Fashion & Luxury: Integrating ESG Criteria in the Supply Chain
The Tesisquare ESG Vertical Platform is designed to meet the challenges posed by the increasing integration of ESG criteria in the supply chain.
The Supply Chain is evolving with a greater emphasis on ESG criteria. Integrating environmental, social, and governance requirements into operations not only addresses current challenges but also represents an opportunity to demonstrate commitment to sustainable and ethical business management. While this may involve high initial costs and changes in processes, companies that adopt sustainable practices can gain significant competitive advantages, such as enhanced reputation, increased customer loyalty, and preferential access to investment capital. Sustainability also fosters innovation, leads to greater operational efficiency, and creates new market opportunities. Companies that adopt advanced solutions like the TESISQUARE ESG Vertical Platform will be well-positioned to lead the shift towards a more sustainable and responsible business model.
SUSTAINABILITYIN THE SUPPLY CHAIN
With the rising importance of climate change issues and the intensification of regulations, companies are being called upon to rethink their supply chains. This shift is driven by the need to reduce environmental impact, ensure socially responsible practices, and improve transparency, aiming to meet the expectations of consumers, investors, and regulators. Regulations such as the U.S. Uyghur Forced Labor Prevention Act, the German Supply Chain Due Diligence Act, and the Corporate Sustainability Reporting Directive (CSRD) require companies to ensure compliance with ethical and environmental standards not only in their direct operations but also throughout the entire supply chain. Future regulations, such as the Eco-design for Sustainable Products Regulation and the EU Corporate Sustainability Due Diligence, are set to further expand these responsibilities. Companies must adapt to these changes to avoid sanctions and maintain their reputation in the global market.
Sustainability in the supply chain involves the integrated management of environmental, social, and economic aspects throughout the value chain, from raw material suppliers to the end consumer. This approach is based on three main pillars: reducing environmental impact, social responsibility, and creating sustainable economic value.
- Environmental Impact: Minimizing the use of natural resources and reducing carbon emissions. This can include optimizing production processes, adopting more efficient technologies, and selecting suppliers who meet high environmental standards. Implementing practices such as circular economy, recycling and reusing materials, and using renewable energy sources are fundamental strategies to achieve these goals.
- Social Responsibility: Improving working conditions and respecting human rights. Companies must ensure that their suppliers adhere to fair labor practices, provide safe working conditions, and respect workers' rights. This includes preventing forced and child labor, promoting diversity and inclusion, and creating a work environment that fosters employee well-being. Companies must be prepared to monitor and verify suppliers' practices to ensure compliance with these standards
- Sustainability: The ability to generate long-term economic value without compromising future resources. This requires balancing operational efficiency with environmental and social responsibility. Companies must adopt business models that foster innovation and sustainable growth while minimizing risks associated with unsustainable practices. Resource efficiency, product lifecycle management, and supplier sustainability are crucial aspects for ensuring long-lasting economic value.
THE LUXURY& FASHION MARKET
The luxury market shows relative stability despite geopolitical and economic turbulence, surpassing a global value of €1.5trillion in 2023. In this context, Bain & Company identifies jewelry as the standout sector—surpassing watches—with a clientele favoring investment-oriented purchases. Aspirational consumers, on the other hand, direct their spending towards makeup, perfumes, and eyewear, considered small indulgences. Apparel has overtaken accessories, thanks to strategies aimed at capturing high-end clientele, while shoes are experiencing a slowdown. In the future, a dual strategy will be essential: attracting high-end customers and offering small daily luxuries. Growth occurs at both ends of the price spectrum. For companies, it will be essential to rethink the value proposition from a high-low perspective across all consumer touchpoints, expanding the base while simultaneously consolidating loyalty and advocacy. Brands will need to invest in growth drivers, defend the core elements of their business, maintain decision-making agility, and optimize stock management to ensure efficiency and responsiveness to demand.
DIGITALIZATION OF THE SUPPLY CHAIN
Many fashion & luxury companies have embarked on a journey to digitalize the supply chain, adopting technological solutions such as artificial intelligence (AI), the Internet of Things (IoT), blockchain, and cloud platforms. The TESISQUARE ESG Vertical Platform is designed to meet the challenges posed by the growing integration of ESG criteria in the supply chain. The platform integrates with TESISQUARE's existing solutions, such as TESI SRM, TMS SALES, and CT, and introduces new products like TESI MAKE. The platform supports companies in managing a more sustainable and transparent supply chain, covering every stage of the process, from supplier selection to final consumer communication.
THE ESG VERTICAL PLATFORM
The platform offers a range of features designed to improve ESG management in the supply chain. One of the main features is Supplier Discovery, which enables mapping of suppliers and production sites beyond tier-1 level. Vendor Qualification includes the use of ESG questionnaires to collect data and documents at both the corporate and production site levels, calculating an ESG rating based on ESRS (European Sustainability Reporting Standards). The collection of Technical & Drawing Specifications allows companies to document specific product attributes and gather certificates and indicators to calculate the product’s environmental footprint. The platform enriches data with information on the origin of raw materials, provided by suppliers during the management of raw material batches, semi-finished, and finished products, ensuring traceability and linkage between raw materials, components, and finished products during production stages. The integration of IoT capabilities and collaborative management of Work Orders, along with compatibility with information systems like ERP, DAM, PLM, and MES, facilitates efficient production management and traceability. The platform also analyzes the environmental impact of In/Outbound logistics and consolidates product history in Product Traceability & Genealogy, providing a single repository for all product data and certificates.
BENEFITS FOR COMPANIES
The adoption of the ESG Vertical Platform enables companies to optimize supply chain management with an integrated and comprehensive view of ESG criteria. Companies can ensure regulatory compliance and enhance their reputation through sustainable practices. Additionally, the platform facilitates communication and transparency with consumers and investors, helping build trust and strengthen market position. Integrating ESG criteria in the supply chain through TESISQUARE’s ESG Vertical Platform is raising the standards of sustainability and responsibility in the sector. This approach encourages the adoption of more ethical and transparent practices among suppliers and producers, contributing to the transition towards a low-carbon and sustainable economy. Companies adopting these solutions can position themselves as leaders in the shift towards more responsible business practices.
Tesisquare for Fashion & Luxury
Enhance the sustainability and transparency of your supply chain, from supplier selection to final consumer communication
