ESG. Environmental. Social. Governance. It’s a heightened priority for merchants, brands, and consumers, not to mention manufacturers, wholesalers, and suppliers, for reasons ranging from retail compliance to new regulations to concerns about global warming and fair trade.
Since their inception, many outstanding fashion and retail businesses have held themselves and their suppliers to high standards for working conditions and environmental stewardship. However, today’s ESG compliance requirements reflect greater scrutiny on extended global supply chains and a higher bar to prove compliance with new laws and regulations. Here’s our complete guide on ESG compliance, and how you can ensure that you’re operating in the best way possible as a fashion brand.The complete guide to ESG compliance for fashion brands
September 07, 2023
What Is ESG?
Environmental, social and governance (ESG) is a framework used to assess an organisation’s business practices and performance on various sustainability and ethical issues. It also provides a way to measure business risks and opportunities in those areas.
ESG regulations change often, so fashion manufacturers need to know what they have to do to comply each year. When they do, there’s potential for growth.
ESG initiatives are the No. 2 growth opportunity and improvement priority for apparel and consumer goods businesses, according to our 2023 Supply Chain Trends report.
Learn about what other trends are happening right now.
Why is ESG compliance a pressing priority?
Major retailers such as Walmart have mandated that suppliers provide visibility into their extended supply chains, from raw material to finished product. The Uyghur Forced Labor Prevention Act (UFLPA) does the same. Enforced since June 2022 by U.S. Customs and Border Protection, this U.S. law requires importers to comply with rigorous track-and-trace rules to thwart forced labour risks in Xinjiang, China’s cotton capital. Accounts of Xinjiang’s Uyghur people being forced into camps for “re-education” have appalled the world, including the U.S., which has its own scarred history of slave labour in its Southern cotton fields. UFLPA has shaken up apparel and home fashion supply chains by demanding:
Verified supplier documentation
Chain-of-custody handoff proof for finished products
While this compliance helps protect workers, many apparel businesses are struggling under the burden. Some have hired new employees for the sole purpose of ESG compliance. Others have added ESG duties to already full plates of existing teams, collecting and reporting sourcing information through tedious spreadsheet updates. They squeeze what they can from older business software not built for the rigours of modern retail, much less ESG. Oftentimes, suppliers — and suppliers’ suppliers —bear additional overhead costs and overtime, all trying to ensure:
Safe factories with fair wages and practices
Customer and government ESG requirements are met
Goods make it through U.S. Customs
Right products reach consumers at the right time
But there is a solution. The smarter path with stronger ROI is a comprehensive strategy and technology platform including ERP, PLM, and shop-floor control (SFC). With these tools, companies can manage not only ESG compliance but also strengthen business fundamentals, including:
Cost reduction
Competitive price
On-time delivery
Supply chain visibility
Fulfilment speed, flexibility and accuracy
Customer service
CGS BlueCherry® can be your partner in forging your ESG strategy and determining how to integrate and align ESG with other business priorities. Learn more about our solutions today.
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How do you become ESG compliant?
There are multiple steps you need to take to become ESG compliant. The first step to integrating ESG into fashion supply chains is supplier network modelling.
Supplier Network Modelling
Supplier network modelling is an important first step toward ESG compliance because it provides visibility into supply chain relationships, helps identify high-risk suppliers, and enables companies to monitor and improve sustainability performance across the value chain. How do you model your supply chain? Here are the basic steps:
Create supplier records for each tier by collecting primary data. This is information you request and receive from suppliers or gather through internal teams on factory visits or meetings.
Collect and review third-party assessments and audits of social, safety and human rights conditions across your supply chain.
Maintain all supplier records and activity in a single platform, such as the same ERP and PLM solution where you already centralise bills of materials, supplier information and material libraries.
Connect the dots between buyers and sellers in your supply chain tiers. For example, identify supplier relationships such as which fabric mills supply materials to the same sewing factories.
As well as supplier network modelling, you also need supply chain mapping.
ESG supply chain mapping
To clear U.S. Customs and Border Protection (CBP), importers face stricter product origin documentation requirements. In some cases, businesses must provide supply chain maps tracing every input and process, from the field to finished good, particularly for cotton clothing and home fashions sourced from China or Southeast Asia. Other countries and regions are under scrutiny too.
CBP and its enforcement of the Uyghur Forced Labor Prevention Act (UFLPA) has far-reaching ramifications. In addition, supply chain transparency has fast become a top business priority because of other new and pending laws, regulations, retailer requirements and consumer concerns about environmental, social and governance (ESG) issues.
Thankfully, with BlueCherry, we empower your business with ESG chain-of-custody documentation plus visibility to many other mission-critical business processes.
Supply chain mapping challenges
CBP UFLPA enforcement has put not only apparel but solar panels, electronics, auto parts and other product shipments under the Customs microscope. Now, components that may include lithium-ion batteries, tyres and major automobile raw materials aluminium and steel are increasingly subject to detentions at the border.
Stakes are high. Many millions of pounds’ worth of apparel shipments have come under CBP review or enforcement actions. For electronics, the numbers exceed £1 billion.
Under UFLPA, any products with possible ties to Xinjiang can be held up by CBP. CBP requires detailed supply chain mapping and chain-of-custody documentation to prove forced labour was not involved in any input or step in a product’s production, from picking cotton to ginning, weaving, knitting, dyeing, printing, finishing, sewing, labelling, or packing.
Supply chain mapping solutions
Supply chain traceability mapping at the purchase order (PO) and item level is now an essential business capability. How can your company efficiently get control of chain-of-custody documentation and gain greater visibility to all your business processes?
Business Control Centre: Implement end-to-end enterprise technology such as CGS BlueCherry®, with integrated ERP, PLM, shop-floor control and business intelligence, for managing ESG and core business processes.
Transaction Verification: Ensure your ERP solution accommodates three-way matching of all product transaction documents.
Lot Tracking: Leverage technology to track and trace materials, trim and products as they are transformed and moved from supplier to supplier.
Compliance Certificate, CBP Proof of Admissibility: Centralise supplier information within your core business technology and automate publication of this important documentation.
These steps support not only ESG compliance but also supply chain digitalisation for:
Stronger supply chain management
Seamless information handoffs/communications
Faster speed to market
Improved flexibility and agility
Competitive pricing
Greater efficiency
Better quality
Learn more about our ERP solution and how it allows your fashion brand to remain ESG compliant.
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How does environmental sustainability play into ESG compliance?
Environmental sustainability is a major part of ESG compliance, not to mention that consumers are paying far more attention to it. Protecting the environment is a concern for consumers, retailers, fashion, and consumer goods businesses. Natural disasters and extreme weather are more frequent, and people are paying greater attention to manufacturing waste, recyclability, natural resources conservation and ecological diversity.
Is your business prepared to meet customers’ sustainability requirements? Will your supply chain operations comply with environmental laws potentially coming this year? In two years? In five years? Now is the time to build a big-picture environmental, social and governance (ESG) strategy.
There’s no shortage of new software promising to solve ESG documentation and compliance reporting. However, most are Band-Aids. Rarely do they deliver comprehensive tools for managing both social and environmental requirements, much less day-to-day priorities like product development, quality and order management. They might help shipments clear Customs for a season, but what happens when ESG laws and your supply chain change? The solution cannot keep up.
Rest assured, you do not have to add staff or reinvent the wheel when you want to add environmental elements to ESG. By adopting a single supply chain solution like BlueCherry, you’ll be able to:
Comply with track-and-trace rules of the Uyghur Forced Labor Prevention Act (UFLPA) and other social/labour laws and retailer requirements
Manage environmental metrics related to each supply chain process and handoff
Strengthen, streamline, simplify and speed core business processes, from planning to point-of-sale and product end of life
The challenge of being environmentally sustainable
Environmental sustainability is now a priority for consumers, brands, manufacturers, and governments alike. Many companies face significant hurdles in meeting ESG standards across global supply chains. While visibility and relationships with Tier 1 suppliers are strong, upstream suppliers—such as fibre producers, dye houses, mills, and subcontractors—often remain opaque. Collecting reliable data is time-consuming, labour-intensive, and prone to errors, with teams relying on manual methods like emails, inconsistent documentation, or spreadsheets.
Adding to the complexity, ESG expectations are not standardised across retailers, brands, or governments, making compliance inconsistent and difficult to enforce. Failure to manage these challenges can result in shipment delays, penalties, or damaged customer trust.
The solutions for environmental sustainability ESG compliance
Companies can integrate environmental sustainability directly into their core business processes through centralised, end-to-end data management platforms. Key strategies include:
Centralised ESG Data Management: Consolidate supplier information, traceability, and reporting to simplify compliance.
Technology-Enabled Monitoring: Use ERP/PLM/SFC platforms to automate data collection and ensure scalable, accurate tracking.
Pragmatic ESG Strategy: Develop policies and processes that align with immediate compliance needs while preparing for future regulations like the EU’s CBAM.
With these solutions, you can meet or exceed environmental and labour compliance standards and strengthen operational efficiency, on-time shipments, and quality. You’re also able to enhance brand competitiveness by integrating sustainability into core business processes.
Core steps to become ESG compliant
To build your fashion brand as one that’s ESG compliant, you need to:
Design for sustainability. Much of clothing’s eco impact is related to upstream activities such as fibre production, dyeing and finishing. That’s why it’s so important to specify sustainable materials and production processes. In many industries, the supply chain accounts for more than 80 percent of the environmental impact. Textile dyeing and finishing account for more than 25 percent of the environmental impact, compared with 5 percent for assembly.
Determine Environmental Impact. Evaluate each transformation stage, including transportation between suppliers. Build a digital twin of your supply chain network. This gives your business visibility to who sells to whom and who works with different suppliers across tiers.
Calculate the Lifecycle Assessment (LCA). For each product, you can devise an LCA to determine the item’s eco impact, make changes where possible to improve sustainability or offset impacts and plan for responsible disposal, recycling or reuse at end of life. Partners like BlueCherry can help capture and manage the relevant data.
Publish Social and Environmental Metrics: It’s important to publicise and amplify your ESG efforts through reports, website highlights, social media and marketing, being careful to avoid greenwashing, which impacts trust and authenticity. The ultimate goal is to publish item-level ESG information for consumers, which can be shared through QR codes and Digital Product Passports (DPP), which can be integrated into product hangtags.
Choose BlueCherry to aid with ESG compliance
Partnering with a technology provider like BlueCherry enables your business to take a strategic, long-term approach to ESG while navigating the complex, ever-changing landscape of global supply chains. By leveraging integrated solutions and data-driven insights, companies can improve transparency, strengthen compliance, and embed sustainability into core business processes - all while enhancing efficiency and competitiveness.
For a deeper perspective on how supply chain transparency is shaping the future of fashion and driving ESG priorities, check out CGS Vice President Mark Burstein’s article on Forbes: Fashion Supply Chain Transparency Takes Center Stage. It’s an essential read for executives looking to turn sustainability challenges into opportunities for growth and resilience.