Fashion SMEs are the heart of transition management & legislations- and they need your help

By Dr. Nicole Stein

Today’s fashion and lifestyle brands are under tremendous pressure to implement environmental, social and governance solutions to their supply chains. Customers expect it and the planet requires it. Current geopolitical developments further force businesses to deal with increased energy prices and uncertain access to raw materials. Never has there been such urgency to evolve supply chain norms to meet shifting demands.

In compliance with the UN Decade of Action things start to shake up: Governments around the globe are enforcing legislation for more sustainable production and consumption processes. The zero-waste law in France bans brands from destroying unsold products. Germany’s supply chain act includes a "duty of care" (Obhutspflicht) to force distributors to control the quality of products returned by the customer in order to?prevent waste. The European Commission is working on EU-overarching standards. Just last week, the European Commission published a strategy to boost the sustainability of the textile industry, which includes a sustainability scale that measures the environmental impact, durability and repairability of products.

With the recent Legislation proposed by New York State Senator Alessandra Biaggi (NY-D), The Fashion Sustainability and Social Accountability Act would require all fashion companies that do business in New York and generate more than $100 million in revenues to map at least 50 per cent of their supply chains and disclose impacts such as greenhouse gas emissions, water footprint and chemical use. Two factors make the New York’s Fashion Act particularly noteworthy: fines levied for non-compliance with the law are used for regional environmental projects and the definition of sustainability explicitly includes supply chain labor conditions. The latter constitutes a crucial extension of the definition of sustainability and an increasing understanding of the interplay between environmental, economic, and social aspects of sustainability.

While the Fashion Sustainability and Social Accountability Act is a great first proposal, it disregards small and medium companies. SMEs are the core of the fashion and lifestyle industry and their active involvement in sustainability efforts is a game-changer for successful transition to a more sustainable system. In their recent EU Strategy for Sustainable and Circular Textiles, the EU commission even explicitly refers to the European fashion industry as “composed essentially of small and medium size enterprises (SMEs)“. This calls to question why SMEs are neglected in the current NYC Fashion Act and whether this lack of legislative accountability is acceptable.

For systemic change to occur, small and medium-sized enterprises (SMEs) must be part of the solution. Unfortunately, these organizations are often deterred from making necessary changes due to concerns about change management, financial investment, resources, and in-house capabilities.

How can SMEs be supported in their sustainability efforts with no further legislation or additional budget? One of the first global initiatives working on a solution is the World Collective (WC). Launched in 2022, World Collective (WC), is an outgrowth of Fashion 4 Development, a private sector global platform committed to supporting the 17 UN Sustainable Development Goals. The WC is the first non-profit consortium to scale transformative actions for supply chain innovation targeting SMEs worldwide. Its program’s sustainability criteria are based on a certification compliance database ensuring full transparency and traceability from Tier 1 Assembly factories to Tier 4 raw material suppliers.?All resources are aligned with the UN’s Sustainable Development Goals (SDG’s) which include poverty reduction, environmental protection, and a limit to the increase in global temperatures levels. Goals are interdependent and integrated, driving towards bold, collective action.?While providing access to multiple transformative initiatives to its members through a digital hub, the WC also supports members by connecting them to software that measures transparency & traceability as they transform their supply chain. Membership requires a three-year commitment and accountability in innovation implementation, with yearly progress reports. Members are encouraged to incorporate supply chain transformation metrics and successes into their organization’s marketing materials and public branding. This platform allows companies the opportunity to build the supply chains that support this legislation as well as building a responsible supply chain with a low entry barrier & cost risk into a brand. By linking and negotiating the cost barriers across all the support structures, the program allows SMEs to build and support a transparent and sustainable business model.

Pooling solutions and therefore allowing for competitive pricing for SMEs is one of the strong points of WC’s approach to engage SMEs in sustainability efforts.

Many businesses lack appropriate and dedicated budgets to explore innovation for clean supply chains and thus, simply cannot afford switching to more sustainable systems. Furthermore, data on best practices are scattered across various platforms, reports, and databases and often issued by biased sources, making it impossible to validate claims and assess high-quality insights. Proactively working on a sustainable business pays in the long-run. Aside from long-term cost advantages, in 70% of customers are willing to pay a 5% price premium for products produced by more-sustainable means.

Solutions like the World Collective (WC) can temporarily bridge the gap between legislation and SMEs but they are not developed to replace governmental oversight and associated regulations. By providing SMEs support and access to efficient pricing and data, solutions like the WC are superior complementary tools for the effective implementation of new legislations. In order to really change the fashion and lifestyle industry upcoming legislation drafts need to focus on the heart of the industry: the SMEs.

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