The Fashion Transparency Index 2023 shows the urgency for change in fashion, but also for improvement - led by luxury brands
Author: House of Eden
Fashion Revolution has launched the eighth edition of its annual Fashion Transparency Index. This is a globally recognized tool to encourage the biggest fashion brands to be more transparent about their social and environmental efforts. Behind this mission is the belief that transparency is a prerequisite for achieving systemic change in the fashion industry. Disclosing information is seen as the key to questioning brands, holding them accountable for their claims and advocating for positive change.
"We can only improve what we see". - Fashion revolution
This year, 250 of the world's biggest fashion brands were reviewed. It's worth noting that this means more brands than ever before are voluntarily disclosing more information than ever. This refers to the social and ecological practices and impacts in their operations and supply chains. Ultimately, this resulted in 64.500 data points on 258 indicators that relate to the most pressing problems in the industry. These include the traceability of the supply chain, the use of toxic substances or materials and decent working conditions. In addition, the indicators for the responsible use of CO2 have been strengthened in order to make the process of decarbonization more comprehensible.
These are the 10 key findings of the Fashion Transparency Index 2023
This year's index reveals that the ranked brands managed to improve their average score by 2% compared to last year. For the first time, two brands even achieved 80% or more in their overall ranking. However, 70 out of 250 brands are still in the 0-10% range. Despite increasing willingness to participate and sustainable development, the index shows a lack of transparency in crucial areas. The results inspire confidence and a need for action in equal measure.
1. Fashion Transparency Index 2023 Rising: The luxury sector
The luxury sector, which has long lagged behind retail and sportswear in terms of transparency, is making great strides this year. A surge in participation from premium brands demonstrates their willingness to disclose who and where clothes are made by. In fact, the five biggest climbers of the year, the brands that improved their performance the most, are all luxury brands: Gucci, Armani, Jil Sander, Miu Miu and Prada. With an average score of 80% (+ 21% since 2022), Gucci even positions itself as the first luxury brand in the top 2 of the index.
However, the development of Jil Sander is particularly encouraging. Because the brand previously consistently scored 0, motivates and encourages those companies that are currently performing poorly.
2. Supply Chain Traceability
For the first time, more than half (52%) of the major brands have disclosed their first tier suppliers, i.e. a list of direct suppliers, production facilities or partners. That's a 20% increase compared to 2017 when only 32% of brands disclosed their supplier lists.
However, this improvement is offset by a rather sobering overall score. Almost half of brands (45%) shared little to nothing about their supply chain traceability. Fashion Revolution interprets this lack of transparency as a deliberate tactic to maintain the status quo. After all, only practices and impacts that are visible can be held accountable or even accountable.
3. Tax and Purchasing Practices
The Fashion Transparency Index points out that the compliance status quo for fashion brands has long been to shift direct responsibility for human rights and the environment onto suppliers. They distanced themselves from supply chain problems or disguised their direct role in promoting grievances. This structure has been in upheaval since the Covid-19 pandemic. With an increased awareness of mindfulness and sustainability, the pressure on brands to take responsibility for the impacts they create has also intensified.
However, this development does not seem to have had enough of an impact. Only 12% of brands publish a code of conduct for responsible shopping. Among them is only one, Zeeman, which publishes a standard template for agreements. Additionally, only 4% of brands report the number of orders where retrospective changes are made to previously agreed payment terms.
Additionally, less than half of brands (45%) publish a responsible tax strategy. That big brands use tax havens and loopholes to maximize their profits or circumvent forced labor regulations is appalling. But usual. This makes the introduction of a fair tax system not only important, but sufficient. This must address current grievances and ensure that multinational companies pay their share in the countries in which they operate in order to address growing inequalities between and within countries.
At the same time, the wage gap between the CEOs of the fashion industry and the people who make the clothes is increasing. While 26% of brands disclose whether executive compensation is linked to human rights and environmental goals, only 18% of brands report the percentage of executive bonuses or compensation that are linked to those goals.
4. Waste and Overproduction
Thousands of tons of fashion waste are polluting various ecosystems and are now even visible from space. And despite upcoming -- necessary -- legislation to curb this waste, 88% of fashion brands still don't disclose their annual production volumes. Presumably to hide the extent and truth of their overproduction.
This year, for the first time, the Index looked at whether brands are committing to degrowth. An effort to balance the economy with planetary boundaries through a planned reduction in the production and consumption of new clothing. The bottom line: Only two of the 250 brands, Armani and United Colors of Benetton, pursue degrowth. In contrast, 99% of brands do not commit to reducing the number of new items they produce.
5. Water and Chemical Management
As one of the most water-intensive industries, the fashion industry is one of the main contributors to global water pollution. More than 8.000 synthetic chemicals are used in its manufacture. Worryingly, this year’s index revealed that only 7% of major fashion brands publish the results of their suppliers’ wastewater tests.
In addition, many of the largest producing regions face significant water risks. These include water availability, flooding, pollution or gaps in water regulation and planning. These risks will increase in the face of the climate crisis and will be compounded by the negative impact of textile waste in landfills. Despite these unacceptable working conditions, only 23% of brands disclose their methods of identifying water-related risks.
One finding from the index is particularly critical given the need to address water stress within fashion supply chains. Fashion brands disclose less information about their water footprint where wet processing or cultivation of fibers such as cotton and linen takes place. While 32% of brands disclose their water footprint at their own operations, only 24% disclose the water footprint at the manufacturing level. And even less at the level of fibers and raw materials (4%).
6. Material Procurement
51% of major fashion brands publish sustainable material targets. But only 44% show what they define as sustainable. In addition, only 42% are transparent about the progress towards achieving these goals.
Additionally, only 29% of brands disclose the breakdown of fibers sourced annually. This does not provide a complete picture of the fashion industry's fiber mix and its collective environmental impact. This means that there is still a lack of data on the actual impacts of each material, which also varies by type and place of manufacture.
With the forthcoming wave of legislation regulating the fashion industry, brands should continuously improve their performance in this area over the next few years. This development is particularly important given that the industry's largest environmental impacts come from the energy-intensive production, treatment and processing of raw materials.
7. Duty of Care
With looming due diligence legislation spearheaded by the EU, fashion brands have stepped up their social and environmental due diligence disclosures. According to the Index, this has improved performance on each human rights and environmental due diligence indicator compared to last year.
Overall, more brands than ever (37%) were transparent about how affected stakeholders are consulted, what risks are identified, and what steps are being taken to address those risks, as well as the outcomes of both human rights and environmental due diligence. Additionally, 68% of brands disclose how they conduct human rights due diligence. And 49% on environmental due diligence.
8. Freedom of Association and Living Wage
In the area of freedom of association and collective bargaining, the index found a high level of cryptic lip service to workers’ rights. Only 1% of brands (3 out of 250) disclose the number of collective agreements that provide for higher wages than those required by law. This is despite the fact that a full 85% publish policies outlining their commitment to freedom of association, the right to unionize and collective bargaining at the supply chain level.
However, only 39% of brands share how they put these policies into action. And only 15% communicate the number or percentage of supplier factories that have independent, democratically elected unions.
These findings are more than critical, as collective bargaining is the main, and often the only, tool to help garment workers achieve better conditions and wages that go beyond national labor laws. Action is urgently needed given that only 1% of fashion brands have been able to transparently demonstrate that workers in their supply chain are paid a living wage.
The fashion industry is accelerating biodiversity loss from deforestation worldwide. The Amazon rainforest is even on the brink of irreversible collapse. Yet this year only 12% of brands have published a time-limited, measurable commitment to avoid deforestation. That is 3% less than last year.
Additionally, only 7% communicate measurable progress toward becoming deforestation-free. None of them have a time-limited zero-deforestation commitment according to the Fashion Transparency Index.
10. Energy and Climate
Despite the intensity and urgency of the climate crisis, 94% of brands still do not disclose the fuels they use to make their clothes. However, as the transition from coal to clean energy is essential to curbing climate change, this year the Index introduced a new indicator to measure dependence on coal. Only 6% communicated how much of their supply chain is powered by coal. The same applies to whether it has been disclosed which geographic regions are still dependent on fossil fuels.
The Index launched another new indicator to capture the number of brands that have committed to RE100. A global corporate initiative committed to 100% renewable electricity. 31 brands have signed up, including Burberry. However, while the luxury brand aims to power its entire business 100% renewable, most are just focusing on their own businesses rather than the manufacturing factories.
In addition, only 9% of major fashion brands disclose their investments in decarbonization. This includes investments in research and development, but also supporting suppliers in accessing finance. This should enable them to cover the costs of a green transition, sustainability-linked loans and linking back to the supply chain.
Fashion Transparency Index: Wake-up call & bearers of hope for a positive development of fashion
The Fashion Transparency Index 2023 shows that there is positive progress. However, this still needs to be accelerated in the future. Behaviors such as complying with the minimum, passively waiting for legislation or even finding deregulated loopholes must clearly be replaced by proactive strategies that promote ecological and social sustainability. In particular, the growing area of social inequality should be more than alarming. And turn urgent action into action.
Nevertheless, improvements, for example in the performance of the luxury sector, show that the index not only helps brands to identify their weak points, but also motivates them to address them. Comprehensive transparency leaves no questions about environmental or social costs unanswered. Which enables us to hold brands accountable and strengthen their self-commitment.