McKinsey’s 2019 Chief Purchasing Officer (CPO) survey, the fifth in the series since 2011, focuses on sustainable sourcing at scale—fashion’s new must-have. The survey finds that social and environmental sustainability has become a burning priority for apparel companies, just as it is becoming an increasingly important issue for consumers and governments.
A skeptic might ask: does this spotlight on sustainability represent a move towards long-term transformation of the industry or is it simply the fashion of the season? The clear majority of survey respondents expect the industry to transition to a much more sustainable model by 2025. They foresee wider use of sustainable materials, an improved ecological footprint, increased transparency, and strengthened supplier relationships and purchasing practices. But most apparel companies will need to shift current practices dramatically if they are to deliver on such bold expectations.
Our survey reflects the perspectives of 64 participating sourcing executives, who are responsible for a total sourcing value of over USD 100 billion. These respondents cover the full spectrum of the market, including vertical apparel retailers, hybrid wholesalers, and sportswear companies. We supplemented the survey findings with proprietary analyses of sustainable apparel offerings, powered by EDITED; street interviews with young consumers in four European cities; and background interviews with sourcing executives and industry experts. Highlights of four of those interviews are included in this report.
This report presents respondents’ and interviewees’ outlooks on the future of apparel sourcing, interwoven with our own interpretation and experience from our client work. McKinsey is deeply committed to supporting greater sustainability in the fashion industry.
This report makes it clear that it will be challenging to deliver true progress in the complex arena of sustainability. Indeed, the industry lacks a common language on sustainable sourcing, let alone a shared set of standards. But our findings leave no doubt that sustainable sourcing at scale is a must for apparel companies over the next five years—and that consumer demand for sustainable fashion is growing rapidly. At the same time, margin pressure is making it even more important for companies to improve the efficiency of end-to-end product development and sourcing processes. As our survey shows, executives see no conflict between this imperative and the drive for sustainability.
We also point out that companies need to make progress on sustainability while navigating a volatile, fast-changing environment. Our survey underlines the impact of “Trade 2.0”—increasing trade tensions exemplified by the US- China trade war, which is amplifying country shifts in apparel sourcing. That, combined with ongoing demand volatility, is pushing companies towards a more flexible, demand-driven sourcing model.
In the years ahead, apparel companies must shape a robust sustainability agenda that addresses both social and environmental imperatives. And they must deliver it at speed and scale, harnessing innovations in technology, standards, processes, materials, and communication. Our survey sheds light on companies’ preparedness, plans, and progress in four key areas of that sustainable-sourcing transformation:
—— Embracing sustainable materials. The share of products containing sustainable material remains low today, but CPOs envisage a major scale-up in the next few years. The majority of those surveyed aspire to source at least half of their products with sustainable materials by 2025. That won’t be easy: CPOs cite several obstacles to implementation, including availability, cost, and quality of materials.
—— Driving transparency and traceability. Apparel companies are under increasing pressure to create transparency on their supply chains and to share that information with consumers—but few companies have yet achieved that transparency. Eight in ten CPOs surveyed have ambitious plans to step up transparency by 2025. Six in ten plan to go further and share information about their suppliers at the point of purchase. Again, the change required will be dramatic.
—— Turning supplier relationships into strategic partnerships. In supplier relationships, social and environmental sustainability is taking on much greater importance: two-thirds of CPOs surveyed said it would likely become a top factor in their supplier ratings. This is encouraging garment manufacturers to invest proactively in environmental sustainability, worker well-being, and fair wages. CPOs recognize that more is needed: collaboration across the value chain is key to achieving an industry-wide transformation in sustainability.
—— Reinventing purchasing practices. Our survey underlines the fact that sustainable and responsible sourcing has significant implications for purchasing practices, from planning to negotiation to order placement. Two-thirds of CPOs expect sustainable sourcing to add between 1 and 5 percent to their costs, with most agreeing that this is an investment in building competitive advantage. That said, there are important opportunities to improve the efficiency of internal productdevelopment processes.