Greenwashing may not be in the rearview mirror, but the more recent trend of “greenhushing”—or underreporting ESG efforts in order to avoid scrutiny from shoppers and regulators—is rising up quickly in its place.
“Brands have made very tall claims about sustainability” over the years, according to Shameek Ghosh, co-founder and CEO of traceability platform TrusTrace. But as shoppers become more discerning, makers of fashion products have been pulling back on these public declarations. “When it comes to making a specific product-related claim—for example, at the sweater level—they are avoiding saying, ‘This is a green product.’”
That’s because “they cannot defend those claims and will be penalized for them” now that regulation has taken shape around product sustainability reporting. Brands now have to answer to “consumers, NGOs and market authorities who are cracking down” on claims that a product is sustainable without substantiation, Ghosh said. Since the passage of the Uyghur Forced Labor Prevention Act (UFLPA), brands have also become increasingly bullish about identifying risk in their supply chains. “Forced labor, or worker conditions more generally, is one of the key issues” brands are contending with today.
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“I think that thanks to the general focus on regulation by most of the western governments, action is picking up” on the part of brands, he added. Lawmakers and regulators have come to understand that the industry will not evolve quickly or significantly enough to help solve the climate crisis or lift up the markets within which it operates, he said. Fast fashion, or companies that operate with linear production models and produce on a large scale, are now under the microscope.
“I think many of these apparel brands do not know their full supply chain,” including Tier 1, Tier 2 and Tier 3 suppliers, the executive said. “They make many of their [sustainability] claims based on certain information that they have collected, but it’s not sufficient in most cases.” Traditionally, relationships between brands and suppliers have lacked a high level of trust, he added. “In some cases, it’s a very lopsided relationship favoring the brands.”
Therefore, suppliers aren’t incentivized to provide the in-depth reporting brands are now demanding. It’s not just a matter of developing a greater capacity for traceability, Ghosh said. Brands must develop deeper relationships with their suppliers built on trust. “The larger the brand, the more complex the supply chain,” he added, noting that TrusTrace works with global players like Adidas, Asics, Decathlon, Houdini and Brooks. Tracing a full product portfolio takes time, especially when a company operates across a breadth of categories.
According to Ghosh, Adidas has been using TrusTrace for four years to certify its material claims. As a part of the German sportswear label’s ESG commitments, it has pledged to transition to 100 percent recycled polyester by 2024, and by 2025, it aims to see 9 out of 10 products made with environmentally preferred materials. “At a product level if they want to make a claim that a product is made out of 30 percent recycled polyester, they build a complete chain of custody using our platform,” he explained. “They track right from Tier 3—what is the material received? What is the wastage? What is the output?” and that information becomes input data for the next product category that the brand aims to trace.
“Most of the outdoor brands and [performance] footwear companies—their consumers are typically more demanding when it comes to transparency,” he said. Hikers and trail runners are environmentally conscious because of their love of the outdoors, and want to buy from brands that mirror their values. According to Ghosh, outdoor companies are also typically producing more manageable volumes because their products are so technical. There are more components to track down for a complex hiking boot or trail runner than a T-shirt, but product assortments are typically smaller, making tracing supply chains a lighter lift. “Product portfolio or category, along with sourcing processes, have a big bearing on what kinds of data you can collect.”
TrusTrace aims to “remove as much friction” as possible from the process of tracing a supply chain, Ghosh said. “We leverage technology at a significant scale using the AI techniques that that are available in the industry.” The technology also uses a brand’s owned product data, like a bill of materials stored in a PLM system, and its ERP systems, which contain information about its roster of suppliers. “Our platform will typically integrate into these systems to collate all this information relevant to traceability,” he said. Suppliers can input the required data directly into the centralized system.
Ghosh said interest in traceability technology has ramped up significantly since last year, amid discussions about sustainability regulations in the E.U. and across the globe. “Our vision is to try to make all the value chains fair, circular and traceable,” he said. Brands are coming to realize that collaboration, not just visibility, is essential to improving the supply chain. “As you grow as a company and improve your sustainability performance, your suppliers are also improving. It’s a win-win situation we are able to create with them.”