Fashion Supply Chain Due Diligence For Beginners

With a surge of new sustainability roles, people from all backgrounds are jumping into the fashion industry. So, if you're a newcomer and supply chain due diligence makes your head spin, you're in the right place. This article is your quick Fashion Supply Chain Due Diligence 101. Trust me, you'll find this helpful (and a bit fun, too).

In fashion, every piece of clothing takes a world tour before reaching you. Raw materials like cotton and wool are sourced from one country, spun into yarn in another, woven into fabric elsewhere, cut and sewn in a different region, with buttons and labels from yet another place. Finally, the finished product rests in a warehouse before hitting store shelves. Note that the buyer's closet is not the end of this journey. I'll discuss product life cycle and circularity in another article—essential not just for compliance with new sustainability legislation (ESPDR) but as the only responsible way to use our resources in a circular economy. It will focus on the current, outdated, and unsustainable journey from farm to consumer.

Now, getting back to our globe-trotting journey, each piece of clothing faces numerous challenges along the way. With such a spread-out supply chain, risks for labor abuses and environmental damage are high.

Without transparency and a solid traceability system from farm to store, companies risk non-compliance with sustainability laws, financial losses, reputational damage, and issues like fraud and counterfeiting. Ensuring products are made ethically and sustainably isn't just a choice—it's the law. This is where global supply chain due diligence comes in.

Now, let’s start with the basics.

What is Global Supply Chain Due Diligence?

Think of due diligence as a thorough background check for your supply chain. It involves systematically examining and managing the risks in your company’s network of suppliers.

As regulations tighten, having a rock-solid traceability system is more critical than ever. It protects your business and ensures reliability. You can't be everywhere, and audits can be corrupted, while certificates may turn out to be mere fabrications. So, it's essential to shine a light on the darkest corners of your supply chain—that means, pinpointing the riskiest spots, setting up a robust monitoring system, and collaborating closely with partners for compliance are non-negotiables.

A classic blunder I often spot in the industry is brands shifting the burden of compliance onto suppliers—suffocating them with paperwork, and pushing them into a 'comply or else' situation. That’s not just unfair; it’s downright Mafia-style business. So my advice is, rather than playing the blame game with your suppliers, view them as your trusted partners in this mission.

Work hand-in-glove with them to ensure everything is produced fairly and safely. This means verifying where and how products are made to ensure they comply with legal standards, ethical practices, and environmental sustainability.

Global supply chain due diligence is all about teamwork with your suppliers to achieve shared goals of ethical production and sustainability. By collaborating and sharing information, you build a supply chain that's a win-win for everyone. So, instead of pointing fingers, work together for a more sustainable future!

Why is it Important?

It should be obvious why it's important, but I'll spell it out here.

1) Protecting Human Rights

Imagine discovering your favorite shirt was made using child labor. Yikes! Companies definitely want to avoid such PR nightmares to protect their reputation and avoid customer boycotts. More importantly, it’s about doing the right thing. Supply chain due diligence ensures no child labor, forced labor, or unsafe working conditions are part of the process.

2) Environmental Impact

Garment making can really put a dent in the planet. Toxic dyes pollute water sources, while fabric waste and packaging materials overflow landfills. Plus, the whole production process emits VOCs and greenhouse gases, contributing to air pollution and climate change. Due diligence steps in to spot these environmental risks, and clean up the supply chain.

3) Avoiding Legal Trouble

Regions like the European Union have strict regulations on supply chain practices. The Corporate Sustainability Due Diligence Directive (CSDDD) mandates companies to identify and prevent risks to human rights and the environment. Non-compliance can lead to hefty fines or worse, ban from selling in the EU altogether.

4) Building Trust

Customers trust companies that are transparent and ethical. Demonstrating responsible practices builds customer loyalty and enhances brand reputation.

And much more!

Consequences of Neglect

1. The Rana Plaza disaster
2. Boohoo faced scrutiny for failing to improve working conditions in its supply chain
3. The Tazreen Fashion factory fire in 2012
4. The Karachi textile factory fire
5. Lahore shoe factory fire in 2012
6. Forced labor in Xinjiang, China
7. Lawsuit against Welspun
8. Rat fur in clothes labeled as cashmere or pashmina. Read 1 | Read 2

And that's just scratching the surface!

How to Implement Supply Chain Due Diligence

Here’s how to actually do it:

1. Map Your Supply Chain

Identify all the tiers of your supply chain, from raw material sourcing to the finished product. Understand the geographic locations, production processes, and key players involved. Think of it as drawing your supply chain family tree.

Tier Breakdown and Risks

Tier Zero

Think corporate HQs, offices, warehouses, distribution centers, and stores owned by your brand. While they are not part of the production process, Tier Zero impacts carbon footprint and sustainability reporting.

Tier One

These are your direct suppliers - those you cut, sew, package, and prepare garments for shipment. Brands usually have direct relationships with Tier One suppliers. Key risks include worker rights and unsafe conditions.

Tier Two

Suppliers that produce fabrics through processes like printing, spinning, and tanning. They often have direct relationships with Tier One suppliers. Major risks involve risky business with chemicals and environmental impact.

Tier Three

Where raw materials become fibers, like spinning cotton into yarn. Brands typically have less visibility at this tier. Risks include chemicals, water, and labor concerns.

Tier Four

They are the sources of raw materials, such as cotton farms or livestock producers. They have big impact on nature—soil, critters, air quality. Risks vary by material and region, including forced labor and deforestation.

2. Risk Assessment

Hunt down the risks within your suppliers' operations: human rights, labor conditions, and eco impacts. Prioritize risks based on their severity and likelihood of occurrence.

3. Set Standards and Policies

Develop a clear set of standards that align with international guidelines such as the UN Guiding Principles on Business and Human Rights. Make sure suppliers know these standards and stick to them.

4. Build Relationships with your Suppliers

Visit, chat, maybe even hug. The closer you are, the safer and cleaner your products will be. Offer training and support, even financially if needed, to help them meet your standards.

5. Implement Monitoring and Auditing Programs

Regularly audit and visit sites to ensure compliance with your standards. Use third-party auditors to provide unbiased evaluations.

6. Develop a Remediation Process

When things go wrong, have a plan. Fix it, track it, and make sure it stays fixed.

7. Report and Communicate

Regularly publish reports- what you did, found, fixed and your progress.

8. Leverage Technology

Get techy: Use DNA marking traceability, scientific verification of origin or software tools for monitoring compliance.

By following these steps with diligence (pun intended!), you can ensure your supply chain is not just compliant but also that you're trustworthy and sustainable.

Why Due Diligence Pays Off

Beyond just playing by the rules and being ethically sound, supply chain due diligence offers real business perks:

• Brand Loyalty and Customer Trust

Nobody likes surprises, especially in their shopping cart! Today, customers aren't just buying products—they're buying into values. They want commitment to ethical practices. Show them your supply chain isn't a mystery — being transparent builds trust and attracts new customers.

• Investor Confidence

Investors are all about ESG (Environmental, Social, and Governance) criteria these days. Do due diligence right and watch those checkbooks open wider.

• Competitive Advantage

When you're on top of your supply chain game, you're ahead of the pack. This means more market share and better financial performance.

• Crisis Prevention

Dodge those disasters and keep your reputation sparkling. Spotting and snuffing out risks early can save you from reputation ruination and financial woes.

Conclusion

Global supply chain due diligence isn't just a box-ticking exercise; it's a moral and business imperative. It ensures products aren't tainted by hidden human rights abuses or environmental destruction. The benefits are clear, and the consequences of neglecting it are too stark to ignore. And for the love of fashion, don’t just comply for the sake of compliance.

I hope this helps :)

Thanks for reading! Wishing you a happy journey towards compliance!

If you need assistance with supply chain due diligence for your fashion brand, feel free to reach out via DM or email at [email protected]