March to Sustainability 2010

Ph

oto

co

urt

esy

: h

ttp

://w

ww

.fli

ckr.

com

/ph

oto

s/ta

na

kw

ho

Exporting Textiles: March to SustainabilityPreview of the coming decade:Textile Supply Chain Sustainability Plans by Brands and Retailers

Getting Manufacturers to Create Business Value through GHG (Energy), Water and Waste Conservation

REPORT EXCERPT

2010

3

The 1990s was about the march towards manufac-tur ing qual i ty as the text i le industry worldwide raced to adopt lean manufactur ing and ISO dr iven qual i ty pract ices. The 2000s were about ensuring ethical sourc ing and labour pract ices. The coming decade is going to be about sustainabi l i ty and opt i-mal ly us ing natural resources to generate value in the text i le supply chain. This report previews act iv-i t ies a lready underway that are harbingers of this coming movement.

S u P P O r T e d by

r e P O r T by

5

Content

02

06

10

40

50

60

66

68

18

41

28

45

64

52

20

42

30

46

64

69

53

57

22

43

32

47

65

69

54

55

58

24

44

61

33

26

44

62

51

51

34

37

P r e fa c ec r e aT I n g S u S Ta I n a b l e S u P P ly c h a I n S I n T h e T e x T I l e I n d u S T r yI n f O c u S : a c T I v I T y S n a P S h O T O f T e x T I l e b r a n d S a n d r e Ta I l e r S

a d I d a S

g a P, I n c

h & M

I K e a

l e v I S T r a u S S & c O.

M a r K S & S P e n c e r

n I K e

O T TO

c a r r e f O u r

Wa l M a r T

c O n T I n e n Ta l c l O T h I n g

B r a n d s a n d r e ta i l e r s w i t h s u p p ly - C h a i n i n i t i at i v e s i n p l a n n i n gp h i l l i p s - va n h e u s e n

T h e T I M b e r l a n d c O M Pa n y

I n d I T e x

g r u P O c O r TO f I e l

P r I M a r K

J O h n l e W I S Pa r T n e r S h I P

l I n d e x

T e S c O

S Ta n d a r d S a n d c e r T I f I c aT I O n S S Ta n d a r d S f O r r e P O r T I n g a n d c a P T u r I n g e M I S S I O n S by c O M Pa n I e S

I S O 14000

g h g P r O TO c O l

g r I r e P O r T I n g f r a M e W O r K

Pa S 2050

P r O d u c T S Ta n d a r d S a n d c e r T I f I c aT I O n S

g l o B a l o r g a n i C t e x t i l e s ta n d a r d ( g o t s ) C e r t i f i C at i o n

b l u e S I g n

I n d u S T r y I n I T I aT I v e Sb S r W O r K I n g g r O u P S

O u T d O O r I n d u S T r y a S S O c I aT I O n

M a d e - By

T e xc u T S

b e T T e r c O T TO n I n I T I aT I v e

P r e d I c T I O n S a n d P l a n n I n g a h e a dg l O S S a r y a n d r e S O u r c e S

d aTa S O u r c e S f O r T h e r e P O r T

r e S O u r c e S

6

P��“ F O O D, C LO T H I N G , S H E LT E R ”

“ R O T I , K A P D A , M A K A A N ”

“ N O U R R I , LO A G É , B L A N C H I ”

. . .

7

fOr centuries, these three have defined our basic human needs across all cultures around the globe.

Of these three, however, only textiles are both non-perishable and easily transported. Thus, textiles have been part of a global market since the days of the Silk Road. This market has continually evolved over time, and just as the mills of Manchester and Leeds radically changed the way textiles were produced and distributed over a cen-tury ago, rapid shifts are continuing in the way textiles are produced and supplied. Yet just as in centuries past, much of the production is based in Asia. Today it is difficult to go shopping anywhere in the world and not find goods made in China, India, Bangladesh, Vietnam, Cambodia, etc.

As the textile supply chain has evolved to meet changing price and quality demands from the global marketplace, so has the sophistica-tion of buyers in tracking their suppliers. In the mid-1990s, buyers added a new dimension to their requirements, and began making de-mands regarding health, safety and labour conditions. Global manu-facturing centres have increasingly had to respond not only to local requirements but also to global ones.

In this report we talk about a new dimension on the cusp of being rolled out throughout the supply chain: Environmental Sustainability.

Environmental Sustainability takes into account the use of water, en-ergy, and natural resources, and seeks to minimize negative impacts to the environment in the production of textile-based goods, as well as in their use by consumers. The long term goal of such initiatives would be complete sustainability.

Progressive brands and retailers have been exploring sustainability initiatives since the middle half of the last decade: testing initiatives first internally and now considering roll-out through their global sup-ply chains. This report profiles such firms and what they are doing.

Sustainability is about doing ‘more with less’, which means finding savings and creating business value in addition to having a positive impact on the environment. For the purpose of this report, we are looking at aspects of sustainability which concern the textile supply chain from the raw material (natural fiber or man made fiber) to the point that it is converted to finished product. The focus in the re-port is primarily on the following aspects: energy efficiency, carbon / greenhouse gas emissions, water and chemcial footprint as well as logistics. We have intentionally left out raw material production and product composition since they are typically out of the control of textile suppliers and since they are vast topics in themselves to work upon.

Preview of the coming decade 3

8

The report is written keeping a supplier perspective in mind:

1. What are some of the progressive brands and retailers doing and planning for their supply chain?

2. How does one begin to measure sustainability and compete in this changing market?

This report also touches upon initiatives that companies have already started to engage in to improve raw materials in the supply chain, such as the Better Cotton Initiative and the Organic Exchange. In ad-dition, the report discusses other initiatives where buyers are coming together to form a unified voice, including the Outdoor Industry As-sociation, and working groups assembled by the Business for Social Responsibility (BSR).

While much of the current work being done to increase the sustain-ability of the global textile supply chain is still in its early stages or being applied regionally, in the next 24-36 months these initiatives will become mainstream globally.

The message for the supply chain should be clear: make no mistake, sustainability is the next wave in the ever-changing landscape of tex-tile manufacturing.

firms and brands (excluding store-brands) represented in this report

4 exporti ng texti les: March to Sustainability

ADIDAS GROUP ADIDAS, REEBOK, TAYLORMADE

CARREFOUR

GAP INC. GAP, BANANA REPUBLIC, OLD NAVY, ATHLETA

H&M

IKEA

LEVI STRAUSS & CO. LEVIS, DOCKERS, SIGNATURE

MARKS AND SPENCER

NIKE

OTTO GROUP OTTO AS FLAGSHIP AND OVER 20 GROUP COMPANIES AND BRANDS

WALMART

PHILIPS VAN HEUSEN CALVIN KLIEN, ARROW, IZOD, BASS, VAN HEUSEN

GRUPO CORTEFIEL CORTEFIEL,PEDRODELHIERRO,SPRING-FIELD, WOMEN’SECRET

INDITEX ZARA, OYSHO, KIDDY’S CLASS, BERSHKA, MASSIMO DUTTI

CONTINENTAL CLOTHING EARTH POSITIVE APPAREL

JOHN LEWIS PARTNERSHIP

PRIMARK

LINDEX

TESCO

TIMBERLAND COMPANY EARTHKEEPERS

9

CREATI NGSustainable Supply chains

In The Textile Industry

10

The goods of the textile sector are such an intrinsic part of our ev-eryday lives that we take them for granted. The clothes we wear, cushions we sit on, bed sheets we sleep in, carpets we walk on – textiles surround us so completely, that the only other comparable global human needs are food and shelter.

Textile production is resource intensive

This vital global industry employs hundreds of millions of people, and is also very resource intensive: consuming copious amounts of en-

ergy, water and other raw materials.

According to research done by the World Wildlife Federation (WWF), an average of 8,500 litres of water is needed to grow one kilogram of cotton, equivalent to one pair of jeans. Due to the hundreds of harm-ful chemicals routinely used in washing and dying fabric, the textile industry is also the #1 industrial polluter of fresh water on the planet.

In developing countries where large global production centres are based, the textile sector forms a large part of their carbon inventory. As a case in point, in India the textile sector consumes 10% of the country’s energy and has an increasing carbon intensity compared to other sectors.

Sustainability in supply chain is integral for the sector

Because of impacts such as these, over the last few years some pro-gressive brands and retailers in North America and Europe have em-barked on integrating sustainability into their supply chain. While there is the societal imperative, the greater opportunity lies in sus-tainability through more efficient resource utilization which in turn has a positive financial impact for every part of the supply chain.

Virtually all the production and manufacturing of textiles occurs in developing countries and hence activities being planned in the de-veloped world are having a ripple effect in bringing about resource conservation elsewhere.

This report profiles 18 such firms building plans for offshore sustain-ability and how they are looking to create a competitive edge for

themselves.

Why supply chain sustainability is important to brands and retailers

From the standpoint of many North American and European firms that have a large textile product range, almost all the environmental impact from manufacturing occurs offshore. Some of these compa-nies are at the forefront of working towards sustainability for a num-ber of reasons:


11

1

1. Sustainability generates business value. Less is the new more and firms are looking at identifying resource savings which come from undertaking sustainability measures.

2. Capital market shareholders and stakeholders are reward-ing firms with sustainability practices (and this is applicable to sectors outside textiles too). The Dow Jones Sustainability Index and the FTSE4Good Environmental Leaders which track the financial performance of the leading sustainability-driven companies worldwide have been outperforming the market. Additionally, investor groups interested in sustainability are uniting their voice through organizations like Ceres and Carbon Disclosure Project.

3. Risk mitigation at a few different levels. As climate legislation continues to develop in Europe and some of it is being planned in US/Canada, firms are looking to get an idea of their supply-chain risk and proactively managing it. In addition, developing countries themselves are working on looking at legislation on carbon and water usage. This too impacts the brands and re-tailers depending on their sourcing regions.

4. Attracting conscious consumers with new products and car-bon/sustainability labelling. There are consumer segments get-ting savvy and looking to make purchase decisions based on environmental impact.

R&D work on sustainability for some of the firms has been done in their corporate responsibility groups and now is being entered into the mainstream (Nike, Adidas), while in other cases firms have made it a centerpiece of their new strategy (M&S, Walmart) and still in some other cases internal EHS initiatives are evolving further to focus on sustainability (PvH, IndiTex).

Nike for example began building capabilities through its Considered range of products in 2005 and now has plans to require all its apparel products to meet the Considered Standard by 2015. The company sees sustainability as a route towards future profitability. It created a dedicated group of 130 people in what is called Sustainable Business & Innovation, and last year made a commitment to weave sustain-ability into the mainstream.

According to the non-profit organization Organic Exchange, glob-al retail sales of organic cotton apparel and home textile products reached an estimated $3.2 billion in 2008, a 63 percent increase from the $1.9 billion market in 2007. The top ten users of organic cotton include some of the biggest names in retail including Walmart, Nike, H&M, and the Inditex brand Zara.

The direction is clear. Many brands and retailers are moving rapidly and inexorably toward increased sustainability standards for their textile supply chains, all the way from raw material through to fin-ished goods.

8 exporting textiles: March to Sustainability

c r e aT I n g b u S I n e S S va l u e

Walmart i s wel l -known for making i ts stores and bui ld-ings more energy ef f ic ient , and now the company is us -ing that knowledge to help suppl iers save money. The program is ca l led S .E .E .P. , which stands for “Suppl ier Energy Ef f ic iency Project ”.

James Stanway, Senior Di -rector of Global Energy Serv ices at Walmart says that the “program only makes our suppl iers more prof i table; and there is an environmental impact ”. In an i l lustrat ive success of the program, Walmart sent i ts engineers to a suppl ier in Georgia: Dana Undies where 71% of the ut i l i ty b i l l was saved.

12

What is the implication for textile manufacturers?

As the market for sustainable textiles grows, many more firms will be-gin demanding sustainability from their manufacturers the same way they demand fair prices, fast delivery and high quality. Currently, this means having a sustainable supply chain is a competitive advantage for textile manufacturers.

While most suppliers selling to the brands and retailers are engaged only in cut & sew, it is only a matter of time before the entire sup-ply chain is held accountable. In section titled Industry Initiatives on Page 60, we outline initiatives that have already commenced on the raw material sourcing front. Many brands will soon start shifting focus beyond that and downstream to manufacturing. Already firms like Levi Strauss & Co. and Walmart have started collecting data from the rest of the supply chain.

In order to build best-practices and quantify savings, different ap-proaches are being taken. For instance, Marks & Spencer is creating entire ‘eco factories’ where it is able to demonstrate energy savings to the tune of 40% over comparable factories. Nike on the other hand is working with a set of strategic partner factories that are part of its MLS (Manufacturing Leadership), to establish benchmarks.

The signaling for manufacturers is quite clear: become aware and get started on this new path!

how does one begin to measure sustainability that makes sense to buyers?

In this report we have compared a few standards and certifications underway that ought to be on the radar of every supplier. While most of the standards are still in the adoption phase, the underlying data requirements for most of them are quite similar. The section titled Standards and certifications on Page 50 summarizes a few key stan-dards and initiatives.


carbOn label fOr cOnScIOuS

cOnSuMerS

The UK has been amongst the most progressive mar-kets in defining a formal carbon footprint that can be used by consumers.

The Carbon Label Company set up by the Carbon Trust in 2007 provides information for both consumers as well as businesses on how to use the Carbon Label.

The Carbon Footprint is de-veloped on basis of the PAS 2050 guideline. Tesco, Conti-nental Clothing, Levi Strauss & Co. are amongst those that have been testing some products with the Carbon Label.

13

IN FOCUSactiv ity Snapshot of

Text i le brands & retai lers

14

brand STandardS and fraMeWOrKS beIng uSed

WhaT are They dOIng On rePOrTIng fOr SuPPlIerS + InITIaTIveS relevanT fOr SuPPlIerS

ADIDAS • ISO14001

• Internal EBA tool

• Using EBA to collect data from Tier I and II suppliers

• Better Place Project to mainstream sustainability

• Global Apparel Strategic Alliance

CARREFOUR

• GRI

• GHG Protocol

• Oeko-Tex Certification

• CDP supply chain leadership collaboration

• Training regional supply chain teams on logistics

GAP

• GRI

• GHG Protocol

• Clean Water Programme

• Expanding the environmental footprint pro-gramme into supply chain in 2010

H&M • GRI

• Internal LHF tool in dying factories

• Efficiency index for suppliers on wet processing

• Cleaner Production Programme for fabric mills

• Initiate supply chain footprint monitoring in 2010

IKEA • Own tool: e-Wheel for assessing environ-mental impact

• Internal “IKEA Goes Renewable” is now extend-ing to suppliers to cut CO2 emissions

• Implementing new quality standards to reduce textile weight

OTTO GROUP Proprietary toolbox con-taining over 70 custom-ised measures

Climate Protection Strategy being rolled out

WALMART • Sustainability Index

• GOTS Certification for organic textiles

• CDP supply chain leadership collaboration

• Supplier Energy Efficiency Programme

• Walmart online resources for supplier sustainability

• Expanding supplier assessment internationally in 2010

SnaPShOT Of fIrMS WITh SuPPly chaIn SuSTaInabIlITy acTIvITIeS fOr The TexTIle SecTOr

15

S TaT e d g O a l S a n d T I M e l I n e

As per the strategy 2008-2010, Adidas has identified three primary sustainability areas as being core to their business:

• Embedding environmental sustainability across the business.

• Effectively managing business risks and social compli-ance in the supply chain.

• Extending engagement internally and externally.

The Group has stated its commitment to reducing energy consumption by 20% per square meter of sales area by 2020 (compared with 2004 levels).

By 2010:

• Complete first phase of an environmental footprint as-sessment across select owned and operated locations.

• Complete the implementation of the denim clean wa-ter programme.

• Have LEED accredited designers at Gap, BR and old Navy Brands.

• Develop quantifiable environmental goals based on data from the environment footprint assessment.

• Introduce new supply chain waste management initiatives.

Since 2005, H&M has set a clear goal to reduce their car-bon footprint 10% by 2009 compared to a 2004 baseline year. In 2008, H&M listed Key Focus Areas for the envi-ronment including reducing CO2 emissions, promoting environmentally responsible cotton growing, and paying increased attention to water impacts throughout their product life cycle.

Reducing CO2 emissions, and also increasing their share of renewable energy.

Reducing 20 million tonnes of CO2eq from its supply chain (not only textiles) by 2015

aaaa

aa a

aaaa

aaa

aaaa

aaa aaaaaa

ParaMeTerS fOr SuPPly chaIn

car

bo

n

emm

isio

ns

ener

gy

Was

te

Sust

ain

able

Mat

eria

ls

logi

stic

s


1616

brand STandardS and fraMeWOrKS beIng uSed

WhaT are They dOIng On rePOrTIng fOr SuPPlIerS + InITIaTIveS relevanT fOr SuPPlIerS

LEVI STRAUSS • GHG Protocol

• Global Effluent Guidelines (GEG) for wastewater

• Finalizing methodology for analyzing water foot-print of supply chain partners, to be deployed in 2010.

• Information management system being rolled-out to suppliers to collect and track energy use data.

• Extending its Global Effluent Guidelines (GEG) to second-tier suppliers of bulk fabric and sundry items.

• Extended its Greenhouse Gas Inventory to all of owned and operated locations worldwide

MARKS AND SPENCER

• DEFRA GHG Guide-lines/ PAS 2050

• GRI G3

• Internal programme: Plan A

• M&S Supplier Exchange for sharing best practices

• Cotton Sourcing Strategy in 2010

• Aim to have 20 million clothing garments that use Fairtrade Cotton by the conclusion of Plan A

• Working with suppliers to improve logistics efficiency

• Looking to promote PAS to suppliers as the preferred method for calculating product carbon footprints

NIKE

• Material Analysis Tool (MAT) to evalu-ate lifecycle impacts (Nike internal tool)

• Considered Index (Nike Internal Tool)

• Nike Water Programme

• Will require all its apparel to meet the Consid-ered Standards by 2015

• Integrating energy efficiency practices at sup-plier factories and bringing contracted factories to the same relative energy performance level

• Closed loop business models

• Lean manufacturing

CONTINENTAL CLOTHING • GOTS

• PAS 2050

• Carbon Reduction Label

• Continental’s EarthPositive Apparel


1717

STaTed gOalS and TIMelIne

Current goals are mainly for Scope 1 and Scope 2 and the company is collecting data on its supply chain to define its goals.

Aims to be the world’s most sustainable retailer by 2015.

Nike will require that 100% of its apparel meet Considered Standards by 2015.

aaaaa

aaaaa

aaaaa

a aa

ParaMeTerS fOr SuPPly chaIn

car

bo

n

emm

isio

ns

ener

gy

Was

te

Sust

ain

able

Mat

eria

ls

logi

stic

s


18

P��and Planning ahead

19

The evidence pointing to a new wave of sustainability is quite clear. The analogy that we will offer again is that of quality and the move-ment towards ISO 9000 in the early 1990s. By the mid-1990s the entire industry knew about the savings possible from quality and by end of the 1990s one had to be ISO 9000 certified to be in business.

The investments being made in sustainability allow companies to use fewer resources for a greater output. Manufacturers that are early adopters on carbon efficiency, water conservation, energy savings, etc. will not only add to their bottom line but also have an opportunity to differentiate themselves with the buyers in the near term.

As we synthesize the available datapoints around us, we offer the following predictions:

• By the end of 2011 all major textile brands and retailers will have announced initiatives that plan for working with a more sustainable supply chain. Most of the firms are already imple-menting measures within their own facilities and it is a matter of months before they look to their supply chain which is where the majority of the environmental footprint exists. We expect the movement to move beyond the early adopters and into the mainstream between 2012 and 2015.

• Textile brands will make supplier choices based on which suppli-ers are able to report and demonstrate sustainability measures.

• Brands and retailers may struggle initially in mapping out their supply chain but we expect that issue to be overcome by 2011.

• Some of the low-hanging opportunities from a retailer stand-point will be logistics, and 2010 will see increasing activities on this front.

• From a supply perspective, vertically integrated firms are likely to be early adopters of sustainability reporting because they have easy visibility throughout their supply chain. They will also likely use this as a market advantage.

• We expect to see a buzz around non-tariff barriers being raised by some textile exporting nations at the WTO. We are quite cer-tain that market mechanics will soon trump these concerns. Just like no one questions the need for quality products any longer, no one will question the need for sustainable products.

• The buzz around organic cotton will continue to increase. But as soon as it is public knowledge that organic cotton is going to remain a very small percentage of the overall raw mate-rial for the textile sector, we expect to see the emphasis shift toward other sustainable materials. We also expect to see a greater emphasis on reducing toxics and chemicals.


20

To access the complete report, please visit:

http://www.cKinetics.com/Marchtosustainability2010/