• Video
  • Sustainability
    • Understanding ESG

Tech makes retail goods traceable

Shoppers and investors want transparent supply chains: disruptive technology provides a solution.

A cashmere jumper can take two years to make, pass through 100 hands, three countries, 18,000 miles, and 13 different processes between the farm and the purchaser. Consumers increasingly want to know where their clothing has come from and are demanding better social and environmental credentials.

Retail supply chains are vast and complicated but disruptive technologies such as blockchain, artificial intelligence and element analysis can help improve traceability and transparency.

The manufacture and assembly of garments is increasingly outsourced around the world using raw materials from numerous locations. But there is mounting concern from customers and investors over the lack of transparency on governance, working conditions and environmental issues.

The fashion industry is estimated to contribute 10% of global greenhouse-gas emissions and 20% of freshwater pollution but the environmental footprint of different garments depends on the raw material used, making tracing fibres along supply chains important.

Some mainstream retailers’ websites or labels include information on their garments’ sustainability credentials, sometimes detailing supplier facilities, assembly locations or – more rarely – the source of raw materials. QR codes can provide traceability and circularity information including how the product can be resold or recycled.

But only 40% of retailers publish lists disclosing the direct suppliers who contribute to the final stages of production, such as cutting, sewing, assembling and packing. And supplier lists tell only part of the story: these firms may be outsourcing embroidery, printing, bleaching, dyeing or other processes.

Only by creating a complete picture of the whole chain can the social and environmental footprints of a garment be truly understood.

Governments in Germany and the UK are seeking to ensure that environmental and social standards are adhered to along supply chains but employing disruptive technologies can provide a more specific and detailed look at the journey of fibres and other supply-chain components, from farm to consumer.

Blockchain can map a product’s entire journey from raw materials to finished goods on a decentralised data log. Artificial intelligence can raise efficiency and productivity while reducing human error, helping forecast and prepare for demand changes.

Internet-of-things technology allows increased monitoring and inspection, with sensors tracking products through the supply chain while checking temperature, humidity and pressure in warehouses and transport vehicles to preserve the textiles’ quality.

These technologies could become commonplace across retail before long but drones, element analysis and digital fashion need to prove their commercial viability.

Drones, already delivering the final stage of the supply chain, could also be used at the start, collecting data on assets, geography and environmental conditions or trends. Element analysis uses isotopes and trace elements to create a chemical fingerprint that can identify the location of a product’s source and thus reveal any counterfeit labelling.

And the pandemic has seen augmented-reality or virtual-reality plus digital fashion used for customers unable to visit stores because of lockdowns or health concerns.

A combination of these technologies could allow retailers to provide a clearer, more dynamic and up-to-date view of their garment production.

First published 12th January 2022.

Would you like to find out more? Click here to read the full report (you must be a subscriber to HSBC Global Research).

Global Research

HSBC Global Research provides information, insights and thought-provoking ideas.

Need help?

For more information, please contact your HSBC representative.