How Blockchain Can Solve Retail’s Sustainability Problem

At this year’s G7 summit in Biarritz, 32 companies banded together to sign the Fashion Pact, a commitment to solving one of the apparel and retail industry’s biggest problems: sustainability.

The fast-fashion sector has been a main contributor to the problem. With companies churning out more clothing on a faster production cycle, the fashion world now produces 150 billion garments per year. Without foresight into demand, many organizations end up overproducing, resulting in 30 percent of items going unsold and 12.8 million tons sent to landfills.

Luxury brands have been accessories to the environmental impact of retailing as well. To protect brand image, those like Burberry have historically sent unsold items to the incinerator. When these products are burned, they release carbon dioxide and other greenhouse gases into the atmosphere, further contributing to global warming.

How can organizations improve sustainability within their supply chains? One way is through the widely discussed technology of blockchain.

Blockchain Combined With Intelligent Planning Eliminates Overproduction

Blockchain provides a distributed ledger of all activities and transactions in a product’s life cycle — from sourcing and production, through transport to the retail level. The data is decentralized and visible to everyone on the network in real time. This transparency means people responsible for production planning, channel allocation, demand forecasting, and replenishment — upstream in the supply chain — can have visibility downstream into what consumers are buying at any given moment.

They can thereby better plan production numbers, manufacturing only the precise amount of stock to satisfy demand and thus eliminating overproduction. With geographic data, companies can send products to the regions where they're in high demand to further minimize the likelihood of unsold stock sitting in stores only to meet a landfill or incinerator.

For fast-fashion retailers, luxury players, and everyone in between, these proactive measures can benefit the planet in many ways.

• Less Water Usage: Studies show that a pair of jeans requires 7,000 liters of water. Similarly, a T-shirt takes 2,700 liters. In total, the fashion industry uses 1.5 trillion liters of water each year. When 750 million people worldwide lack drinking water, these numbers are quite alarming. By reducing overproduction, organizations can limit water wastage in producing unsold products.
• Less Chemical Contaminants: After production, chemicals often find their way into the environment through wastewater dumped into nearby rivers. This wastewater often contains toxic substances like lead, mercury and arsenic that can harm aquatic life and enter the water supply. Notably, 20 percent of industrial water pollution can be traced to textile treatment and dyeing. While making a conscious decision to use only organic and natural fibers is one solution, blockchain presents another viable way to cut down on harmful chemicals.
• Less Agricultural Impact: By eliminating overproduction, companies can minimize the amount of fabric and raw materials required in manufacturing. This can lessen the issue of soil degradation posed by activities like excessive cotton production and overgrazing by goats and sheep raised for cashmere and wool. For instance, in Mongolia, 90 percent of the country’s surface is facing desertification due to overbreeding of cashmere goats.

Beyond doing the right thing, sustainability is important for brands and retailers because it matters to consumers. According to a 2019 survey, 68 percent of respondents noted sustainability as an important factor when making purchase decisions, and 47 percent said they would pay more for an environmentally friendly product. Since all supply chain data is permanently logged on blockchain with a historical chain of custody, brands and retailers can assure consumers that their products were produced according to sustainable and eco-friendly practices, which can be a powerful differentiator.

Pratik Soni is CEO of Omnichain™, an end-to-end blockchain solution for supply chain management.