment.

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Free from Hazardous Chemicals, Traceability and Cruelty Free / Biodiversity Friendly attributes rank at the highest level in the consideration in Brands’ CSP. The answers witness a higher level of maturity, beyond what we can define Phase one of sustainability management that was almost exclusively focused on CO2 emissions cuts.

This ranking reveals also a close connection with some of the influential high-profile campaigns launched in recent years by environmental, workers' rights advocacy and animal welfare NGOs. Citizens more than consumers appear to be pulling fashion brands into the sustainability journey.

The role of certification labels Compliance to voluntary certification standards and labels are a widespread and valued tool among CSP managers to evaluate suppliers, their processes, products or even the supply chain and to overcome information asymmetries about suppliers’ management practices.

An affirmative answer to the question “Do You value certification labels awarded to suppliers?” has come from most brands, demonstrating that notwithstanding pitfalls and criticisms, compliance to certification standards and labels remains a key factor in brands CSP, although just few brands consider certifications mandatory and brands with established CSP place less value on certifications. The role of certification emerges as crucial when brands compare suppliers. Answers from some leading brands however, still leaves open the issue of what can be the expected future developments in the certification labels labyrinth. Most valued labels are Oeko-Tex100 / 100plus, GOTS, SA8000 and Bluesign.

Finally, the Survey findings were consistent with some more general conclusions: 1. the movement towards a more sustainable fashion has already started and goes full steam. Sustainable fashion is already among us, it is not matter of future or expected developments: it is now; 2. the process of change proceeds in unexpected directions: from industry to consumers more than the other way round, from consumers to industry. Supply chain relationships are changing more rapidly than consumer purchasing behavior.

At the current development stage of the market, the consumer as citizen through the NGOs campaign, more than the consumer through its own wallet that is driving the movement towards a more sustainable fashion.

3. the pressure on the supply chain to adapt to the movement is very strong and relies on very practical and compelling aspects of the buyer–supplier relationship;

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Methodological Notes Sustainability-lab invited to participate in the Survey CSR managers and/or managers with different business function that influence the selection of fabrics and accessories from 18 major European and American brands. Headquarters of the 18 brands are located in Germany (5 brands), Italy (5) Sweden (1), UK (4) and US (3). Two selection criteria have been considered: a) brands are active on the various fronts of sustainability and b) are recognized as leaders in their respective market segments.

The Sustainability-lab 2014 Fashion Brands Sustainable Procurement Survey questionnaire was delivered online to the 18 brands in July 2014 and non-disclosure of individual answers granted to the respondents. Some brand asked to keep non-public the participation in the Survey.

The analysis of CSP management styles was implemented by means of a MCA (Multiple Correspondence Analysis) model to find correspondences among variables and similarities among companies. Four answers to questionnaire items have been the basis for the MCA, the answers have been recoded according to an ordinal scale metric, to reflect the progression from a first development stage to a structured and integrated style of CSP. The MCA approach followed Version 1.0 of the methodology set in â&#x20AC;&#x153;Data Theory Scaling System Group (DTSS) Faculty of Social and Behavioral Sciences Leiden Universityâ&#x20AC;?. Data were processed with IBM SPSS 19 software.

The results of the MCA have been checked and confirmed by a hierarchical cluster model in which the distances are measured using the Manhattan City Block method.

Variance accounted for by the MCA model is 52,9% of variables total variance.

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The Sustainability-lab Reporting Framework (SusReF) Sustainability-lab has been working on the definition of a Reporting Framework for textiles and accessories manufacturers sustainable behavior since 2012. The effort is driven by the need for a practical way to implement the 6 principles of clarity, accuracy, relevance, coherence, reliability and comparability in a quick and easy to read tool aimed at fashion buyers and designers attending textiles trade exhibitions.

In cooperation with MilanoUnica, the largest textile trade exhibition held in Italy, the Framework has been developed and tested in four editions of the Sustainable Fabrics and Accessoriesâ&#x20AC;&#x2122; Catalogue.

We are now heading for the 5th edition with further refinements.

SusReF is based on a self-reporting system, information is gathered trough questionnaires delivered on-line to companies. Answers are checked first for accuracy, relevance, and reliability, the next step is information processing to organize them in a clear and comparable way.

The final outcome is summarized through a set of 18 icons, according to the Glossary below.

survey@blumine.it @SustLab

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