by Miko Takama
Sustainability and transparency are among the biggest problems the global fashion industry needs to overcome today. Following the shift in the ‘90s to offshore production, which saw fashion brands relocate their production factories abroad, often in developing countries where labor regulations are nearly non-existent, supply chains have come more complex and opaque. According to research from Fashion Revolution, only 31% of the top 62 surveyed global retailers disclose some parts of their garment production site, with only one brand revealing the full list of all of its production sites. This remains problematic as the lack of transparency into the supply chain makes it more challenging to hold fashion brands accountable for the conditions under which their garments are made.
Simultaneously, consumers nowadays are well-educated, and brands can no longer hide their dirty secrets. Gen-Z and millennial consumers especially are hyper-conscious about what they buy and which company to invest in, and even boycott with their wallets if they don’t agree with a brand’s business model. Another study by National Retail Federation and leading Austria-based sustainable fibre producer, Lenzing, found that 77% of consumers surveyed said sustainability is important to them, 57% of respondents were willing to change their buying habits to reduce any negative impact on the environment, and 70% will actively educate themselves on sustainability through researching the production process. Producing a beautiful dress and putting it on a popular influencer is not good enough to make sales anymore. Interestingly, a study carried out by Morning Consult found that 64% of respondents were more likely to purchase a garment if new technology could prove its sustainability claims.
As consumers are increasingly pressuring brands and retailers to improve transparency and present proof of their ethical practices, the industry seems to be jumping on to one (possible) solution in the last few years: blockchain.
What is Blockchain Technology?
Blockchain technology simply explained, is a decentralized, frictionless way of permanently exchanging verifiable value between two entities on an open ledger. It allows any two entities (a person, a company, an institution) to exchange data (text, image, voice, video, materials or products, or GPS coordinates). But what does it mean for the fashion industry? Well, there are potential applications in everything from supply chain to resale in the fashion industry.
Essentially, blockchain can visualize and deconstruct sustainability in fashion for consumers. One of the biggest sustainability issues in the fashion industry is that terms such as ‘sustainable’, ‘ethically made’, ‘natural’ or ‘clean’ have no clear meaning or regulated standards, which has enabled greenwashing to thrive. When it comes to manufacturing, suppliers can use blockchain to store and share information regarding the source of raw materials - from how it was grown, where it was shipped, the amount shipped to the garment factory from the textile mill and so on, then create a permanent, immutable digital record of all the manufacturing process.
So what would the shopping experience look like if each garment’s production process was visualized using blockchain and the information was available for shoppers to access in-store or online? Imagine a world where you go into a retail store, grab a hoody you fancy and scan its QR code. You could then see where the cotton was grown and who the farmer is, where the cotton was dyed, where the zipper came from, where all the components are put together and by whom.
For instance, if you go on to H&M’s website and check out one of their “conscious” items, there’s absolutely nothing conscious about the garments. They are not made of sustainable materials, there is no information about where materials come from or working conditions of their garment factories, it’s a great example of greenwashing. However, if you are shopping in one of H&M’s retail stores or its website, there’s no way to access its supply chain information. If visualized supply chain information through blockchain was accessible to shopping at any sales point, brands would not be able to greenwash and hide their supply chain from consumers. But how long will Gen-Z or millennial consumers buy from brands that cannot substantiate their authenticity and its brand claims with traceability data? Probably not for long.
The very first garment tracked using blockchain technology was made by Danish designer Martine Jarlgaard in 2018 by partnering with UK-based blockchain technology company Provenance and London College of Fashion’s innovation agency. Each step of the manufacturing process of garments made from organic British alpaca was tracked and registered via blockchain through the Provenance’s app. It was a one-off experiment, and the designer presented the garments at the Copenhagen Fashion Summit in 2017. The garments were accompanied by tags that could be scanned to pull up a full history of the supply chain, even including names and profile photos of the specific alpacas whose coats were sheared to make the sweaters. Since then, more major fashion players have begun to explore how blockchain can help the fashion industry work better together while creating a permanent record of the origin of materials used in production.
Luxury Brands Battle Against Counterfeit
Another benefit of using blockchain, especially in the luxury sector, is that brands can verify the authenticity and provenance of luxury goods by tracking and tracing any product with a unique digital identity based on non-fungible tokens (NFT), which are unique tokens on the blockchain.
In April, a nonprofit Aura Blockchain Consortium announced a partnership with LVMH, Prada Group, and Richemont, to collectively contribute to the blockchain governance and strategy. The collaboration among these luxury players gives a boost to the blockchain, an increasing focus for luxury amid consumer expectations for transparency and the pandemic’s pivot to digital-only (or focused) products.
What’s incredible about this collaboration is that despite being competitors, high-level executives from each group gathered at the historic Louis Vuitton family house in the Asnières-Sur-Seine suburb of Paris to hammer out the details of a blockchain platform created specifically for the luxury industry by Consensus and Microsoft in 2019.
Aura can authenticate each product by assigning a unique digital identity that stores provenance information, which can be attached to products through various means, including QR code or RFID tag.
Aura is a private blockchain, meaning only companies on the network have full access and control over their data. Customers will be able to see only the information brands give them access to. Thus, it raises questions about how private blockchain can be transparent without being open access. Aura is still ironing out details as they go on; it does have a strict point of view on why a private platform is ideal and what the future might entail.
Other fashion blockchain startups such as Lukso and Arianee operate public, decentralized blockchain and open-source protocols, meaning that anyone can join and customers can see every “event” in a product’s supply chain and life cycle.
The open source blockchain technology can help brands engage the consumers after the sale or resale by allowing consumers to contribute and create the product’s life story together. If you purchase a garment with blockchain technology integrated, for example, and you decide to resell the garment, the next person who purchased your garment can see all the whole product’s life story and you would be able to see that your garment lives on. It can offer “full transparency” to the consumers and is the best way to gain trust for brands.
Applying New Technology to Old Fabrics
The three-year-old marketplace, Queen of Raw, have sprung up to make it easier for retailers to buy and sell headstock fabric or materials that brands own but never used and don’t want anymore. The marketplace with 325,000 buyers and sellers globally, has worked with companies including LVMH, Cartier and H&M. It doesn’t hold inventory physically, but rather is a virtual marketplace in the vein of Poshmark, or eBay, and takes an undisclosed portion of sales made through its platform. Since the pandemic, after brands struggled to get rid of dead inventory due to store closures and decline in consumer confidence and spending, interest has intensified as brands become more aware that inventory might not match demand.
Queen of Raw provides a data dashboard to its users, such as their involvement in reducing carbon emissions, water consumption and landfill dumping, and verifies supply chain data which is attached to blockchain to ensure integrity. This transparency factor is a great tremendous advantage for the company. For example, if a brand only wants to purchase materials with certain certification, it can be verified on the company’s platform through blockchain, which is something that wouldn’t necessarily be possible for a smaller company putting something for sale.
The way in which Queen of Raw incorporated blockchain technology can fundamentally change the way brands buy materials and produce. In the industry were less than 1% of materials used to make clothing is recycled, and an estimated 18.6 million tons of clothing end up in a landfill every year, according to the Ellen MacArthur Foundation, allowing designers and brands to connect with each other and share their unwanted materials can reduce the waste created by the industry. For brands, it helps to decrease waste while generating extra revenue.
Challenges to Overcome
Transparency for the fashion industry is no quick fix, and there are still challenges that the industry needs to overcome. Brands need to be able to scale their ability to gather the necessary information across their sourcing and supply networks, as well as be able to organize that information effectively to make it meaningful and trustable for consumers.
Another challenge that stands in the way of adopting the technology is the lack of adequate skills. As blockchain technology is still relatively new, there are still few developers comfortable with programming for blockchain or putting in place systems with organizations. This means that costs are high which small brands are not able to afford.
Moreover, theoretically, blockchain should help monitor energy use and thereby reduce it in the supply chain. Today the blockchain systems in themselves use a huge amount of energy because recoding all the ledgers in safe environments requires a lot of data storage. This means that, at least for now, technology is not yet supporting the move to the low-carbon fashion industry.
In an industry so imbued with imagination and mystery, integration with blockchain sounds like a technical issue. However, at a time when consumers are becoming more demanding and much more informed, fashion could welcome a big dose of technical consistency.
Perhaps a Brighter Future Beckons
The fashion industry has been aware of the shift in consumers’ needs and that focus on sustainability has accelerated the urgency due to climate change in recent years. However, the industry hasn’t given them the right information and tools to make the right buying decisions. Instead, brands have been practicing greenwashing to make them appear “greener”. By integrating blockchain, that can finally change. Brands can truly empower consumers by providing information they need to shop by their values and make informed buying decisions.
Perhaps the real power of blockchain technology is ultimately in decentralization, meaning that there’s no central authority. In order for users and companies to verify the ownership and authenticity, as well as the transparency of a product, product identity needs to live on a decentralized permission-less public blockchain.
As traceability and sustainability are two sides of the same coin, once a brand has transparency within its supply chain, it can reduce its environmental and social impact and improve overall quality. It might not be so long until blockchain technology goes mainstream, and we can go into any store and access full supply chain information by scanning a QR code. Imagine how powerful would that be.