Fashion Brands Show Limited Progress on Supply Chain Transparency: Implications for Third-Party Risk Professionals

Fashion Revolution, a global movement advocating for increased transparency and sustainability in the fashion industry, released its eighth annual Fashion Transparency Index earlier this month. The report reveals that many fashion brands are still falling short in increasing transparency in their supply chains and addressing global impacts from the previous year.

The Index collected data from 250 of the world's largest fashion brands and retailers, evaluating their disclosure of social and environmental policies, practices, impacts, and supply chain operations. Each brand received a transparency score based on the level of information they chose to disclose in various categories, including governance, supply chain traceability, gender and racial equality, and other standards.

Key Findings from the Fashion Transparency Index

1. Slow Progress: While two brands, OVS and Gucci, achieved transparency scores above 80% for the first time in the history of the Index, the average transparency score among the world's largest fashion brands increased by only two percentage points compared to the previous year.
2. Lack of High Scores: No brand in the report scored 100% in transparency, indicating that there is still significant room for improvement. A perfect score would require a brand to publicly disclose comprehensive details about every supplier in their supply chain and a broad range of policies, procedures, and impacts related to human rights, environmental issues, and governance.
3. Low Transparency Scores: Alarmingly, 70 of the ranked brands scored between 0 to 10% for transparency, demonstrating that a considerable number of companies are not adequately disclosing their practices and impacts.

The report's introduction emphasizes the concerning lack of progress in the fashion industry despite an increasing climate crisis, growing social inequality, environmental degradation, and the emergence of regulations aimed at regulating the sector.

Fashion Revolution's executive team expressed their disappointment, stating, "This report should not exist," highlighting the urgent need for the industry to take transparency and sustainability seriously.

Implications for Third-Party Risk Management (TPRM) and Governance, Risk, and Compliance (GRC) Professionals

The Fashion Transparency Index's findings present significant implications for Third-Party Risk Management (TPRM) and Governance, Risk, and Compliance (GRC) professionals working in the fashion industry. The report highlights the critical need for fashion brands to address supply chain transparency and sustainability, as the industry faces increasing scrutiny from consumers, investors, and regulators alike. As companies navigate the complex landscape of social and environmental responsibilities, TPRM and GRC professionals play pivotal roles in guiding brands toward responsible practices, mitigating risks associated with opaque supply chains, and ensuring compliance with emerging regulations. Let's explore the key implications for these professionals in detail.

1. Supply Chain Risks: TPRM professionals need to address the supply chain risks that arise from insufficient transparency. Companies must proactively assess and monitor their suppliers' social and environmental practices to prevent reputational damage and compliance violations.
2. Regulatory Compliance: GRC professionals must keep abreast of evolving regulations and standards in the fashion industry to ensure that brands comply with the increasing demands for transparency. Failure to do so may result in legal repercussions and reputational harm.
3. Sustainability Initiatives: Companies should prioritize sustainability and transparency efforts to build consumer trust and stay ahead of evolving market demands. Emphasizing sustainability and transparency can also attract environmentally and socially conscious consumers.
4. Stakeholder Engagement: Collaborating with stakeholders, including consumers, suppliers, and NGOs, can enhance transparency efforts and help identify areas for improvement. Engaging stakeholders in discussions about supply chain practices and impact reporting can foster accountability and drive positive change.

The Fashion Transparency Index serves as a wake-up call for the fashion industry to accelerate its efforts toward supply chain transparency and sustainability. TPRM and GRC professionals play crucial roles in guiding companies toward more responsible practices and ensuring compliance with emerging regulations.