This article appeared first in The Sustainability Gap, an in-depth analysis of BoF’s new report, The BoF Sustainability Index, which tracks fashion’s progress towards urgent environmental and social transformation. To learn more and download a copy of the report, click here.
Key Insights from The BoF Sustainability Index
The inaugural BoF Sustainability Index tracks fashion’s progress towards ambitious sustainability targets for the coming decade. It examines public disclosures to rigorously benchmark performance and enable like-for-like comparisons at 15 of fashion’s largest companies.
While fashion companies are speaking about sustainability more than ever before, BoF’s comprehensive analysis found actions are lagging public commitments, even among the industry’s largest and most highly resourced businesses.
The average overall score of the companies assessed was just 36 out of a possible 100, with significant disparities between engagement and action. Overall, progress skews towards target setting, with data often self-reported and unverified, pointing to a wider accountability challenge.
The BoF Sustainability Index Transparency Targets:
a. Traceability — By 2022: Achieve full supply chain traceability and disclose suppliers.
b. Disclosure — By 2022: Analyse and disclose data on environmental and social impact.
Fashion’s modern, globalised business model is based on complex and convoluted supply chains that are functionally almost impossible to monitor. That enables human rights abuses to go undetected or ignored. It also makes it difficult to establish the extent of the industry’s environmental impact or measure the success of efforts to reduce it.
The Index is powered by public disclosures. Transparency is the cornerstones of any effort to drive meaningful change, establish accountability and benchmark progress.
Relatively strong performance reflects advances in measuring and monitoring impact.
Transparency was one of the strongest-performing categories in the Index, but progress towards this foundational goal remains far too slow.
As a critical first step required to identify strategic focus areas, track progress and hold companies to account, the deadline to achieve the targets in this category was set for 2022. With less than one year to go, the companies are on average less than halfway there.
Overall, companies showed most progress in the Index’s second transparency target to analyse and publicly disclose environmental and social impact (Target 1b, Disclosure). Two thirds of the companies scored more than 50 out of a possible 100 here, while Kering and Nike, the two overall top performers, both achieved a score of more than 80.
Data is limited, hard to find and often of dubious quality.
Progress so far was heavily skewed towards risk assessments and high-level analysis.
Most of fashion’s environmental impact takes place externally in the manufacturing supply chain, but many of the companies’ disclosures were limited to their own internal operations.
Industry efforts to establish more consistent data and the tools to gather it are gaining traction; two thirds of the companies indicated they use the Sustainable Apparel Coalition’s HIGG Index to monitor environmental performance in their manufacturing supply chain.
But coverage is patchy, disclosure selective and much of the data that is available is self-reported and unverified.
Efforts to establish transparent supply chains are lagging.
Transparent supply chains are vital to ensure commitments to ethical business practices are upheld, but progress here was mixed.
Fewer than half of the companies disclosed a full list of their direct (tier 1) suppliers, and none provided a complete catalogue deeper in their manufacturing base (tier 2 and beyond).
Kering, Richemont and Inditex did not publish a supplier list for any of their brands at all, though Kering says it can trace 88 percent of its materials back to at least country level. Inditex pointed to relationships it has with key partners like IndustriALL Global Union, with which it said it shares full details on its supply chain. Kering and Richemont did not provide additional comment.
VF Corp, on the other hand, has a goal to map the supply chain of 100 key products by the end of this year. It already publishes detailed maps for more than 50 products that provide information down to textile and material suppliers.
The Sustainability Council’s Take
“The transparency analysis reveals what environmental professionals have long feared: most companies are still neither collecting nor disclosing the information they need to reduce their environmental footprint. Moreover, the quality of the data they do manage to collect is widely acknowledged to be unscientific and unreliable — self-reported and seldom verified by third parties.
“Until this changes, companies’ commitments to reducing their environmental impact cannot be taken seriously. How do you craft a reduction plan without quantifying a starting point? How do you identify where to target reduction initiatives? How do you track progress, disqualify egregious polluters, curate your supplier base to reward less energy-intensive producers, develop minimum performance standards, or truthfully communicate with your customers or shareholders about your green performance? Public disclosure of this information, which would drive improvements in data quality and create accountability for progress, is still in its infancy but it is a foundational and urgent area for the industry to address.” — Linda E. Greer, Global Fellow, Institute of Public and Environmental Affairs
The BoF Sustainability Index is built on over 5,000 data points gathered across the 15 companies included in this year’s edition. To request access to the full underlying data, click here.
The BoF Sustainability Index is based on a binary assessment that examines companies’ public disclosures up until December 31, 2020. There are limitations to this approach and while the assessment was conducted in good faith, the results should be viewed as a proxy for sustainability performance and not an absolute measure. Where BoF was unable to identify public evidence to support a company’s performance relating to the assessment criteria, it does not necessarily mean the company is taking no action at all or that bad practices are present. Read the full methodology on pages 38-41 in the report here or see the FAQs.
Disclaimer: LVMH is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholders’ documentation guaranteeing BoF’s complete editorial independence.