By Liam Salter, CEO of RESET Carbon.
Central Textiles Group, a leading textiles supplier in Asia recently becomes one of the first Asian major textiles suppliers to complete the Supplier Facilities Module assessment of the newly released Sustainable Apparel Coalition (SAC) Higg Index 1.0. Central’s Director, Pat-Nie Woo, shares his reflections on the business values for and challenges faced by suppliers in adopting this “game-changing” Index.
Motivation for adopting the Higg Index
Launched late July 2012 by the SAC, with members representing more than a third of the global apparel and footwear market, the Higg Index is a sustainability tool designed to assess the environmental and social impact of apparel and footwear products. Still in its early stages, the current version of the Higg Index focuses on measuring water use and quality, energy and greenhouse gas, waste, chemicals and toxicity, and has three modules: the brand module, product module and facilities module. The Higg Index aims to dramatically reduce sustainability measurement redundancy and create a common means to benchmark performance in the industry.
With textiles and apparel manufacturers operating under increasingly tough business environment these days, the myriad of brand-specific scorecards and questionnaire have induced audit fatigue, and is gradually becoming financially unsustainable for suppliers to respond. In contrast, “The SAC Higg Index’s promise to drastically reduce sustainability measurement redundancy is definitely ground-breaking. This scale of brands buy-in is the closest to what we have seen to a unified measurement system for the industry,” comments Pat-Nie Woo, Director of Central Textiles.
Motivated by the belief in the triple-bottom line business model, and having already implemented various energy efficiency and carbon reduction initiatives since 2008, Central Textiles carried out a gap analysis on its Hong Kong fabric mill’s performance using the Higg Index beta version supplier facilities module. Gaps identified between the actual performance and that required to meet Central Textiles’ desired Higg Index score were addressed through the implementation of sustainability measures, including putting in place an ISO14001 environmental management system and energy targets. Central Textiles contracted RESET Carbon, an independent carbon and energy management company to assess data integrity and scoring of the facility’s performance against the launched version 1.0.
Considerations, challenges and pitfalls for suppliers
Central Textiles considers the key challenge for the suppliers adopting the Higg Index assessment to be data availability and integrity. “As the Higg Index is arguably the most thorough and comprehensive attempt at measuring environmental performance in the industry, it makes you start measuring lots of things you’ve never measured before, with clear audit trails. It recognizes companies with systematic environmental management, and the requirements for data integrity definitely make it harder for companies who have never got the sustainability business model to get a good score,” says Woo.
The questions regarding measurements and monitoring of waste streams, air emissions and water data are particularly delicate to facilities locating in regions where local government regulations have limited control of these environmental aspects. Besides the data challenge, the limited supply of quality sustainability services support with sufficient industry expertise in the Asian region may also hold some suppliers back. Before tackling all the technical issues, however, the crucial starting point is still for suppliers to overcome the conceptual complexity of the sustainability agenda and garner top management support.
Beyond compliance: suppliers and brands incentives alignment
Precisely to help make the business case more compelling, the Higg Index is built on a shared-value approach.
“Unlike the historical scorecards and questionnaire approach, hopefully the Higg Index will align incentives instead of audit and compliance. Through this Index, suppliers will not just be asked to do stuff but will be told what they can get for using Higg,” Pat-Nie Woo, Director of Central Textiles.
For suppliers, Higg Index promises a benchmarking methodology that not only recognizes continuous improvement instead of box ticking, but is, more importantly, backed by the commitment of some of the world’s biggest brands to apply the scores in sourcing and purchase decisions. As brands in the SAC incorporate Higg Index findings into product development, material sourcing through end of life, suppliers are hoping for the Higg score to become the common language in the industry and enter day to day business discussions and decisions.
The experience of assessing the one Hong Kong facility has also demonstrated the instructive value of the Index. After the gap analysis, Central realizes that the whole range of environmental and social initiatives carried out in the absence of an overarching EMS would have hampered their score considerably. This has encouraged the Group to put together an EMS system and got the spinning facility certified against ISO14001. “So the Higg Index does help decision making and KPIs setting,” Woo suggests.
Central Textiles looks forward to the maturing of the Index over time and backs the SAC’s decision to launch the current version before verifications guidelines are published. “All verifications and certifications against standards have cost implications. The Higg Index appeals to us to as it pertains to a tool built genuinely to replace redundant measurement and reporting, and to service the industry’s interests instead of that of the standards themselves. This, and the brands’ intention to adopt the Index in purchasing decision making, will make verification interesting,” Woo states.
Going forward, Central Textiles expects more brands and suppliers in the industry to adopt the Higg Index. Commenting on RESET Carbon’s role in getting Central Textiles assessed with validated data, Woo reckons, “RESET’s work with key brands and suppliers in the region has built them an industry expertise. Their work linking the buy side and sell side serves a bridging the gap role for the industry.”
Liam Salter is CEO of RESET Carbon, a Hong Kong-based carbon and energy management firm serving companies in Asia. RESET specialises in supply chain solutions supporting brands to develop strategies and tools to engage suppliers, and working with suppliers in particular to improve energy efficiency on-site. Salter is formerly Director of WWF International’s Asia-Pacific Climate Programme & Head of Climate, and is currently member of the Board of the CDM Gold Standard,