It is a commonly debated and discussed topic that the manufacturers of apparel do not feel that they have been adequately compensated with orders, better pricing or even granted the status of being a preferred supplier by the big brands who source sustainable merchandise from them, though they have spent huge amount of money to be sustainable. The industry at large argues that the extra spend has put so much burden on them, with no real gains. Is this really the picture or are we missing the bigger story as 72 per cent of buyers claim that they not only want to work with sustainable partners but would also like to increase the number of sustainable products in their offering basket!
The movement towards sustainability is no longer a new development, but what has changed is the urgency and the driver of the movement. Various market studies clearly indicate heightened consumer awareness around the concept, which in turn is driving a higher demand for sustainable sourced and manufactured products. New global research conducted by the Economist Intelligence Unit (EIU), commissioned by WWF, shows a staggering 71 per cent rise in popularity of searches for sustainable goods over the past five years, with continuing growth during the COVID-19 pandemic.
The evolving pulse of the consumer is not only felt in the data which is coming from research agencies, but also from the feedback from retailers who are asking for more sustainable products as sales increase. Sustainability is no longer a luxury or marketing tool; it is a reality that cannot be ignored. “Kmart group being one of the largest retailers in Australia & New Zealand, we take our responsibility very seriously to care for and respect our planet and all the lives that we touch. Our customers are constantly demanding more sustainable product offerings from us and we have seen a significant growth in sales through our sustainable offerings over last few years,” says Arjun Puri, Director at KAS Group Asia.
Sustainable products increase sales 4 times for companies that walk the talk
A recent Nielsen report found that consumer brands that demonstrate commitment to sustainability outperform those that don’t. ‘ Sales growth by companies with a demonstrated commitment to sustainability was four times higher than that of competitors.’ This is indeed an encouraging finding as it boosts the orders for such products in almost every category. Sanjay Thakur, Sourcing Director, Ethical Sourcing, whose company is working with many brands/retailers around the world looking for ethical and sustainable products shares, “What is noteworthy is that the demand is not just for apparels but for other categories as well like dog clothing, which is a big growing category for us.”
The first-ever edition of the Business of Sustainability Index found that 78 percent of people in the US are more likely to purchase a product that is clearly labelled as environment- friendly. What’s more, this welcome news isn’t limited to developed nations and advanced economies. The EIU report found a similar trend in many developing nations and emerging markets as well, including India. “The demand for sustainable products is real and many more brands are joining this transition than ever before. Practically, all market and price segments, right from Walmart, Tesco to premium brands like Everlane, etc., are asking for such offerings,” shares Sanjay Shukla, Triburg.
The demand for sustainable products is universal
Though the European Union has been the front runner in adopting to sustainable products, other countries – USA, India, China, Africa, ANZ are also gaining traction for sustainable products. Having worked on both the buyer and manufacturing side of the business, Pallab Banerjee, President – Pearl Global Industries Ltd, with extensive experience in apparel sourcing, manufacturing, strategies and operations gives an insight that is encompassing. He states, “The demand is here to stay and it is spread across the spectrum in US, UK, Spain, Australia, Japan where we do most of our business. Retailers, department stores, grocery stores, specialty brands – all are being pushed by their customers to invest in such products.” The bottom line is that consumer preference is driving the entire industry to change, and no market or sector is unaffected. Sustainability has become a way to stay consumer-centric in business!
Consumers are driving the movement
There is no doubt that people are waking up to the urgency of the moment. They see forests, grasslands and other critical ecosystems vanishing at an alarming rate. Governments across the world are concerned and are coming together to take actions. Growing public awareness has helped to produce new sustainable laws and policies. “We work with globally recognised and credible sustainability standards including the Better Cotton Initiative (BCI), Global Organic Textile Standard, Global Recycled Standard and Forest Stewardship Council. All our cotton products are made using BCI cotton. Our babywear and sleepwear ranges are largely produced using sustainable organic cotton and we are continuously working on expanding the scope of our sustainable offerings,” avers Arjun.
Also Read: Sustainability doesn’t come at ‘extra’ cost…
Lack of sustainable supply chain is a challenge
The fact is that now the Demand has become ‘Default’. Market research suggest that customers are specifically asking for sustainable offering and sales of such products in increasing much faster than regular products. But there is a concern. “The supply chain is not ready yet with dependable and traceable supply chain,” cautions Sanjay Thakur. The lack of sufficient sustainable material availability drives higher cost, and this can only be addressed when more and more retailers/brands join their hands to march towards their sustainable journey. But the good news is that nearly two-third (64 percent) of Americans are willing to pay more for sustainable products.
Who is paying the extra cost for sustainable products?
What is even more encouraging is that more people than ever before are speaking out on behalf of the planet — not just with their voices and votes, but with their wallets as well. “If the consumer truly connects with the brand philosophy and the narrative, there is definitely a willingness to pay a little extra. With issues around green washing and other concerns of fast fashion, the question becomes how convinced the customer is with your sustainability story,” reasons Arjun. He points out that if corporates continue to build their sustainability purpose, with the help of right messaging, they can bridge the gap between customer’s sustainability expectations and cost. What is significant is that according to a recent NRF report, over 70 percent consumers today are willing to pay a premium of 35 percent, on an average for brands that are sustainable and environmentally responsible.
While smaller brands are still finding it easy to give real nominal price hike, the big brands and particularly the ones in the middle or entry segment with volume, do not want to offer the nominal hike and are expecting the suppliers or value chain to take the hit. Shares Sanjay Shukla, “True organic/sustainable has a substantial premium and now buyers are shelling out part of the increase for sure and the rest is being absorbed by the supply chain.”
There are some who believe that the suppliers are taking the maximum load of the cost of sustainable products. “Everyone is talking about sustainable products, but the reality is that no one is willing to pay the price. I think everyone wants to take advantage of selling sustainable, because it is the right thing to do, but not everyone is willing to pay the price,” says Sameer Thapar, CEO Montrose (Fashion Industry), that ships to buyers like One Jeanswear Group, IDG, NYC Alliance, Haggar, Jordache, Lord & Taylor, Dillard’s to name a few. However, Rakesh Saigal, CEO at Orange Sourcing has another take on this as he says, “The awareness is really increasing amongst the consumers and so is the willingness to pay some extra, but not a lot extra. Now brands are being competitive on their retail pricing on sustainable products. Gone are the days of premium and niche. Sustainable products are neither niche nor with a premium any more. That’s a big and important change for the industry.”
Accepting the price challenges, Arjun avers, “Our vision is to make our customers life brighter through our product offerings and like majority of mass retailers, we do face challenges around passing the incremental sustainability cost to our consumers. We work closely with our partners, work on making our processes more efficient to continue to march towards our sustainability ambitions.”
Suppliers take on the cost debate
While many suppliers on anonymity share that the price pressure is on them, yet despite having an initial cost of being sustainable and not having any direct benefit in order booking (in case of minor higher price), such initiatives are continued by Indian apparel exporters as it attracts the buyers, making it easy to start the process with a new buyer. Also, such initiatives make a company a preferred supplier and they get priority if the prices quoted by him and other exporters are the same.
“Retail giants and brands have a major responsibility towards their shareholders and they have to show a profit in every quarter. So, issues like sustainability do get ignored at times. A disaster like the global recession and Covid also had a very negative impact. Most of them do realise that saving of one cent per piece can have a huge negative impact on sustainability efforts and the workforce across the supply chain, but they are forced to give priority to price… Overseas buyers, Government of various countries, apparel exporters and Indian buying houses have to come together on a platform and have to create an eco-system which can change the situation,” says Lakshmi Menon Bhatia, an apparel industry veteran, working in the area of ethical and sustainable practices in the supply chain.
Retailers/brands are now building a competitive sustainable strategy
It is becoming increasingly critical that retailers/brands carve out their sustainability strategy clearly to offer a competitive sustainable product. If organisations believe in their sustainability purpose, they will always find a way to deliver what customer want. “Even in an environment of inflated raw material prices with a very high impact on organic cotton, Target Australia is continuing its journey to expand its usage of this item. Last season saw this category grow by about 25 per cent in our apparel ranges. A sustainable story is definitely resonating with the customer,” shares Arjun.
He further shares, “Keeping our customers’ growing expectations in mind and our responsibility towards our planet, by 2025, we are committed to 100 per cent of our cellulose fibres (Viscose, modal, Lyocell) traceable to sources that are at low risk of contributing to deforestation and certified to independent forestry standards. We are also committed to convert minimum 50 per cent of the polyester and nylon used in our own brand clothing and bedding ranges to be recycled material.”
All buying offices, with their experience of interacting with international retailers, agree that the movement is only going to get bigger. “The demand for everything sustainable is only going to grow and unlike earlier times, when it was brand driven, this time it’s the aware consumer who is looking to buy apparel with a difference. It’s a bottom-up push. There are also brands who want to ‘ build back better ‘ and are going all out to package their apparel along with a compelling sustainable story for the consumer,” says Sanjay Shukla.
One thing is for sure, demand is definitely going to accelerate in the coming months and years. With effects of climate change and global warming becoming more visible, customers will be demanding that businesses that they patronise do the right thing when it comes to the environment. Echoing what most buying offices say, Rakesh closes the discussion firmly, when he summarises the business environment today – “The demand for sustainable product is real. Every brand has set up a sustainable blueprint but the mill capacity has a lot of work to do and the ones who are set-up to do sustainable fabrics are running full capacities. The brands are willing to pay extra for sustainable products as it has an image impact. I feel that by 2027, 35-50 percent could be sustainable products overall if the mills and fabrics are able to cope up.”