Written by Sustainability and the construction of profit in the textile chain
by Larissa Roviezzo, REGENERATE’s cofounder
* Article originally posted in FFW fashion portal – Translated from Portuguese
As a sustainability consultant, I have participated in numerous discussions that sought to find sustainable solutions for our industry. Topics such as the use of new materials, companies transitioning the implementation of strategies into the product design phase, application of circularity (strategies that follow the concept of Circular Economy), and the search for obtaining certifications and increasing transparency, among others, are on the rise. In the midst of so many discussions, I always had the following thought in mind: “we need to talk about building profit!”.
Today’s fashion industry is established on the ideas of lower production and purchasing costs, large volume and long term. With this reasoning, factories sell their services at maximum capacity and low value. Retailers buy at the lowest price to keep their margins high and dilute the cost caused by risks such as: lack of inventory (or excess), freezing of working capital and reduction of the selling price.
Covid-19 showed that the ‘larger order – lower cost’ structure does not leave the industry immune from financial risk when there are no active consumer markets. With that, the wheel that seemed to spin tirelessly stopped, resulting in excessive inventory, suppliers with no payments, and a lack of new orders. In times of crisis, clothing is not considered an essential product. What is essential though is the source of income for workers in the chain.
Covid-19 showed that the ‘larger order – lower cost’ structure does not leave the industry immune from financial risk when there are no active consumer markets.
Is this business model outdated? The time has come to change the culture of minimal cost and rethink new ways of collaborating.
A SOLUTION
John Thorbeck, president of consulting company Chainge Capital, defends a new model for the textile chain. For him, optimizing Lead Time (moment between when the order is placed by the customer and the effective delivery of the product) and the Just in Time production (everything must be produced, transported or purchased at the exact time), are the keys to reducing risks, and thus costs, in the textile industry. Two concepts that reduce, for example, the costs of excessive inventory and, consequently, the waste generated at different points in the chain.
For example: Instead of beginning production on a collection six to twelve months in advance, rather produce for a collection that will be launched next month. This model is similar to the business model implemented by Zara, who puts out 12 collections a year. This not for the purpose of stimulating consumption, but rather in terms of speed of production.
It may seem contradictory in terms of sustainability, but in fact this model reduces overproduction and the environmental impacts caused by it. It reduces risks and costs, and, consequently, frees up a larger margin to be used in the cost of the product. In other words, clothing can be sold at a higher price per unit, which will benefit workers in the chain, and provide more resources for retailers to implement the use of sustainable materials and processes in their products – which are currently some of the highest costs.
For this model to succeed, the upstream (suppliers of raw materials, weaving, clothing) and downstream (distributors, wholesalers, retailers) relationships of the textile chain need to move closer together, collaborating instead of fighting for the lowest cost. Through this approach the industry will begin to share the risks and the rewards. And of course, it is also crucial to invest in technology, data sharing and strengthening the local supply chain.
Even if the idea of sustainability has not been attractive to all so far, the capital market shows that the topic is finally being taken seriously. Investors are prioritizing the investment of their capital in companies that meet environmental, social and governance (ESG) criteria. These movements characterize the strengthening of global changes towards more sustainable industries.
Inevitably, times are changing and the current structure of the textile chain does not seem to support the needs of these new times. Quarantine destroyed the illusion that we only prosper individually.
…none of the world’s problems is technically difficult to solve; they arise from human disagreement…
Charles Eisenstein
For this reason also, there is no longer room for us to continue looking for increasingly cheap suppliers and producing unnecessary mountains.
As writer Charles Eisenstein said, “none of the world’s problems is technically difficult to solve; they arise from human disagreement”.
* Article originally posted in FFW fashion portal – To read original article in Portuguese visit: FFW SUSTENTABILIDADE E A CONSTRUÇÃO DO LUCRO NA CADEIA TÊXTIL
Cover illustration source: techpacker.com