How Clothing Supply Chain Transparency is Reshaping the Industry

"Transparency” — lofty pipe dream…or achievable reality?

And, in the context of fashion brands, is the promise of transparency primarily about maintaining compliance? Or can it become a strategic asset with a verifiable ROI that makes a business case beyond mere regulation?

The answers to these questions aren’t as abstract as you might think — because transparency isn’t just a concept. At ground level, its presence (or lack thereof) has real-world implications. And all you need to do is zoom into any of the most recent investigations around alarming labor conditions in factories supplying major brands or reports of workers enduring grueling hours with minimal compensation.

If you immediately thought of the “Shein Village” example, where workers in Shein's Guangzhou supplier factories reportedly endured 14-hour shifts, earned as little as 97p per hour, and faced punitive fines for minor errors, you’re on the money.

And that’s how we got here — a laser-focus on the money. It’s also how we get ourselves out: because the real costs of brand damage from media exposés or penalties under new EU directives are rising. Case in point: some estimates put Shein’s overall position today as having lost a third of its market value, with further downturns imminent as funding dries up and investors pull out.

But it’s not all doom and gloom. Future-focused ESG managers already know that the implications of regulations like the European Union's forthcoming Digital Product Passport (DPP) initiative mandating detailed product information demands more than vision statements. They know transparency operationalized means traceable data, integrated systems, and cross-functional accountability.

In this article, we’ll explore how transparency is reshaping the modern clothing supply chain — from the regulatory pressures accelerating disclosure requirements to the digital tools that help fashion brands build trust, improve traceability, and future-proof their business critical areas like across sourcing, production, logistics, and compliance. 

Building Transparency By Starting With Supply Chain Challenges

Fashion's supply chains are long, layered, and often opaque — spanning multiple continents, sub-suppliers, and manufacturing stages. For ESG managers tasked with bringing clarity to this complexity, the path to transparency is rarely straightforward. 

Below, we unpack the six biggest barriers ESG teams face — and how the most forward-thinking brands are overcoming them.

Challenge #1: Fragmented Supplier Networks Obscure Deeper Tiers

Most fashion brands have a relatively clear picture of their tier 1 suppliers, but visibility drops dramatically beyond that. Tier 2 and 3 suppliers — those involved in production processes like fabric weaving, dyeing, and even raw material harvesting — often remain undocumented and unaudited.

In action: Allbirds misleading carbon footprint claims

Allbirds, known for its sustainable footwear, faced a lawsuit alleging that the company misled consumers about the carbon footprint of its products. 

Even though it was eventually dismissed, the lawsuit claimed that Allbirds' life cycle assessments omitted significant environmental impacts, such as those from wool production and transportation — ultimately proving that, in the absence of transparency in supplier networks, environmental reporting, at the very least, needs to remain reliable and transparent so that these types of potential issues are visible faster.

What are ESG managers doing about it?

To close this visibility gap, brands like Armedangels and Kings of Indigo rely traceability platforms to digitally map supply chains several tiers deep in their production. 

• Armedangels emphasizes mutual trust and transparency as the basis for all partnerships, responsibly selecting suppliers who share the same values and striving for long-term commitments.

• Kings of Indigo actively combats greenwashing by mapping supply chains, tracking sustainability efforts, and providing easily accessible information to end consumers through QR codes attached to each garment.

Challenge #2: Data Silos Limit Impact Assessment

Even when sustainability data exists, it’s often scattered across procurement, legal, compliance, and logistics teams. Without integration, ESG managers struggle to produce reliable assessments of product- or supplier-level outcome.

In action: Higg Index suspension following greenwashing claims

Several fashion brands, including H&M and Norrøna, paused their use of the Higg Materials Sustainability Index (MSI) after the Norwegian Consumer Authority warned that the tool's data was misleading. They warned that the MSI’s data catalogued unsubstantiated environmental impact information and that this led to potential greenwashing coming from a business's supply chain.

“If you think of a lifecycle assessment as a clock face, the Higg MSI is only looking at midday to 3pm – only a very selective part of the impact [...] To represent how sustainable a product is, we need the assessment to go from midnight to midnight. The Higg SMI does not enable consumers to make informed decisions.” — Philippa Grogan, Sustainability Manager. 

To redeem the supply chain data measured and published by the Higgs Index, Grogan suggests taking an open source approach to operationalizing its collection, calculations, and assessments. 

What are ESG managers doing about it?

Leaders are investing in digital infrastructure that connects sustainability data with core business systems like ERP and PLM software.

• Chloé’s 2023 report shows the brand’s progress in embedding sustainability within its operational ethos by integrating sustainability objectives into personalized Key Performance Indicators (KPIs) for every employee, spanning all departments.

Challenge #3: Supplier Resistance and Reporting Fatigue

Transparency can feel like a burden to suppliers, especially smaller vendors facing overlapping demands from multiple clients. The fear of audits, data leaks, or being penalized for imperfections can foster reluctance or even non-cooperation.

What are ESG managers doing about it?

Progressive brands are reframing transparency as a collaborative process to turn supplier resistance into participation.

• There’s an industry-wide move to simplifying reporting requirements and aligning them with industry frameworks such as ZDHC or the Open Apparel Registry. 

• Many fashion brands are also offering training and digital onboarding tools to help supply chain partners to meet expectations.

Challenge #4: Regulatory Complexity is Increasing

The pace and breadth of new ESG regulation are accelerating. Between the EU’s CSRD, the Digital Product Passport, and UFLPA in the U.S., brands navigate an increasingly fragmented compliance landscape. For ESG teams, this makes prioritization — and execution — especially difficult.

In action: Further Shein investigations sparks Italian antitrust case

In 2024, the Italian Competition Authority launched a new investigation into Shein's sustainability claims, particularly those made under its "#SHEINTHEKNOW" and "evoluSHEIN" campaigns. The authority scrutinized whether Shein's marketing portrayed the company as more sustainable than it actually is, especially given reports of rising greenhouse gas emissions. 

First reported on by the Wall Street Journal, Shein’s continuing controversy is particularly notable today for more than its egregious human rights violations — these have now evolved sufficiently far enough that they’ve run straight into the increasing regulatory attention on fashion brands' environmental claims.

What are ESG managers doing about it?

Rather than reacting to each new policy in isolation, brands need to developing centralized, scalable disclosure strategies for the industry.

• Tactically-speaking, brands are using scenario modeling to assess which product lines are most exposed to risk, and incorporating Double Materiality Assessments to set informed reporting priorities.

• Legal and compliance teams are also being embedded earlier into sustainability decision-making processes, setting a new baseline for the industry.

Challenge #5: Reputational Risk, Rather Than Reward, Still Drives Decisions

Despite growing pressure, some industry brands hesitate to publish detailed supply chain information due to fear of backlash. Admitting to imperfect labor practices or emissions can seem like a reputational risk — especially in a polarized media environment.

In action: Boohoo’s bad media call

In 2022, Boohoo made to choice to include Kourtney Kardashian as its "sustainability ambassador" — but the move was met with skepticism that grew into controversy. 

Critics argued that the collaboration was Boohoo's attempt to “greenwash” away their fast-fashion business model and the limited scope of the “sustainable: collection. Along with the failed media stunt, the backlash emphasized consumers' desire for genuine sustainability efforts by fashion brands.

What are ESG managers doing about it?

More companies are embracing a “progress over perfection” narrative — highlighting improvement pathways rather than claiming to be fully sustainable. 

• Industry leaders are using third-party verification and they now include voluntary disclosures (e.g., through Textile Exchange or Fashion Revolution’s Transparency Index) to help build credibility in the process while showing stakeholders that they’re serious about accountability.

Challenge #6: Rising Consumer Expectations Demand Proof Over Promises

Consumers behavior has become increasingly discerning. Their expectations go beyond claims of sustainability — instead, they want verifiable evidence about the full product process. This shift is driven by heightened awareness of environmental and social issues, leading to a call for transparency in sourcing and production practices.

In action: H&M’s “Conscious Collection” lawsuit

In 2022, H&M faced a class-action lawsuit filed by New York resident Chelsea Commodore, alleging that the brand's "Conscious Collection" was marketed as environmentally friendly without sufficient evidence about the process or supply chain to support such claims. 

Commodore argued that she paid a premium for products she believed were sustainable, only to discover that the environmental benefits were overstated. Her claims shine a spotlight on the growing consumer demand for verifiable sustainability claims — along with the legal risks brands may incur when such claims are unsubstantiated.

What are ESG managers doing about it?

Brands are adopting Digital Product Passports (DPPs) to provide detailed information about a product's lifecycle and the supply chain, including sourcing, manufacturing, and environmental impact.

• There’s an industry-wide move to simplifying reporting requirements and aligning them with industry frameworks such as ZDHC, Higg Index, and the Open Apparel Registry. 

• In partnership with Vogue Business, fashion brands are using digital passport platforms (DDPs) to provide access to vital sustainability information through QR codes, enhancing trust and engagement.

Building a Supply Chain Fit for a Transparent Future: Key Levers for Fashion Brands

With increasing consumer demand for ethical standards and stringent regulatory requirements, brands must embed transparency into every facet of their operations. The supply chain, often the most opaque part of a fashion brand's operations, is central to achieving this transparency. 

Let’s examine four levers you can develop internally, with concrete action steps you can take to embed transparency as a priority.  

Build in Supplier Engagement Using Data Integrations

Engaging suppliers and integrating data systems are foundational steps toward achieving end-to-end transparency. Without active supplier participation and cohesive data management, visibility into the supply chain remains fragmented.

Remember the Armedangels and Kings of Indigo examples? Their use of traceability platforms to digitally map their supply chains beyond tier 1 suppliers — and, like these companies, you can operationalize transparency in a similar manner, tracking sustainability efforts and providing accessible information to consumers through QR codes attached to each garment

Key takeaways: How to operationalize

• Implement digital traceability tools: Utilize platforms that allow for real-time tracking of materials and products throughout the supply chain.

• Foster open communication: Encourage suppliers to share data and practices openly, building trust and facilitating collaborative problem-solving.

• Standardize data collection: Adopt industry-wide standards for data reporting to ensure consistency and comparability across the supply chain.

Develop True Transparency At the Raw Materials Level

Unsurprisingly, the International Centre for Trade Transparency & Monitoring is a stickler for transparency that not only begins on the right foot — but at the right level. 

In the UK, for example, initiatives like British Pasture Leather and Billy Tannery are promoting homegrown leather and wool supply chains. These efforts focus on sustainability, traceability, and ethical production by sourcing hides from grass-fed cattle and using plant-based tanning methods.

To make sustainability, well, sustainable, the ICTTM recommends focusing on the origin of raw materials within the supply chain. At this level, raw materials sourcing directly influences the environmental and social footprint of fashion products in a very tangible and controllable way. Transparency that starts here has every opportunity to not only verify sustainability claims but to take action and avoid unethical sourcing.

Key takeaways: How to operationalize

• Map raw material sources: Identify and document the origins of all raw materials used in production.

• Engage with local suppliers: Develop relationships with local or regional raw material providers to enhance traceability and support sustainable practices.

• Invest in sustainable materials: Prioritize the use of materials that have a lower environmental impact and are sourced ethically.

Support Suppliers (But Audit Them, Too)

As regulatory and consumer scrutiny intensifies, maintaining strong, transparent relationships with suppliers is essential for compliance and brand integrity. It’s a developing theme for future-focused fashion brands — one that research by McKinsey supports. 

A survey of chief purchasing officers (CPOs) at global apparel brands revealed that, especially due to volatile market dynamics, they can’t avoid taking a more strategic approach to their supplier relationships, deepening them by emphasizing collaboration and long-term partnerships.

In 2023, “deeper” supply chain relationships included long-term volume commitments, shared strategic three- to five-year plans, and collaboration partnerships, which represented 43% percent of apparel’s total supplier base — nearly double from 26% in 2019. They’re expected to increase this to 51% by 2028 — and European brands are “leading the charge in the shift.”

Key takeaways: How to operationalize

• Develop long-term partnerships: Move beyond transactional relationships to build strategic alliances with key supply chain partners.

• Provide support and training: Offer resources to help industry suppliers meet compliance and sustainability standards.

• Conduct regular audits: Implement consistent monitoring to ensure adherence to agreed-upon practices and identify areas for improvement within the supply chain.

Reduce the Financial and Reputational Impact of Supply Chain Blind Spots

Lack of visibility in the supply chain can lead to significant financial losses and damage to brand reputation, especially when unethical practices are uncovered. 

Just ask luxury fashion brand Dior that, in 2024, became the target of legal challenges after an Italian court revealed that contractors for the brand were engaged in human rights violations, including labor exploitation. 

According to a 34-page filing detailed by Forbes, investigators found that unethical activities allowed two so-called “small manufacturers” to supply “Made in Italy” Dior-branded handbags for a cost of $57 (€53). Each manufacturer billed Dior for a cost of €752,881 and €737,623, respectively. 

Meanwhile, Dior sold these for about $2,800 (€2,700), which is a 48x markup. That’s almost $80 million in resale value for a combined billing of only $1.6 million.

“This and similar cases could further undermine the credibility of the luxury fashion industry as a whole [...] This could be a very hard and hardly fixable blow, since it would mean questioning not only the tangible, intrinsic value of the products, but also their intangible value that includes their credibility and integrity.” — Alessandro Balossini Volpe, Business & Marketing Professor @ ISTUD

Key takeaways: How to operationalize

• Enhance supply chain visibility: Invest in technologies and processes that provide comprehensive insights into all tiers of the supply chain.

• Establish crisis management protocols: Prepare for potential disruptions by developing strategies to address and mitigate issues swiftly.

• Engage in transparent communication: Proactively share information about supply chain practices with stakeholders to build trust and accountability.

Moving Beyond Audits: Creating a Culture of Transparency Across the Business

Transparency isn’t a checkbox. It’s a culture. That culture begins with a company-wide commitment to visibility, accountability, and collaboration. And it must extend beyond compliance departments to involve every function—from product design and sourcing to marketing, legal, and logistics.

Here’s how ESG managers are helping to shift transparency from a siloed activity to an integrated business practice:

• Empowering cross-functional ownership: Brands like Patagonia and Eileen Fisher are embedding supply chain transparency goals into every department’s KPIs, not just those of sustainability teams. This creates mutual accountability and ensures visibility goals aren’t deprioritized under cost or speed pressures.

• Using tech to democratize data access: Tools such as Retraced are enabling teams across departments to access supplier data and audit findings in real-time, helping to reduce bottlenecks and empower faster, more informed decision-making.

• Embedding transparency into brand storytelling: Danish fashion brand GANNI publishes detailed supplier lists, progress against climate targets, and the methodologies behind its claims, not just in reports, but in marketing communications and store experiences too.

• Moving from reactive to proactive supply chain management: Companies like Kering have introduced traceability platforms and blockchain solutions to monitor material flows upstream — preempting reputational risks rather than reacting to public backlash.

• Training and incentives for transparency: Transparency champions within businesses are receiving specific training, budget autonomy, and leadership backing. These enable them to drive supplier engagement programs and collaborate on improving shared systems, rather than just flagging problems.

Ultimately, the goal isn’t just to comply — it’s to create trust. A culture of transparency protects brand integrity, supports long-term supplier relationships, and positions companies to lead in a marketplace that increasingly values verified proof over polished promises. For ESG managers, nurturing this shift isn’t just a moral obligation — it’s a strategic advantage.