With the aim of supporting the local fashion industry further progress in improving their ESG performance in their supply chains and their operations, given the growing focus of stakeholders and consumers who expect an emphasis on sustainability and social responsibility from their fashion brands, PricewaterhouseCoopers (PwC), collaborated with the Export Development Board of Sri Lanka (EDB) and the Joint Apparel Association Forum (JAAF), to examine the impact of ESG and its crucial nature in the apparel industry.
Zahra Cader, ESG Lead for PwC Sri Lanka, stated that ESG is now a make-or-break consideration for investors, with almost 80% saying it is important in their decision making. Surveys in developed markets indicate that 83% of customers think companies should be actively shaping ESG best practices; and 86% of employees prefer to work for companies which care about the same issues they do. With regulators moving from voluntary ESG disclosures to mandatory ones, Zahra explained that the shift to being more ESG ready today is an investment towards future proofing business.
Suresh De Mel, Chairman of EDB, underscoring the importance of Sri Lanka’s apparel industry and its innovative and competitive nature, said that the ESG movement has become a widely accepted criteria for apparel brands and those that don’t meet this demand will be left behind.
Jeremy Prepsius, the Asia Pacific Regional ESG Supply Chain expert at PwC, provided insights on the global ESG movement in the apparel industry and discussed the future drivers impacting businesses due to ESG. These included decarbonizing operations, the need to align with UN guiding principles on business and human rights, build traceability systems into procurement systems, engage in supplier engagement approaches with a focus on skills training, business incubation and technical support and enabling financial instruments to be aligned with ESG performance.
Director of PwC India,Sandeep Kumar Mohanty, defined it is imperative for businesses to prioritize on ESG issues saying that the era of shareholder activism has now shifted to stakeholder activism, leading to either value creation or value erosion of a company. He covered a wide range of operational aspects apparel organizations require to adapt to, comprising of a 19 step process including waste management, data transparency, resource efficiency, ESG being integrated into business strategy, setting up governance structures, capacity building, ESG reporting and assurance amongst others.
Representing JAAF, CFO of Hela Clothing, Moiz H. Rehmanjee explained the impact of ESG transition on the Sri Lankan apparel industry stating that ESG is more than compliance and is one that is outcome driven, where the entire carbon footprint is mapped and measured in terms it’s value of all the three components of ESG. These included collecting, tracking and monitoring data on raw materials, transforming raw material sourcing practices, increasing the use of recycled materials, working with suppliers towards toxic-free production and measuring how the final products are delivered to the end customer. He stressed that the time has come for the local industry to look at best practices in ESG, uncover it’s strategies, structures and tools and get the entire industry engaged towards adapting to ESG.
Given this context, Sri Lanka’s apparel industry has made great strides being the world’s first custom built green apparel factory and Asia’s first CarbonNeutral® Certified Factory, along with the first in the world to inculcate fair labour practices and safe working conditions in the industry. However, even with these achievements, the companies within the industry has still much to do in terms of adopting the end to end delivery models and practises required to be ESG compliant. As such, the overall takeaway from the discussion was that there’s never been a greater need and opportunity for the local apparel industry to collaborate in driving both sustainability and profitability through product innovation, brand differentiation, diversity and inclusion and exceptional customer experiences.
