Date: 02 June 2020
Companies across sectors are under pressure to gain visibility into their multi-tier supply chains and to share more information with their customers, partners, and stakeholders. Regulatory due diligence requirements, increased investor and consumer expectations, and technological advances have all raised the bar.
But what is company transparency? Why does it matter? How it is measured? What are the benefits?
What is Transparency?
The public disclosure of credible, comprehensive and comparable data and information about fashion’s supply chains, business practices and the impacts of these practices on workers, communities and the environment.
TRANSPARENCY "relates directly to relevant information been made available to all elements of the value chain in a standardized way, which allows common understanding, accessibility, clarity and comparison".
Garment & Footwear Value Chain
Why does it matter?
1- Lack of transparency costs lives
When Rana Plaza collapsed seven years ago in Bangladesh, killing and injuring thousands of garment workers, people had to dig through the rubble looking for clothing labels in order to figure out which brands were producing clothes in one of the five garment factories operating in the building.
Simply put, if we don’t know where and by whom our clothes are being made, then it is difficult to for relevant stakeholders to work together to fix problems before they end in tragedy.
2- Consumers want to know #WhoMadeMyClothes
The rise of connected devices and the worldwide web have opened customers to an unlimited number of product choices and a limitless amount of internet users to exchange information with. When consumers are equipped with more - and better quality, credible - information about the social and environmental impacts of the clothes they buy, they are able to make better informed decisions.
Because it evolves in line with the rise of environmental and wellness consciousness, it is likely to have an even bigger impact on the developed countries’ retail industries, both in B2B and B2C.
We are just witnessing the beginning of the shift from company to customer power; enabled by the rise of social networks and the wisdom of the crowd.
How to Evaluate Transparency?
Fashion Revolution, a non-profit movement, has created Fashion Transparency Index in 2016, includes 40 of the biggest global fashion brands which have selected based on annual turnover. It is an index which ranks companies according to their level of transparency based on a questionnaire and publicly available information about supply chain issues. The brands receive points for information that has been publicly disclosed on the brand or parent company website, through self-published annual reports and via third parties where there is a link between the company’s website and the third party disclosure.
The rating for the Fashion Transparency Index is given by assessing 5 criteria which are: policy and commitment; traceability; governance; know, show, and fix; and spotlight issues.
1- Policy and Committments
Policies and procedures brands disclose both at company level (as related to the company’s own operations in head offices, stores, warehouses, and owned production facilities) and at supplier level (Code of Conduct or supplier guidance document)
2- Govarnance
Evaluates who in the company is accountable for social and environmental performance and impacts.
3- Traceability
Publishing lists of the suppliers and what level of detail brands are disclosing about these suppliers.
4- Know, Show, Fix
Know- Supplier assessment of brands to ensure they meet their ethical standards and policies (typically factory audits) and which third party auditing standards used.
Show- Disclosure of the results of the supplier assessments, either as a summary of issues found in factories or at a more granular level (e.g. disclosing findings by individual factory).
Fix- Publishings about how they remediate human rights and environmental violations occurring within their supply chain
5- Spotlight issues
Each year, a few key issues are reviewed in deeper detail. For 2020, four strategic areas has been evaluated, 4 C’s: conditions, consumption, composition and climate.
Advantages for Retailers/Companies
As a result of this “wisdom of the crowd”, retailers had to adapt their operations to these customers’ expectations and desires for meaningful and conscious consumption. Luckily for them, increased transparency was found to yield profit, foster brand loyalty and to increase internal productivity.
1- Transparency yields profits
Consumers are willing to spend more for products made by companies viewed as socially responsible and who are taking steps to ensure the protection of workers and the environment. More than half of shoppers (54%) are willing to pay more for a product that displays additional product information.
2- Transparency fosters brand loyalty
Transparency builds trust in the brands they buy and a lack of transparency can damage brands’ reputation. Pressured by their North-American millennial customers, retailers are now forced to use transparency and traceability as a means of differentiation, with the ultimate goal of building customer trust and loyalty. Even though being transparent is costly, it yields tremendous benefits to retailers, in terms of customer loyalty and profitability. Researches denote that it also contributes to better internal effectiveness.
Indeed, 39% of customers say they would switch to a new brand if it offered full product transparency and 56% say they would be loyal for life if it provided complete transparency. Moreover, 81% of consumers would consider a brand’s entire portfolio of products if they switched to that brand as a result of increased transparency (The 2016 Label insight Transparency ROI study).
3- Transparency increases internal productivity
Internally, transparency in-between employees enhance communication, knowledge sharing, and collaboration. Implementing a transparent culture helps to build trust among leaders and employees, leading to improvements in terms of alignment, problem solving and engagement. Providing as many information as possible to staffs result in greater productivity. Moreover, businesses with high levels of engagement reported 22% higher productivity.
As a result, becoming a transparent company does not happen overnight, and has to be implanted carefully, in line with the company’s objectives and employees’ mindsets. Overall, the transparency trend has had a positive impact on both consumption and production. Business integrity has been on the rise, and retailers are shifting towards more conscious and sustainable operations.
Source:
https://www.fashionrevolution.org/about/transparency/
https://medium.com/@alexiasaumon/the-rising-importance-of-transparency-and-traceability-in-the-retail-industry-44a46e4d65fa
https://www.unece.org/fileadmin/DAM/uncefact/OECD_Feb2019.pdf