Supply chain professionals in the fashion industry have long understood the importance of knowing their suppliers and, when possible, their suppliers’ suppliers, to achieve transparency and traceability throughout the supply chain.
However, recent regulations—such as the Uyghur Forced Labor Prevention Act (UFLPA), which aims to prevent the importation of goods produced with forced labor from the Xinjiang Uyghur Autonomous Region of China, and the European Union’s Corporate Sustainability Due Diligence Directive(CSDDD), which mandates companies assess and address their environmental and human rights impacts—have intensified the pressure on companies to gain visibility into the highest-risk areas of their value chains.
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Despite these increasing rules and regulations, the current level of supply chain visibility remains relatively low.
In fact, many companies struggle with transparency across their supply chains. A recent survey by software company Tive Inc. revealed that 77 percent of supply chain decision-makers view real-time visibility as essential, yet only 25 percent currently utilize it. This disconnect indicates a critical area for improvement within the industry.
While consumers and regulators push for improved traceability and ethical sourcing, only a small percentage of brands can fully track their products from raw materials to finished goods. This discrepancy showcases a significant gap between the desired level of transparency and actual implementation, as highlighted by Blythe Chorn, managing director of supply chain advisory at accounting firm KPMG.
Chorn notes that the benefits of enhanced supply chain visibility extend beyond mere compliance. “Increased visibility can lead to greater resiliency and improved cost efficiency, which are crucial for navigating today’s complex market dynamics,” she said. “One of the greatest business advantages is how visibility can be leveraged to advance decarbonization through reduced waste, energy and resource use across the supply base, ultimately resulting in more cost-efficient and better managed supply chains.”
By providing a clear view of the entire supply chain, visibility allows supply chain and procurement professionals to pinpoint specific areas where significant greenhouse gas emissions occur—known as emissions hotspots—and identify the suppliers directly contributing to those high emission levels through detailed data on their operations and practices, enabling targeted efforts to reduce overall carbon footprint while improving cost management and resiliency. Because the emissions footprint of the fashion industry is largely driven by activities and suppliers deep in the supply chain, visibility is necessary to know where and with what supply partners to drive decarbonization efforts.
Furthering the benefit of these efforts, “companies can foster a positive feedback loop wherein supplier engagement to enhance visibility points toward where to target decarbonization efforts—and driving emissions reductions requires collaboration with suppliers, thus strengthening relationships with suppliers and making other forms of supply chain collaboration easier,” Chorn explains.
Given the stakeholder and regulatory pressure to demonstrate the decarbonization progress—along with the critical role of supply chain visibility in achieving this goal—investing in the right visibility solutions strengthens the business case for companies.
According to the MIT Sloan School of Management, brands and retailers should prioritize visibility solutions, as they significantly enhance the customer experience. Improved visibility ensures product availability, reduces stockouts, optimizes inventory management and boosts operational efficiency. While investing in supply chain transparency can be costly, companies that make this investment gain favor with consumers and often see higher sales from socially conscious or skeptical buyers, the school stated.
Yet, despite the advantages of visibility solutions, Chorn notes that no single technology effectively addresses all supply chain visibility challenges.
“While your company might not hold direct commercial relationships with those sub-tier suppliers, you can partner with your [known] suppliers to reach the suppliers driving emissions to set decarbonization expectations and provide capacity building, technology access and financial support,” Chorn added.
Achieving this “real and deep” supply chain decarbonization necessitates integrated procurement processes. This integration links sustainability performance to commercial incentives, such as continued sourcing, favorable payment terms, longer contracts and collaborative business planning with suppliers.
“Knowing your suppliers’ suppliers and taking an integrated approach to managing suppliers across sustainability and procurement will enable you to identify and address the highest emitters in the supply chain, no matter how indirect the sourcing relationship is,” Chorn said.
To learn more about KPMG and how its solutions are enhancing visibility throughout the supply chain for the fashion industry, click here .
