Moving the needle

kpmg.com/cn

seraitrade.com

Moving

the needle

Threading a sustainable future for apparel

Content

Foreword

Executive summary

About the study

Data at the core of supply chain transparency

Transparency – a prerequisite for sustainability

The path to end-to-end transparency

Capabilities needed to deliver transparency

Developing effective strategies to achieve transparency

About KPMG

About Serai

Acknowledgements

Sustainability is deﬁned as meeting the needs of today

without compromising the ability of future generations

to meet their own. Consumers are increasingly

expecting organisations to take a sustainable approach

and consider their environmental, social and economic

impact. At the same time, governments are steering

businesses towards more sustainable practices through

new regulations.

The apparel industry has been behind the curve

when it comes to sustainability. While there is a

willingness to change and improvements have been

made, the adoption of sustainable practices remains

a work in progress. Issues such as the provenance

of raw materials and the carbon footprint of fashion

have emerged in recent years, but are yet to be fully

addressed. Working conditions in the industry remain a

key area of focus too.

Supply chain transparency is one of the core pillars to

create a more sustainable fashion industry. Without

visibility of the types of companies involved across

the entire value chain, as well as insight into all the

materials and components used, it is impossible for

Foreword

Vivek Ramachandran

Chief Executive Officer,

Serai

Lindsey Hermes

Head of Enterprise Solutions,

Serai

Anson Bailey

Head of Consumer &

Retail, ASPAC,

KPMG China

consumers and regulators to ascertain the sustainability

credentials of an item of clothing. This is exactly why

KPMG China and Serai have joined forces to take an

in-depth look into the current state of the apparel supply

chain and how the industry can move forward.

Moving the needle – Threading a sustainable future

for apparel is a research study based on a series

of extensive interviews with senior executives in

the industry as well as a global survey. It ﬁnds that

technology will be a necessity if the industry is to

gain end-to-end transparency. It also sets out how

relationships between brands, retailers and suppliers

need to become more collaborative if we are to make

industry-wide progress and facilitate the sharing of

information across all links in the supply chain.

We hope that this report provides you with valuable

insights and we welcome the opportunity to discuss

these ﬁndings further. We would like to thank all

interviewees and survey respondents for their input,

which has been instrumental in shaping the discussion

on how the industry can achieve a more sustainable

future.

Pat Woo

Global Co-Chair,

Sustainable Finance,

KPMG China

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

Executive summary

Sustainability has become a core theme in the apparel industry. It

encompasses many different facets: from working conditions in garment

factories to the origins of raw materials and the environmental impact of

the wider industry, as highlighted at the COP26 climate conference. It is

also an issue that continues to evolve and may yet see other aspects such

as water usage and fair wages come under the spotlight in the future.

Pressure for the industry to change has come from three directions. On

the one hand, consumers are taking a greater interest in the sustainability

credentials of fashion. They are also putting that interest into their

purchasing intentions. Meanwhile, governments around the world are

introducing new regulations around how clothing is produced and what

materials have been used. Lastly, Environmental, Social and Corporate

Governance (ESG) factors have become a key focus for the investment

community and are impacting the industry too.

Supply chain transparency is an essential component to meet these

demands for sustainability. Without visibility of all the companies across the

entire supply chain and traceability of all materials and components used,

the sustainability credentials of the industry cannot be ascertained.

This report comprises an in-depth study into how the apparel industry

is responding to these calls for greater transparency. Based on in-depth

interviews with industry insiders, as well as through a global survey among

senior executives, we have identiﬁed the following trends:

• Transparency capabilities are still low

The overwhelming majority of companies operating in the apparel industry

ﬁnds supply chain transparency to be an important issue. Yet good

intentions have not led to tangible transparency outcomes. Only 19 percent

of respondents to the survey claim to have full visibility of all stakeholders

operating across the entire supply chain, while merely 15 percent have full

traceability of the materials used to produce their products.

• Fixation on reducing costs has hampered progress

Apparel supply chains have prioritised cost minimisation over the last few

decades, driven by consumer demand for cheap fashion. This ﬁxation on

margins has come at the expense of supply chain transparency, with high

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

investment costs identiﬁed by respondents as the largest barrier towards

achieving transparency. A lack of resources is also raised as a major

challenge – particularly for smaller brands and suppliers. If industry-wide

progress is to be made, cost-effective solutions need to become available

for all stakeholders in the supply chain.

• Dependence on manual systems to track visibility and traceability

Entrenched operating practices, low margins and the high degree of

complexity in today’s apparel supply chains mean that over half of all

respondents still have manual processes in place to track both visibility

and traceability. The adoption of digital technologies will be key towards

capturing material ﬂows across the supply chain and to gain visibility of

the entire network. While more than 80 percent of the industry plans to

have a transparency solution in place by 2027, a greater sense of urgency

is needed to respond to increased demands for information from both

consumers and regulators.

• Data standards needed to facilitate flow of information

Half of all apparel companies struggle to achieve transparency because of

difﬁculties in obtaining and managing information from other stakeholders

in the supply chain. Supply chains need to ensure consistency in the

way data is collected, shared and consolidated. A consortium of apparel

brands, retailers, suppliers and related stakeholders such as government

agencies should come together to agree on data-sharing protocols and

the technologies that will govern this process. A platform that connects all

industry participants will help facilitate standardisation and the exchange of

data.

• Sustainable approach can provide boost to margins

Investment in sustainability and transparency is often seen as a cost rather

than an opportunity. However, this report ﬁnds that taking a sustainable

approach can provide a host of ﬁnancial beneﬁts to apparel companies,

including lower costs of capital and reduced insurance rates. Analysis by

KPMG ﬁnds this could boost net proﬁt by 1-1.5% for apparel brands and by

1.5-2.5% for suppliers. The industry therefore needs to view transparency

as a critical component of its competitive advantage.

• Collaboration is key to a sustainable future

Traditionally hierarchical relationships in the industry – in which brands

and retailers have the upper hand on suppliers – require a reset. A more

collaborative, partnership-based model will create a foundation of trust that

can facilitate the ﬂow of information between all stakeholders in the supply

chain. Rather than having individual companies focus on the areas that are

under their direct control, initiatives need to span the entire length of the

supply chain if the industry is to move towards a more sustainable future.

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

About the study

This report examines how supply chain transparency is going to be one of

the key drivers of change in the global apparel industry over the coming

decade. It looks at the industry’s current supply chain capabilities and

the need for greater visibility and traceability. It also identiﬁes the barriers

that are currently holding back supply chain transformation, as well as

investment priorities for the coming years as the industry responds to

consumer demand for sustainable fashion and increased regulations from

governments around the world.

The study draws on the ﬁndings of a global survey of 202 senior executives

in the apparel industry conducted in August 2021. Respondents represent

brands and retailers, suppliers, manufacturers and sourcing agents of

varying sizes. Brands and retailers are the ﬁnal link in the supply chain

before products reach end consumers. Suppliers can be subdivided into

tier 1 (manufacturers), tier 2 (suppliers that weave fabrics), tier 3 (yarn

producers) and tier 4 (producers of ﬁbres and other raw materials).

Respondents are headquartered in Asia Paciﬁc, North America and Europe.

They work in a wide range of roles and departments, including c-suite,

supply chain management, sourcing and procurement, manufacturing and

operations, compliance and risk, technology and sustainability. The largest

proportion of respondents are based in Asia Paciﬁc. It should be noted that

not all ﬁgures add up to 100% due to rounding.

To provide a comprehensive analysis of the key challenges and

opportunities facing the industry, and as a basis for the recommendations

to build a more sustainable apparel industry, the survey’s ﬁndings were

supplemented by in-depth interviews with executives at more than a dozen

market-leading apparel brands, manufacturers, associations and solution

providers.

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

Business type of survey respondents

Roles of survey respondents Annual revenue of respondents'

business

28% 30%

42%

Large-sized company (US$1bn or above)

Medium-sized company (US$500-999m)

Small-sized company (US$0-499m)

16%

Europe

59%

Asia Pacific

24%

North America

Regional breakdown of survey respondents

Tier 1

supplier

Tier 2

supplier

Tier 3

supplier

Tier 4

supplier

Sourcing

agent

Others

76%

Brand/

retailer

34%

21%

10%

11%

23%

46%

Source: KPMG/Serai survey analysis

* Respondents could choose more than one category

Executive level

Supply chain

management

Sourcing/procurement

Manufacturing/

operations

Technology

Compliance/legal/risk

Sustainability

Others

15%

16%

20%

34%

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

In recent years, calls for the apparel industry to become more sustainable

have grown louder. At ﬁrst glance, requests for more information on how

products are made and the origins of materials seem reasonable. However,

that does not take into account the way the global apparel supply chain

has evolved over decades to meet one objective: cost minimisation. That

push for cost efﬁciency has come at the expense of transparency. Most

companies just do not know who is in their supply chain as they go further

upstream.

Underpinning this lack of transparency is an industry that still hinges on

physical contact, such as visiting trade shows, walking factory ﬂoors

and conducting in-person audits. These sorts of business practices have

become untenable – not only due to the current COVID-19 pandemic, but

also because the complexity of today’s supply chains makes it incredibly

difﬁcult to exchange and share all of the required information.

With manual processes still widespread in the industry, it is encouraging to

see that this report ﬁnds that the majority of brands, retailers and suppliers

understand the need to invest in solutions that will achieve greater

transparency in their supply chains. Yet, it is also concerning that nearly half

are only planning to have a transparency solution in place by 2025 at the

earliest.

Data at the core

of supply chain

transparency

Vivek Ramachandran

Chief Executive Officer,

Serai

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

Transparency tools are not going to be a ‘nice to have’ – they are a ‘must

have’. Companies that don’t adopt these will lose a huge competitive

advantage. There is also a ﬁrst mover advantage to be gained by being able

to shape the solution, rather than adopting a solution that other people have

set the standards for.

It is worth pointing out that achieving supply chain transparency will not

require futuristic technology that does not exist today. At Serai, we have

built a platform that is plug-and-play and allows companies to interface

with existing solutions. This means the cost of adoption is much lower

than it has been historically. It is also a scalable platform that can easily be

expanded across use cases.

Moving forward, I would urge the industry to work together as it transitions

to a more transparent supply chain and build more sustainable practices.

Brands and retailers must incentivise suppliers by giving them more

business if they are able to provide full transparency and are aligned

together in their mission for sustainability in the long term. Network

beneﬁts need to be realised for those companies that are willing to work

together. Collaboration across the supply chain is key for success.

Businesses also need to think strategically. Today, the major issue

impacting the industry is cotton traceability, but tomorrow it will be carbon

footprints or water consumption. Solutions need to be able to grow with

the industry’s needs, as opposed to adopting something that is unable to

cope with tomorrow’s issues. This will also help increase the resiliency of

supply chains.

If the industry is unable to pull together all the different data that exists

across the ecosystem, it will be impossible to solve the underlying problem

of transparency. This in turn becomes an existential threat, as having bad

actors in the supply chain has the potential to derail an entire business.

Companies must act now if they are to meet the growing demands placed

on the industry.

Businesses need to think strategically. Today, the major issue

impacting the industry is cotton traceability, but tomorrow

it will be carbon footprints or water consumption. Solutions

need to be able to grow with the industry’s needs.

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

Transparency –

a prerequisite for

sustainability

Sustainability within the apparel industry has come under the spotlight in

recent years – and not without reason. The fashion industry is estimated to be

responsible for 10 percent of global carbon emissions, according to the United

Nations. Its environmental impact on the planet includes pollutants from dyeing

processes, the use of large volumes of water to grow cotton and the release of

micro-ﬁbres from synthetic materials into the ocean.

Scope 3 emissions have also become an area of concern. These represent

all indirect emissions generated by supply chain partners upstream and

downstream of an organisation.

Walking the talk on sustainability issues is something that

apparel companies can no longer afford to ignore. Consumers

nowadays have so much more information on the sustainability

credentials of products, as well as the companies behind

them and their impact on the wider community. The COP26

climate summit has also highlighted the need for the industry

to change. Greater transparency means that brands will be held

accountable, however it also opens up opportunities to better

manage inventories, introduce more agility and achieve greater

collaboration across the entire supply chain.

Anson Bailey

Head of Consumer & Retail, ASPAC, KPMG China

Moving the needle - Threading a sustainable future for apparel

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To their credit, many retailers, brands and suppliers have started to implement

change. As far back as 2010, 19 businesses launched the Sustainable Apparel

Coalition (SAC), which is now the world’s leading organisation committed to

cleaning up the fashion industry. And since its release in December 2018, more

than 100 companies have signed the UN’s Fashion Industry Climate Charter, with

its call for the industry to have net-zero greenhouse gas emissions by 2050.

Consumers continue to shape the

industry

Changing consumer attitudes are a major reason why sustainability has risen up

the agenda for many apparel businesses. There is a growing amount of research

that points towards increased consumer interest in the origins and sustainability

record of fashion – particularly among the young. Consumers are also

increasingly willing to pay more for sustainable products, so it can be potentially

lucrative for brands to differentiate themselves this way.

This trend appears to have accelerated during the COVID-19 pandemic, with

consumers having taken the opportunity to reassess their consumption

habits. For instance, a KPMG study in 2021

found that since the beginning of

the pandemic, 68 percent of Hong Kong consumers and 65 percent of those

from Greater Bay Area cities in mainland China have become more conscious

of a product’s origins. However, there are still differences between purchase

intentions and actual behaviour of consumers.

The industry itself is also showing concerns about the impact of transparency on

corporate reputation, with over half of the 200-plus companies surveyed for this

report indicating this as the main driver for transparency. This is particularly the

case for retailers and brands in North America and Asia Paciﬁc, who are keen to

manage the downside risks to their corporate reputation if they are found to have

problems in their supply chain.

Brands want to be able to tell a story about the garment you're

wearing, right down to what material is in the button, to all the

individual parties involved in creating the collection. This won't be

possible if we don't have a holistic view across the end-to-end

supply chain. The leading brands of tomorrow will be collaborative

and value transparency, not just on the production line but in

everything they do.

Sandy Lau

Chief Growth Officer, Serai

Retail’s Realignment, KPMG, 2021

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

Suppliers on the other hand are more motivated to improve supply chain

transparency as part of their business goals, as this could open up business

opportunities with brands and retailers that are positioning themselves as

sustainable or need to comply with stricter regulations.

It should also be noted that corporate reputation is closely linked to customer

expectations (mentioned by 31 percent of all respondents as a key driver for

transparency) and demands from investors and shareholders (25 percent).

Environmental, Social and Corporate Governance (ESG) factors have become

a key focus for the investment community. This is expected to strengthen

further over the coming years and is yet another driver for greater supply chain

transparency.

Developing closer relationships across the entire supply chain

does not only make sense from a transparency point of view.

COVID-19 and the associated disruption across global supply

chains have highlighted the need for greater collaboration in the

industry. Having strong partnerships across our entire supply

chain allowed us to weather this storm as a team. The PUMA

Vendor Finance Program – which is a financing programme that

rewards suppliers’ sustainability performance – was very valuable

in allowing us to work closely together with our manufacturers

and customers to overcome any challenges that they were facing

during this period.

Anne-Laure Descours

Chief Sourcing Officer, PUMA

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

SuppliersBrands/retailers

59%

39%

38%

29%

23%

21%

17%

15%

11%

33%

Corporate reputation

Business goals

Operational

excellence

Internal risk

management

Customer

expectations

Investor/shareholder

pressure

Market risk

Employee morale/

retention

Regulatory pressure

Pressure from

peers/media/NGOs

52%

33%

37%

32%

29%

23%

21%

17%

20%

25%

Drivers of supply chain transparency

Percentage of respondents that selected a driver among their top three

Source: KPMG/Serai survey analysis

Breakdown of respondents that ranked corporate

reputation among their top three drivers of supply chain

transparency

Source: KPMG/Serai survey analysis

SuppliersBrands/retailers

Asia-Pacific

Europe

North America

59%

54%

61%

Asia-Pacific

Europe

North America

52%

57%

45%

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

Regulatory environment is also a major

driver

Alongside consumer demand for greener fashion, government regulations

on sustainability will inevitably tighten. The apparel industry’s sustainability

performance has historically been under-regulated. Up until now, the majority of

efforts to clean up the sector have been voluntary. Mandatory enforcements, on

the other hand, are becoming increasingly prevalent.

For example, Sweden is planning to impose a tax on apparel products containing

harmful chemicals that may cause cancer or allergies. France passed a law to

prohibit the destruction of excess apparel products and it also intends to enforce

‘carbon labels’ on products as part of a Climate Bill. In Germany, a due diligence

law will come into effect in 2023, which requires large companies to conduct

human rights and environmental due diligence on their direct suppliers.

Apart from taxation and due diligence regulations, import restrictions are also

being introduced in some markets if products do not meet certain requirements.

For instance, the Withhold Release Order, implemented by the United States

Customs and Border Protection (CBP) agency, prohibits the importation of goods

that are determined to involve forced labour.

Transparency around working conditions in the fashion industry

has already been an issue for years. Retailers and brands are now

requiring more transparency around the source of fabrics and their

environmental impact. That’s the side where I expect there to be

a lot of evolution over the coming years.

Pallak Seth

Vice Chairman, PDS Multinational Group

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The Withhold Release Order (WRO) has made importing apparel products

into the US market increasingly difﬁcult. Importers need to submit over 50

documents per shipment to United States Customs and Border Protection

(CBP) to show proof of origin as well as information on the facilities that

products were manufactured in, regardless of manufacturing country.

Failure to comply means that shipments could be withheld at the border for

several months. In early 2021, a major global apparel brand had a shipment

detained at US borders because of insufﬁcient documentation on the origins of

its raw materials and manufacturing facilities. As submitted documents did not

satisfy CBP’s requirements, the products had to be either exported or disposed

under supervision. The entire process took nearly six months from when the

shipment was detained to the ruling by the CBP.

Increased attention by governments on sustainability issues is part of a global

trend and not just restricted to Europe and North America. In its 14th Five Year

Plan, covering the period up to 2025, China set growth targets for its apparel

and textile industry and promoted a shift towards smart manufacturing and the

introduction of green textiles. Vietnam is taking the environmental impact into

account when granting approval for foreign direct investment in textile projects.

Other major apparel manufacturing countries such as Sri Lanka are expected to

follow with tighter regulations of their own.

Lastly, the regulatory environment in the ﬁnance sector is also impacting the

apparel supply chain as regulators are requiring more oversight of ESG factors.

This means ﬁnancial institutions need more clarity about the business activities

and sustainability performance of their customers, which is driving the need for

more transparency. Financing may become more expensive for businesses that

are not pursuing a sustainable agenda.

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

Supply chain transparency defined

Supply chain transparency is key to meeting the challenges of tightening

regulation and growing consumer pressure for companies to extend

sustainability measures beyond their own operations.

A company has supply chain transparency when it fully understands what is

happening at every point in its supply chain. Ideally, this means putting in place

processes and mechanisms that allow a business to be able to monitor and

evaluate all relevant information.

There are two main components of transparency – visibility and traceability:

Visibility: when a company has a comprehensive view of all parties that play

a role in its supply chain, from farms and other suppliers of raw materials

used in its products, through to the companies responsible for processing,

manufacturing, distribution and logistics.

Traceability: when a company is able to trace all the materials and components

used in a product from their origins, through each step of processing and

manufacturing, to the ﬁnal good sold to a purchaser.

Supply chain transparency should not be associated with having to disclose all

information to everyone. Ultimately, it remains up to each company to decide

what data should be disclosed to whom.

The fashion supply chain

Consumers

Raw materials

(Tier 4 supplier)

Yarn

(Tier 3 supplier)

Manufacturing

(Tier 1 supplier)

Fabric

(Tier 2 supplier)

Brands/

Retailers

Source: KPMG

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

Source: KPMG/Serai survey analysis

Importance of supply chain transparency

Asia-Pacific

Europe

North America

28%70%

48%48%

33%67%

"Extremely important" "Somewhat important"

*Level based on how often an issue was ranked among respondents’ top three issues

Top supply chain issues to be solved in next 3-5 years

Source: KPMG/Serai survey analysis

Gaining end-to-end transparency

Getting value from data

Regulatory and compliance

Quality control and defects

Brand reputation

Optimise cash flow

Resilience to unexpected events

Shorten lead times

Exchange rate and foreign

transaction costs

30%

18%

16%

13%

Highest

Level of importance

Lowest

Industry recognises importance of

transparency

External pressure from consumers and governments has not gone unnoticed

in the apparel industry. In the survey conducted for this report, two-thirds of

respondents stated that supply chain transparency was “extremely important”

for their business, and nearly a third said it was “somewhat important”.

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

However, the ﬁndings suggest that transparency is a more pressing issue in

North America and Asia Paciﬁc than it is in Europe. This could be due to recent

regulatory moves in the US that place greater transparency requirements

surrounding how apparel is produced, with suppliers in Asia Paciﬁc keen to meet

those demands so as not to lose business opportunities. Regulation in Europe is

expected to catch-up to the US.

Through in-depth interviews with key industry players such as brands and

manufacturers it was found that many apparel ﬁrms still have limited visibility

on the factories and plants that work further upstream in the supply chain. It is

therefore not surprising to see that the survey indicates that gaining end-to-end

transparency is the major issue that needs to be solved in the medium-term.

Executives interviewed said that obtaining transparency will enable their

companies to monitor compliance with current and future regulations, as well

as give consumers the information they require before making a purchase.

An added beneﬁt would be that transparency could help identify areas where

efﬁciencies could be improved.

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

CIEL Textile, the garment and textile manufacturing arm of Mauritius-

headquartered CIEL Group, has been promoting sustainability across

its operations since the middle of the last decade. In 2017, it joined

the Sustainable Apparel Coalition (SAC) and a year later was a founder

member of the team that produced the UN’s Fashion Industry Charter

for Climate Change.

Sustainability is recognised as a key driver of innovation across its business,

so CIEL set up supply chain sub-committees in each business unit that looked

at waste emissions, traceability and compliance with labour laws. To date,

the company’s production operations in Mauritius, Madagascar, India and

Bangladesh all have Higg Index scores of 80 percent or above, indicating a good

sustainability performance.

The company’s sustainability initiatives were initially driven by its own managers

rather than external pressure, according to Bertrand Thevenau, Group Chief

Executive Ofﬁcer of CIEL’s Tropic Knits and Chairman of its Sustainability

Committee. “But now consumers and regulators are demanding far greater

supply transparency and it is more important than ever to ensure that our supply

chain is ethical and aligned with our core values,” he says.

One major challenge for CIEL Textile to achieve transparency was that multiple

systems and solutions are in use across the business. The diverse range of raw

materials used during manufacturing also makes achieving transparency further

upstream difﬁcult.

To solve these issues CIEL entered into a partnership with Serai in 2021. “We

chose to work with Serai as their solution grants us the ability to trace the origin

of raw materials and it integrates with global standards to monitor our suppliers’

sustainability performance,” says Thevenau.

“Serai’s Traceability solution lets us access and unify complex supply chain

information from multiple sources to gain full visibility over our global supply

chain. Having this system in place also allows us to collect and analyse data to

help us achieve our sustainability goals.”

Supply chain

transparency as

a dierentiator

Bertrand Thevenau

Group Chief Executive Officer,

Tropic Knits,

CIEL Textile

Trust and transparency

are the drivers of

today’s and tomorrow’s

partnerships –

traceability is part of the

foundation.

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

The path

to end-to-end

transparency

In the age of social media and the 24-hour news cycle, managing corporate

reputation is key as negative reports can have a signiﬁcant impact on revenues

and brand value. A majority of respondents to the survey acknowledge that

reputational risks are an important driver for greater transparency in the supply

chain.

Linked to this, companies operating in the apparel industry are willing to be open

about their transparency efforts, with 65% of all respondents disclosing their

traceability policy to the general public. This is especially true for suppliers in

North America and Europe, which are at a cost disadvantage to suppliers in Asia

Paciﬁc and may use their sustainability credentials to differentiate themselves

from lower cost competition.

Disclosure of supply chain traceability policy

Breakdown by region and business type of respondents that disclose their supply

chain traceability policy and results to the general public

Source: KPMG/Serai survey analysis

SuppliersBrands/retailers

Asia Pacific

56%

71%

Europe

81%

62%

North America

80%

75%

Moving the needle - Threading a sustainable future for apparel

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Full visibility and traceability are rare

Despite this willingness to be open about their supply chains, both the

executives that took part in the survey and those that were interviewed for this

report were candid in admitting the overall degree of transparency in the apparel

industry remains low.

Less than 20 percent of respondents said they currently had full visibility across

their supply chain, while only 15 percent said they had full traceability. Breaking

this down by company size, it is generally the larger companies that have more

advanced capabilities in traceability as they will have more clout to demand

information from their suppliers.

On the other hand, there was a higher proportion of smaller companies that had

full visibility. This reﬂects the fact that such companies may have less complex

supply chains to manage and ﬁnd it easier to gain an overview of all the different

parties along the supply chain.

Current state of visibility and traceability in the supply chain

Source: KPMG/Serai survey analysis

of respondents have full visibility in their

supply chain

19%

of respondents have full traceability in their

supply chain

15%

Moving the needle - Threading a sustainable future for apparel

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Lack of resources and costs are barriers

to achieving transparency

This study has identiﬁed several factors holding back the industry towards

greater transparency. Top of the list is cost, which was stated by over half of all

respondents as one of their top three barriers.

Low proﬁt margins are prevalent in the sector, therefore many transactions are

based on meeting a buyer's speciﬁcations at the lowest price. Historically, buyers

in the apparel industry have been judged and rewarded on short-term ﬁnancial

metrics. This means that it has been very difﬁcult to work on long-term structural

issues such as transparency.

Investments are also prioritised for initiatives where operational efﬁciencies

can be improved to lower costs and preserve margins. That said, achieving

operational excellence was previously found to be the third biggest driver of

supply chain transparency – so this is clearly not the case for all players in the

industry.

Linked to the issue of costs is a lack of resources. This reﬂects the industry’s

commodiﬁed nature and history of investing only in production rather than

looking for innovative sources of value. With the exception of brands, almost

all businesses in the apparel industry work on the basis of limited short-term

ﬁnancial beneﬁts. Tight production deadlines also hamper the ability of many

suppliers to take a longer-term view.

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Low digital capabilities were also highlighted by many respondents. However,

this should not necessarily be an impediment to improving transparency.

Transparency does not require signiﬁcant investment in technology. There are

technology platforms, for example, where stakeholders across the entire supply

chain can easily provide and access information on their companies and how

items or materials were produced.

Moreover, it should not be forgotten that human connections are also a critical

ingredient to foster trust and encourage the ﬂow of information down the supply

chain. Trust is essential in giving all stakeholders the conﬁdence to collaborate

and work towards a common goal.

There is a level of connection that people need to understand

when it comes to supply chain transparency. It is not just about

mapping and digitising a supply chain – it's about connecting

everyone in that supply chain. You cannot take out the human

connection that is needed to build trust for people to send you

data.

Anouschka Jansen

Director Sustainability Solutions, QIMA

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Top ranked barriers to achieving supply chain

transparency

Percentage of respondents that ranked a factor among their top three barriers

Source: KPMG/Serai survey analysis

Hard to obtain and manage data from

other players

High initial investment to

implement system

Insufficient resources to manage

traceability

Limited near-term financial benefits

Low level of technology and digitalisation

Fear that disclosure of information will

undermine competitive edge

Lack of incentive to change current

operations

54%

47%

42%

39%

36%

51%

27%

The fashion supply chain is complex

Executives interviewed for this report frequently cited the complexity of the

fashion supply chain as a key barrier towards greater transparency. Supply chains

typically comprise multiple tiers of suppliers spread across different countries

and sometimes continents. There will also be layers of agents, contractors and

sub-contractors.

Cotton yarn, for example, is often made of cotton from multiple sources over a

cycle that may have started six to 12 months earlier, then stored in a warehouse

for up to two years before being shipped to a spinning mill. In addition, there are

multiple components to a piece of apparel product that go beyond fabric such as

trimmings, buttons and packaging.

In addition, there is complexity resulting from the use of different systems

that are not able to talk to one another. The industry is often hampered by poor

quality and inconsistent data and this is not helped by the amount of handoffs of

information that need to take place throughout the process to meet compliance

with different regulators, customs requirements and with banks.

This sort of complexity makes it incredibly difﬁcult to establish visibility and

traceability across the entire supply chain, particularly for brands and retailers

at the end of the chain. Moreover, there is also a lack of technical expertise

on manufacturing at the brand and retailer level because those activities have

not been done in-house for generations. Without this knowledge, it can be a

challenge to judge the sustainability of a supply chain.

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Complexity of the apparel supply chain

Source: KPMG analysis

Many brands are now focused on consumer-facing activities such

as marketing, branding and retailing. They have outsourced all

other activities like manufacturing, logistics and distribution and

may no longer have deep understanding in-house in these areas.

But that’s where the industry’s carbon footprint lies.

Edwin Keh

CEO, The Hong Kong Research Institute of Textiles and

Apparel (HKRITA)

Cotton Producer

USA

Cotton Trader

Switzerland

Cotton Broker

China

Spinning Mill

India

Yarn Trader

Turkey

Weaver

India

Agent 1

India

Agent 2

Vietnam

Suppliers of trimmings

Japan, Vietnam, China

Dye

Vietnam

Brand/retailer

distribution centre

USA

End consumer

USA

Manufacturing

company

Vietnam

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Capabilities

needed to deliver

transparency

The result of the industry’s entrenched operating habits, low margins and high

degree of complexity is that a majority of companies continue to rely on manual

intervention for supply chain visibility and traceability. Particularly in developing

countries – where much production takes place – levels of digitalisation are

low. Many companies, especially upstream suppliers, still rely on paper forms,

spreadsheets or fax machines for their operations.

Among those polled in the survey, only 14 percent stated that they have fully

automated transparency systems in place for visibility and 13 percent for

traceability. Meanwhile, over half of all respondents still have manual processes

in place for those two components – more so for smaller and medium-sized

businesses.

Larger businesses will generally have more resources, such as dedicated

sustainability teams, and have already invested in IT systems to capture the data

they need. These larger companies also face greater scrutiny over their supply

chain practices by consumers and NGOs. However, if the industry as a whole is

to achieve a greater level of transparency, it will be critical to ﬁnd cost-effective

solutions for smaller brands and suppliers to monitor visibility and traceability.

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Supply chain transparency systems currently in use

Source: KPMG/Serai survey analysis

27% 28%

13%

23% 25%

14%

27%

35%

Manually tracked: 58%

Manually tracked: 54%

Traceability

Visibility

No capability

Manual tracking of supply chain

Manual tracking supported by system

Semi-automated system with low degree of manual intervention

Fully automated system with no manual intervention required

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What systems are currently in use?

The companies that have invested in supply chain transparency systems over

the last two years, have used a variety of approaches. Nearly half of the solutions

implemented (44%) comprised the addition of new capabilities onto existing ERP

systems, while just over a third represented custom-built internal architecture.

Third-party systems were used least frequently (21%).

These ﬁndings tie in with the previous chapter, which found that return on

investment and costs are important considerations in the apparel industry. It is

also notable that larger apparel companies are most likely to have invested in

their own solution and are least likely to use a third-party solution – suggesting

that ﬁnancial and IT resources are more constrained for smaller players.

Going forward, third-party systems are expected to increase their share as more

solutions become available, ﬁlling gaps where internal solutions or ERP systems

cannot meet transparency needs. Due to systems limitations or technical debt,

the trend for specialist smaller vendors looks set to rise.

Use of manually-tracked systems by company size

Source: KPMG/Serai survey analysis

Small-sized companies

(revenues of less than

US$500m)

Medium-sized companies

(revenues of US$500m to

US$999m)

Large-sized companies

(revenues of US$1bn or

more)

Traceability is

tracked manually

Visibility is

tracked manually

64% 60% 49%

57% 58%

44%

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Type of supply chain transparency solution invested in over

the last two years

Source: KPMG/Serai survey analysis

35%

44%

21%

Internal/custom-built architecture

New module as part of existing ERP system

Third-party system

Range of transparency solutions available in the market

Companies in the apparel industry that are looking to work with third parties for their transparency solutions have a

range of options to choose from. These broadly fall into two categories.

• Digital tools which allow for uploading, tracking and managing of data.

• Technical solutions that enable the monitoring of physical items such as raw materials and semi-ﬁnished goods as

they transition through the supply chain.

Among the providers of digital tools are Serai, which offers a platform where companies can collaborate with their

supply chain to gain a comprehensive view of business partners in a single place, with the goal of allowing companies

to understand and manage their supply chain risks. Digital platforms like Serai are plug-and-play and have a low cost of

adoption – they do not rely on advanced technologies that will be out of reach for smaller companies.

Textile Genesis is a notable example of a technical solution that uses blockchain technology to track and verify the use

of sustainable ﬁbres in garments. It combines this with the GS1 global traceability standard that is used in the food and

healthcare industries. Another player in this space is Oritain, which uses forensic science to verify a product’s origin by

measuring the chemical composition of soil, water and other feeds used in its raw materials.

Another promising solution is FibreTrace, which embeds pigments on ﬁbres at the raw material or spinning-mill stage

and then tracks the presence of those pigments at every further stage of the supply chain.

Companies are experimenting with hybrid approaches of digital and technical solutions, in addition to their existing ERP

or custom-built systems. There is no one size ﬁts all approach. Companies need to experiment to see what works best

for them. However, it would appear that the age of a single monolith system providing the golden source of truth in

terms of transparency are truly over.

*Respondents could select more than one option

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Brands and suppliers prioritise

transparency differently

When asked about their priorities for supply chain transparency, companies

overwhelmingly named either traceability or having greater visibility of their

supply chain partners – ﬁndings which point to the growing demand from

regulators in end markets for information about the source of products, their

inputs and the labour conditions under which they are made.

Traceability ranked highest, with 43 percent of respondents marking this

as their top priority. Not far behind was being better able to understand the

companies and other parties involved in the supply chain, picked by 38 percent.

Given upcoming regulations such as Germany’s Supply Chain Due Diligence

Act, companies will need to fully understand who their partners are to ensure

compliance.

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Top priorities for supply chain transparency

Source: KPMG/Serai survey analysis

One interesting point is that brands and suppliers have different views on

priorities. Suppliers place higher priority on traceability than brands, who

prioritise visibility. This highlights the need for suppliers to prove origin of

products as they are normally the ones who need to provide such documentation

to customs; whereas brands face reputational risks if their suppliers are found to

violate regulations.

Only 14 percent of respondents named collecting Environmental, Social and

Governance (ESG) information as their most important reason for supply chain

transparency. However, this is expected to become a more prominent factor as

investors and regulators increase their demands on information on sustainability

and the trend for sustainable ﬁnance gathers pace. As noted previously,

shareholders and regulators were identiﬁed by respondents as a driver for

transparency.

Consumers are asking more questions about not just the place of

manufacturing of a product, but also the raw materials that were

used and where these came from. Being 100 percent transparent

will lead to more orders for suppliers.

Edgar Tung

COO, Esquel Group

Suppliers

Brands/retailersAll respondents

17%

36%

42%

12%

44%

40%

14%

38%

43%

Trace products to raw materials and facilities involved

Understand companies/partners involved along the supply chain

Collect and map ESG data from supply chain

Disclose supply chain information externally

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Majority of companies plan to have a

transparency solution in place by 2027

Supply chain transparency tools are expected to become table stakes, with

companies using these solutions to build insight and even perhaps foresight to

drive competitive advantage. Among the executives surveyed for this report, the

need to invest in transparency solutions is broadly accepted. However, the divide

is over exactly when action will be taken.

Just over a third of brands and suppliers said they expected to implement a

transparency solution within one to three years. Another third of both brands

and suppliers said they would be doing so in four to six years. With 18 percent

of brands and 17 percent of suppliers having already put a solution in place, that

means that more than 80 percent of the industry should have a transparency

solution in place by 2027.

The question is whether that is fast enough. There is a ﬁrst mover advantage in

adopting a solution sooner rather than later. Companies that have traceability and

visibility solutions in place are already able to differentiate themselves through

their transparency credentials. With consumer demand for sustainable brands

expected to intensify over the coming years, it could be too late for companies to

wait until 2027 to gain transparency.

The majority of companies intend to invest less than US$1m in supply

chain transparency solutions over the coming three years. In terms of those

committing to more than US$10m in investment, this is mainly done by larger

retailers. These types of businesses will have more ﬁnancial resources at their

disposal, but also face direct pressure from consumers for greater disclosure on

their supply chains.

Transparency tools will become table stakes to play in apparel.

Companies will then use these solutions to create insight and

perhaps even foresight to drive competitive advantage. There

is no one size fits all approach though. Companies need to

experiment to see what works best for them. However, the age

of a single monolith system providing the golden source of truth

in terms of transparency are truly over.

James O’Callaghan

Head of Technology Enablement and Technology Consulting,

KPMG China

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Source: KPMG/Serai survey analysis

18%

17%

37%

35%

32%

31%

Suppliers

Brands/

retailers

Expected timeframe to implement a transparency solution

Already implemented In 7-9 years

In next 3 years In more than 10 years

In 4-6 years No plan to implement transparency system

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Planned investment in building supply chain transparency

over next three years

Source: KPMG/Serai survey analysis

No investment planned in next 3 years

< US$100k

US$100k – US$1m

US$1m – US$10m

> US$10m

Not sure

10%

24%

29%

22%

Brands/retailers Suppliers

22%

32%

25%

12%

Sustainable approach can transform

businesses and boost margins

Taking a sustainable approach can bring a number of beneﬁts to organisations

across the supply chain:

• Forge stronger relationships. The gathering and sharing of structured

information could result in increased trust and help the industry to move away

from the purely transactional relationships that have long dominated the

industry, to more collaborative and strategic ones.

• Improve decision-making: Companies will be able to generate new insights

based on their deeper understanding of their supply chains, leading to better

decision-making and supplier management, greater competitiveness and,

possibly, new business opportunities.

• Enhance risk management: It will become easier to spot the use of

materials from unidentiﬁed or sanctioned sources. Combined with a strong

general business awareness, this could help companies take a more

proactive stance in anticipating changes in regulations or trade regimes and

also react faster when such changes occur.

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• Increase orders and sales. All things being equal, brands and suppliers

should expect to see increased orders and sales. Brands will be able to reach

consumers that are willing to pay a premium for sustainable products. A

study by KPMG showed that 13 percent of consumers are willing to pay a

premium of 25 percent for sustainable fashion items.

This demand will also

trickle down to suppliers that are able to produce sustainable fashion.

• Improve profitability. Research indicates that businesses with higher

sustainability scores have a lower cost of capital, while improved risk

management arising from greater transparency lowers both insurance

rates and the risk of being ﬁned or subjected to other regulatory penalties.

According to analysis by KPMG, a sustainable apparel business can expect to

have an average increase in their net proﬁt of 1-1.5% for brands and by

1.5-2.5% for suppliers.

Impact of investing in transparency on net profit

Source: KPMG analysis

Expected increase in net

profit for brands

Expected increase in net

profit for suppliers

1.0 ~ 1.5%

1.5 ~ 2.5%

Gap Inc.'s commitment to sustainability is to empower women,

enable opportunity and enrich communities. We aspire to

complete transparency throughout the value chain. The challenge,

and our opportunity, is to integrate transparency and collaboration

into all upstream elements from textile manufacturing, to

processing and finishing. We will continue to connect with other

retailers, industry partners, public partners and tech companies to

set goals and measure progress.

Christophe Roussel

EVP, Global Sourcing, Gap Inc.

Sustainable Fashion, KPMG, 2019

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A few years ago, supply chain transparency was not high on the

agenda for apparel companies. It has now become a norm in the

industry, says Sunil Daryanani, joint CEO of Epic Group, a Hong Kong-

headquartered apparel manufacturer and design services corporate

group.

Demands from consumers that stores and brands provide transparency and

disclose information are cascading up the supply chain to manufacturers, says

Daryanani. The reason: with all industries becoming more digital and being able

to gather and share data efﬁciently, the public now sees having access to that

information as a right.

Dinesh Virwani, joint CEO, points out that consumers’ aspirations have changed.

They want to understand how and where the products they are acquiring are

made. Global issues such as climate imbalance and COVID-19 have accelerated

this trend. Consumers and retailers alike are now making efforts to evaluate the

impact of their purchasing on sustainability.

A tool that consolidates and centralises communication and

moves data onto a single platform boosts collaboration along the

entire supply chain.

Sunil Daryanani

Joint CEO, Epic Group

Tackling

ineiciencies of

manual transparency

processes

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With many regulators around the world demanding increased levels of

information regarding the origins of materials and the companies involved,

supply chain transparency has become a must for the industry. While the form

of a roadmap for sustainability development is starting to take shape, progress

cannot be seen on the day-to-day transaction level. People will need to take a

step back and look at the industry with a holistic view in order to move forward.

A key challenge for companies is that traceability and visibility are still largely

tracked through manual processes. Currently, Epic Group uses an internal

system to track its dealings with its suppliers. This process still relies largely on

the manual operation of gathering and controlling a large number of documents

and then collating the information in spreadsheets and shared folders.

By using Serai, Epic Group can integrate and consolidate all its relationships and

data onto a single platform, saving a considerable amount of time in having to

manage and verify the information. It also meant the company did not have to

spend time and resources on developing its own automated system.

It also gives Epic Group the conﬁdence that there is no hidden or lost

information. A tool that consolidates and centralises communications and moves

data to a single platform enormously helps collaboration, comments Daryanani.

By working with Serai, Epic Group no longer needs to send through a large

number of documents to its customers and can simply give access to the

platform to share the required information. Aside from reducing its workload,

Epic Group will be able to differentiate itself through the completeness and

timeliness of the information that it can provide to its customers.

Consumers want to understand how and where the products they

are acquiring are made. Global issues such as climate imbalance

and COVID-19 have accelerated this trend. Consumers and

retailers alike are now making efforts to evaluate the impact of

their purchasing on sustainability.

Dinesh Virwani

Joint CEO, Epic Group

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Developing eective

strategies to achieve

transparency

Supply chain transparency is a cornerstone of the apparel industry’s efforts to

become more sustainable. It is therefore not surprising to see that the survey

has found that gaining full transparency throughout the end-to-end supply chain

is the single biggest issue that executives want to solve in the short to medium-

term. While there are certainly good intentions, actually transforming operations

and realising the strategy has proven to be a major challenge.

For the industry to move towards a sustainable future, companies need to adopt

a comprehensive, structured and systematic approach to change. As a starting

point, the following ﬁve considerations should be taken into account:

1. Internal alignment

Aligning a company’s internal vision, deﬁnition and direction on transparency

within the corporate strategy is the ﬁrst step to achieving genuine transparency.

Gaining acceptance and cross-functional alignment of the company’s strategic

transparency goals, including a general approach and timeframe, is critical. This

will facilitate communication and collaboration with both internal and external

stakeholders.

It is important that companies align every relevant process, function and

relationship in the business towards the achievement of sustainable growth.

Business stakeholders across the entire organisation need to be involved in

setting enterprise-wide aligned transparency goals.

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2. Implementation framework

Once a company’s overall vision for transparency has been deﬁned, a strategic

framework to implement transparency needs to be designed. Different

departments should be able to disseminate this framework easily, allowing for

a consistent approach. Before actual implementation, a detailed and practical

approach on how to achieve the desired goals is also key. For example, data

structures and formats need to be drawn up and minimum data requirements

set, the type of solutions needed should also be agreed on and potential

partnership or outsourcing requirements laid out.

With a clear implementation framework in place, action plans should be set and

then strictly followed by key stakeholders to ensure processes are aligned with

overall goals.

3. Build a fact-based supply chain

Companies should start by gathering information that will illustrate the origins

and network ﬂows of all materials, highlight their supply chain trading partners

and how they work together. The fact base should also be able to ascertain

credentials for trading partners, whether farms or businesses, and show how

their facilities contribute to environmental and social issues that concern the

industry.

This information would form the basis of a detailed supply chain map. It should

be noted though that mapping is a continuous process that is never ﬁnished

as supply chain relationships constantly change over time. The process of

connecting with related parties can be highly impactful in building trust and

strengthening relationships across the supply chain, which in turn will facilitate

the willingness of stakeholders to share information.

Today, leading businesses are focused on how to make the

supply chain much more transparent, in order to understand

who is in their supply chain up to the raw material. That's where

every company needs to start. Supply chains in the future are

going to get a lot more streamlined, open and data driven, thanks

to technology. This data can then be instrumental in helping

businesses not only make more informed decisions, but more

sustainable decisions. Supply chain technology must support

the evolving needs of both risk mitigation and opportunity

development -- you have to be able to play both offense and

defence at the same time.

Lindsey Hermes

Head of Enterprise Solutions, Serai

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4. Data collection and consolidation

The gap between strategic intent and achieving tangible transparency outcomes

is driven to a large extent by a lack of access to quality and consistent data.

The adoption of digital technologies can help capture the necessary material

ﬂows and illustrate the extent of the network. This will provide the visibility and

traceability that is needed to create transparency.

Companies need to identify where and how data is collected – both in internal

systems and externally – and storage/sharing rules. This will clear the way for

data to be processed, consolidated and accessible by all participants operating

within the supply chain. To ensure the effective consolidation of information, it is

essential that data-sharing protocols are established and that this governance is

supported by technologies and tools.

5. Data analysis and risk management

Once data is consolidated, companies should have the information they need

to generate actionable insights. Clear protocols at this point will allow for the

transformation of information gathered into actionable business insights and

improved risk management. Companies can also utilise tools from both third-

party solution providers or in-house systems to incorporate the collected data

into risk management processes.

Executives have had transparency on their radar for a long time,

but there is still a big gap between strategic intent and achieving

tangible outcomes. Companies must become connected

organisations and align every functional process, related data

and systems, and relationship in the business towards the

achievement of sustainable growth. If stakeholders are not

aligned to enterprise-wide transparency goals, a wrong decision or

misguided action could undo all the goodwill that an organisation

has created.

Peter Liddell

KPMG Partner, Global Leader Operations Centre of Excellence

(Supply Chain, Procurement, Operations Excellence)

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Strengthening capabilities

The ﬁndings of this report underline that apparel companies need to build their

capabilities in several key areas if they are to achieve their goals for improved

transparency in the supply chain. These are as follows:

• Changed mindset and ways of working. Both brands and suppliers will need

to embrace the urgency of reaching full transparency in their supply chains.

This means transparency needs to shift from being a ‘nice-to-have’ concept to

making it a critical component that will ensure business survival. This change

needs to be led by the leaders of the business.

• Aligned data standards. To put in place the necessary data collection

mechanisms, and to ensure the data collected is of an appropriate quality,

companies will have to work with supply chain partners to establish and

apply data consistency. An intermediary could be in charge of facilitating the

collection and exchange of data across the supply chain. It is also possible

that this is done by a consortium of stakeholders, regulators, government

agencies and solution providers.

• Use of digital technologies. A basic level of technological capabilities will

be needed to collect and share information. At a minimum, companies will

need to replace manual processes with dedicated supply chain information

systems or platforms. They need to ensure these systems are capable of

sharing data with other parties in the supply chain.

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• Enhanced relationship management capabilities. In order to work with

all partners along their supply chains, companies will have to strengthen

their ability to build and manage relationships with government ofﬁcials,

partners, industry bodies and related businesses such as transport providers.

Historically, large brands and retailers have had the power to initiate

change. To achieve an industry-wide shift towards transparency, hierarchical

relationships need to become more balanced.

• Organisational capabilities. Companies need to build up talents who

understand transparency and reporting requirements against relevant

standards, certiﬁcations and technology platforms. Talent should also have

experience with emerging sustainability challenges such as living wage and

circular economy textiles. Upskilling across the industry will be an important

driver for change.

Achieving a sustainable future

Supply chain transparency has the potential to bring multiple beneﬁts to

companies across the apparel industry. It can be a tool for identifying areas

where efﬁciency can be improved. It can be used to provide consumers

with the information about products that they want to know before making a

buying decision. It can be used to monitor compliance with existing and future

regulations.

This report ﬁnds that while there are certainly strong intentions in the industry to

become more transparent, the actual outcomes of initiatives are still falling short.

There appears to be a lack of urgency by many companies to deal with a range

of issues. Companies are not realising that this could ultimately impact their

competitive position.

Apparel companies that have already invested in improving transparency in their

supply chains are ﬁnding that there are clear ﬁrst-mover advantages in doing so.

Consumers around the world are demanding more sustainable fashion and –

crucially – are willing to pay more for such products. As highlighted in this report,

there are myriad ﬁnancial and organisational beneﬁts to be gained by becoming

more sustainable.

If the fashion industry is to move forward, supply chains will need to become

more forward-looking, customer-driven and predictive. They should not only be

able to deal with the issues impacting the industry today, but also build resilience

to deal with tomorrow’s sustainability challenges.

Transparency initiatives also need to become more impactful by spanning the

entire length of the supply chain, rather than merely focusing on areas that a

company can directly control. Traditionally adversarial relations between retailers

and brands on the one side, and suppliers and manufacturers on the other, should

give way to a more collaborative and partnership-based approach. By joining

forces, the industry will be able to build the necessary capabilities to achieve a

sustainable future.

In a world

moving

towards

a low

carbon

economy,

achieving

visibility and traceability

throughout the supply

chain will be critical

to understanding the

carbon footprints

of apparel items.

Technology to capture

this data is a must

going forward. ESG

performance will be a

factor in a company’s

access to and cost of

capital.

Pat Woo

Global Co-Chair,

Sustainable Finance,

KPMG China

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Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

About KPMG

KPMG China is based in 28 ofﬁces across 25 cities with around 12,000

partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou,

Guangzhou, Haikou, Hangzhou, Hefei, Jinan, Nanjing, Ningbo, Qingdao,

Shanghai, Shenyang, Shenzhen, Suzhou, Tianjin, Wuhan, Xiamen, Xi’an,

Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across

all these ofﬁces, KPMG China can deploy experienced professionals efﬁciently,

wherever our client is located.

KPMG is a global organisation of independent professional services ﬁrms

providing Audit, Tax and Advisory services. We operate in 146 countries and

territories and in FY20 had close to 227,000 people working in member ﬁrms

around the world. Each KPMG ﬁrm is a legally distinct and separate entity and

describes itself as such. KPMG International Limited is a private English company

limited by guarantee. KPMG International Limited and its related entities do not

provide services to clients.

In 1992, KPMG became the ﬁrst international accounting network to be granted

a joint venture licence in mainland China. KPMG was also the ﬁrst among the

Big Four in mainland China to convert from a joint venture to a special general

partnership, as of 1 August 2012. Additionally, the Hong Kong ﬁrm can trace

its origins to 1945. This early commitment to this market, together with an

unwavering focus on quality, has been the foundation for accumulated industry

experience, and is reﬂected in KPMG’s appointment for multi-disciplinary

services (including audit, tax and advisory) by some of China’s most prestigious

companies.

Anson Bailey

Partner, Head of Consumer &

Retail, ASPAC

KPMG China

+852 2978 8969

[email protected]

James O’Callaghan

Partner, Head of Technology

Enablement and Technology Consulting

KPMG China

+852 2143 8866

[email protected]

Peter Liddell

Partner, Global Operations Centre

of Excellence Leader (Supply Chain,

Procurement, Operations Excellence)

KPMG Australia

+61 408 141 037

[email protected]

Jessie Qian

Partner, Head of

Consumer & Retail

KPMG China

+86 21 2212 2580

[email protected]

Pat Woo

Partner, Global Co-Chair,

Sustainable Finance,

KPMG China

+852 3927 5674

[email protected]

Willi Sun

Partner, Strategy Consulting,

Consumer & Retail

KPMG China

+86 21 2212 3740

[email protected]

Alice Yip

Partner, Head of Consumer and

Industrial Markets, Hong Kong

KPMG China

+852 2978 8152

[email protected]

Fergal Power

Partner, Advisory

KPMG China

+852 2140 2844

[email protected]

Richard Lin

Partner, Supply Chain

KPMG China

+852 3927 5909

[email protected]

Wei Lin

Partner, Head of

Environmental, Social

and Governance

KPMG China

+86 21 2212 3508

[email protected]

Irene Chu

Partner, Head of

New Economy & Life

Sciences, Hong Kong

KPMG China

+852 2978 8151

[email protected]

Alice Leung

Partner, Tax

KPMG China

+852 2143 8711

[email protected]

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

About Serai

Serai is an online B2B platform with a mission to simplify global trade.

Today, over 16,000 buyers and suppliers across 110 countries are on the Serai

platform, leveraging the power of our secure solutions to ﬁnd and trade with new

partners, and learn more about their existing network.

Serai’s supply chain solutions empower brands and manufacturers to make data-

driven risk management decisions while promoting transparency and trust.

Learn more at www.seraitrade.com

Vivek Ramachandran

Chief Executive Officer

[email protected]

Sandy Lau

Chief Growth Officer

[email protected]

Lindsey Hermes

Head of Enterprise Solutions

[email protected]

Katrina Duck

Business Development Lead

[email protected]

Wei Lin

Partner, Head of

Environmental, Social

and Governance

KPMG China

+86 21 2212 3508

[email protected]

Irene Chu

Partner, Head of

New Economy & Life

Sciences, Hong Kong

KPMG China

+852 2978 8151

[email protected]

Alice Leung

Partner, Tax

KPMG China

+852 2143 8711

[email protected]

Jim Brodzik

Business Development Lead

North America

[email protected]

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

Acknowledgements

Anderson Lee

Business Director, HK Non-Woven

Director, SAC APAC

Anne-Laure Descours

Chief Sourcing Ofﬁcer, PUMA

Anouschka Jansen

Sustainability Solutions Director, QIMA

Bertrand Thevenau

Group Chief Executive Ofﬁcer, Tropic Knits, CIEL Textile

Chairman of CT Sustainability Committee

Christophe Roussel

EVP, Global Sourcing, Gap Inc.

Edgar Tung

COO, Esquel Group

Edwin Keh

Chief Executive Ofﬁcer, The Hong Kong Research Institute

of Textiles and Apparel

Gilles Fries

Group Advisor, Epic Group

KPMG co-authors:Anson Bailey, James O’Callaghan, Tina Chen and Natalie Yip

Publications team:Nina Mehra, Victoria Tam and Philip Wiggenraad

Designer:Pui Lam Chan

Glen Seto

Chief Technology Ofﬁcer, Epic Group

Hirdi Johal

Senior Financial Director, Adidas

Jennifer Tam

Director, Chicks

Michel Mayer

Consultant, CDL, CIEL Textile

Pallak Seth

Vice Chairman, PDS Multinational Group

Quentin Thorel

Group Head of Sustainability, CIEL Textile

Roger Lee

Chief Executive Ofﬁcer, TAL Apparel

Sanjaya Jayasuriya

Senior Program Manager, Epic Group

Stanley Szeto

Executive Chairman, Lever Style

We wish to thank the following contributors for their valuable insights that made this report possible:

Moving the needle - Threading a sustainable future for apparel

organisation of independent member firms affiliated with KPMG International Limited,

kpmg.com/cn/socialmedia

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and

timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such

information without appropriate professional advice after a thorough examination of the particular situation.

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.

Publication number: HK-CM21-0002

Publication date: November 2021

For a list of KPMG China offices, please scan the QR code or visit our website:

https://home.kpmg.com/cn/en/home/about/offices.html

@Seraitrade

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