With an estimated value of $3 trillion, the fashion industry is estimated to produce 10% of the total global emissions and is the second-largest polluter in the world. It has been estimated that it will become 50% larger in the next 8 years. As much as 75% of these emissions are from tiers 1-4 of upstream supply chain activities under Scope 3 of “Purchased Goods and Services” as defined by the GHG Protocol.
Apparel and Footwear Value Chain¹
Amid growing regulatory and consumer pressure, fashion brands have pledged to Science-Based Targets for 2030, with net-zero emissions by 2050. To achieve these goals, it is crucial to correctly assess Scope 3 emissions to track the effectiveness of decarbonization efforts across the value chain. However, after interacting with over 100 fashion brands and retailers, it is evident that most of them are struggling with Scope 3 accounting for several reasons.
Key Challenges in Scope 3 Emissions Accounting
1. Limited Access to Primary Data
In the case of early sustainability initiatives by brands, it becomes very challenging to draw a map of the whole supply chain. The opacity of several levels of supply chains means that many are left with no choice but to depend on spend-based calculations. However, this method involves the use of generic emission factors derived from the EEIO model which offers no account of differences in emissions between different brands and manufacturers, hence giving highly erroneous estimates.
Supply Chain tiers of a Fashion Brand
2. Complex Supplier Data Collection
Once brands have mapped out their supply chain, their next biggest challenge is gathering primary emission data from their supplier’s facilities via surveys or using the Higg Facility Environmental Module (FEM) (which is being managed by the Cascale and their technology partner Worldly). This is absurdly complex for large brands that have hundreds or even thousands of facilities worldwide requiring a lot of data wrangling across spreadsheets and manual error-checking in the collected data.
Data Management Workflow for a Sustainability Team
The Higg FEM data is also collected only once a year which isn’t real-time enough for most brands. In addition, brands have to wait for almost a year before the FEM data gets verified for use in their GHG accounting. To compound the issues further, some brands have expressed concern over inaccuracies identified in even verified FEM data!
3. Inadequate Carbon Accounting Tools
A recurring theme that’s emerged from our conversations with brands is their dissatisfaction with existing carbon accounting tools in the industry. There are a few reasons why such tools just don’t cut it:
- Some tools extract the purchased material data obtained from a brand’s procurement systems and combine that with material-specific emission factors to calculate total Scope 3 Purchased Goods emissions. This isn’t enough as it leaves out the emissions of manufacturing processes in the supply chain which make up a big chunk of total emissions.
- Other tools extract purchased product categories from a brand’s purchase orders and combine those with industry-average emission factors of that product type. This approach is still inaccurate as it doesn’t incorporate the uniqueness of the brand’s value chain such as the manufacturing location, weight of the product, etc.
- Most tools don’t integrate with primary supply chain data collection tools like the Higg Facility Environmental Module (FEM), Enablon, Sphera, etc. As a result, sustainability teams spend days aggregating this data in spreadsheets from hundreds of facilities so that it can be combined with their other internal emission data for reporting.
- Moreover, the data in Higg FEM isn’t granular enough to allow easy integration into a brand’s emission accounting. Facilities report emissions for the entire year along with total production volume without allocating emissions across the different product types produced. This gives brands no option but to allocate emissions from these facilities purely based on the amount of volume they purchased during that year vs what the facility actually produced for them alone. As you can imagine, this leads to severe over or undercounting of emissions.
4. Mistrust in the Higg MSI
Many brands use the Higg Material Sustainability Index (MSI) to evaluate the environmental impact of materials used in their products.
The Higg MSI has recently come under controversy for favoring synthetic fabrics and for a lack of transparency in the underlying data. This has led to mistrust in the index and brands are hesitant to use the data for calculating their environmental impact, lest they get called out for greenwashing.
It is vital to address such challenges faced by sustainability teams in fashion as these practices are still resource-deficient. Optimizing manual and time-consuming practices of Scope 3 emissions accounting is possible through technology to provide more time for decarbonization strategies. The lack of accurate Scope 3 data hinders the ability to monitor progress and effectively enact measurable emissions reductions.
One of these emerging solutions is the Product Carbon Footprints (PCFs), which quantify the entire life cycle greenhouse gas emissions of a product. Promoted by leading organizations such as WBCSD and SAP, PCFs offer an opportunity to create a new paradigm of carbon accounting within the Scope 3 frames in the fashion industry. In future work, we will further continue the discussion on the positive impact of PCFs and their contribution towards making sustainability improvements in the sector.
