The global apparel industry is significantly underestimating the potential risks associated with water pollution throughout its value chain.
- The sweeping conclusion comes from Scoping Out: Tracking Nature Across the Supply — Chain Global Supply Chain Report 2022, released recently by CDP (Carbon Disclosure Project).
- CDP now plans to make matters even more stringent. The 2023 water questionnaire will increase accountability with new and strengthened questions regarding pollution and hazardous chemicals, as well as supplier action and targets on water pollution.
The Broad Conclusions: There were two over-arching statements:
- While investors and customers are aware of the need to improve water security, CDP data suggests that relatively few apparel companies themselves are conscious of their water usage. Fewer still are attempting to engage with their supply chains, despite the clear importance of this approach in mitigating the sector’s negative impact.
- Only 56 apparel companies responded to CDP’s water questionnaire in 2022. Of those, just 27% reported that a sufficient amount of high-quality freshwater is vital to the success of their business, an unfeasibly low percentage given the critical materiality of water at all stages of textile production.
How They Fared: The lack of awareness was reflected throughout disclosing companies’ responses to CDP’s water questionnaire.
- None identified pollution incidents as a risk-driver with the potential to have financial or strategic impact on business anywhere in their value chains.
- More than 60% do not consider their suppliers to be stakeholders in water risk assessments.
- None have set targets related to both supplier engagement and reducing water pollution.
- Only one incentivises C-suite employees or board members based on improvements in waste-water quality in their supply chains.
Hermes — Keeping it Clean: Despite poor performance across the sector, some companies are making an exceptional effort to engage with their supply chain and to reduce their water pollution impact. Hermès International received an A from CDP for water security in 2022.
- Hermès requests 100% of their suppliers to report water risks.
- They request an external audit for any supplier where a water risk is confirmed.
- They carry out additional regular visits and third-party supply chain audits that cover wastewater discharge monitoring.
- The procurement department monitors suppliers’ reported wastewater discharge.
- Sub-contractors must be reported by suppliers to Hermès and are also subject to visit-based pre-accreditation, or to third-party audits that cover water-related risks including wastewater discharge.
Making it Work: The report called for a paradigm shift from the way things are currently being done.
- Apparel companies would have to carry out thorough identification and monitoring of risks across the value chain, and implement collaborations with suppliers to create meaningful reductions in water pollution.
- Apparel companies must first recognise the material importance of water in their sector, and the vital importance of their role as stewards of water resources.
- Better risk assessments will help companies to understand and capture the business, environmental and social risks associated with water pollution in their supply chains.
- Ambitious targets must be coupled with strong internal incentives around activities such as monitoring supply-chain wastewater discharges, and monitoring and reducing water pollution.
- The positive water-stewardship practices will not only help improve the companies’ resilience to water-related risk, they will also provide the business with the knowledge and experience to support their suppliers to make such changes too.
