Supply chain expert on traceability: “Not just another compliance requirement, but a risk visualisation and management tool”

Is the textile supply chain really as complex as commonly claimed? Does traceability thus remain merely a corporate buzzword rather than a reality of Tier 4 operations? What role does the informal sector play in the textile supply chain? And how can the physical-digital gap be bridged in rural farming? These and other pertinent questions prove that sustainability is no longer a moral luxury or a consumer-driven trend—it is a rigorous, data-backed financial imperative that starts long before a fibre ever reaches the factory floor.

FashionUnited spoke to supply chain expert Devendra Gupta, head of product at global certifier OekoTex, for a deep dive into the friction between high-level sustainability goals and the ground-level realities of the textile supply chain.

Could you talk a little bit about your background and how you got into the role that you are in?

I did a bachelor's in fashion at National Institute of Fashion Technology in India, and post that I moved to a couple of countries across Asia—from Hong Kong to Bahrain, to Oman, to Jordan—and then to Spain and Germany, and now I am here, in Zurich.

Throughout the journey, it has always been the fashion sector. Initially, I did a lot of factory setups, which allowed me to understand whatever is needed for the whole supply chain to function, from each department to each supply chain actor. It was quite useful to be part of these whole conversations in terms of understanding the customer angle—what they want from the supply chain actor—and also understanding the pain point from the supply chain actor side, in terms of feasibility.

Sustainability caught up in the last decade. It was quite good to have a first-hand experience of how things start—from basic environmental data to social compliances, to wastewater requirements, to traceability. The latter is very much in demand right now but was not in 2013 when I started.

In 2017, the focus was on recycled polyester; that was the "best thing to do in the world" and nothing else beat that. Campaigns from Adidas and Nike reflected this mindset. I was dealing with major buyers across the US—from Walmart to Target to Levi's—so understanding the compliance and ESG requirements was quite good.

Then I moved to the Forest Stewardship Council (FSC), heading the circular economy and fashion sector. That is how I got into the whole certification topic on chain of custody, traceability and impacts on the ground that happen when a decision is made in Europe at someone’s office. How does it impact a person in Vietnam or Brazil? It is quite different. It was important visibility because I have always been involved with Tier 0, 1 and 2 but never with Tier 4. I realised how a decision taken over Zoom can have a ripple effect and impact somebody sitting somewhere else who might not have a meal because we decided to stop or change supply chain partners. In June last year, I joined Oeko-Tex. It is a new phase for the organisation as well because traceability is new in terms of the farm-to-product level.

One excuse brands and retailers like to use is that the fashion supply chain is “too complicated” to allow for complete traceability. In your experience, has it become easier with new data tools, or is there still something to that old excuse?

It is a mix of both. If you ask, ‘has it become easier?,’ I would say no, because the requirements are evolving. You never actually know what you mean by traceability today; it could be so different for one company versus another.

The complexity is based on the number of actors involved. These actors are often not well-funded or oriented with technology, and the margins are not that high. The infrastructure requirement to build a proper traceability chain is taken out of somebody’s pocket. In the end, I would be questioned: ‘We do not have that much margin; can we accept that increase in pricing needed to maintain traceability?’ Especially at Tier 4 or Tier 3 level, where even the infrastructure is not available for traceability to happen digitally. In some regions, do we even know if a cell tower is there to log in?

I want to make this point that the textile industry is constantly being compared to sectors that are really advanced and have high profit margins. But there is no way you can compare fashion to pharmaceuticals or automotive manufacturing. Car manufacturing is owned by seven or eight brands in the world, which means they have all the capital to streamline things. For them, it is vendor management motivation rather than traceability motivation; there is no apple-to-apple comparison.

How can the digital-physical gap be bridged, especially in Tier 4 where load shedding and lack of internet are realities?

Load shedding is such a good example. South Africa struggles today with it; I was trying to have calls with a billion-dollar plant but they were not connecting because the internet was down. To bridge that, it can never be just technology. It has to go hand-in-hand with action points: capacity building, knowledge sharing and making it as simple as possible.

I know there are apps that can be done offline and retrieve data once there is connectivity. But one-size-fits-all is definitely not working. We need to build consensus. For instance, these farmers are not just cultivating cotton; they are doing food crops. Different schemes have to come together to standardise data. If they are using Excel, the format has to be similar, not one person collecting in pounds, another in kilograms and yet another in metric tonnes. Just for a farmer to upload everything in kilograms versus three different formats would be very helpful to bridge that gap.

What would be a good incentive for farmers to start digitising?

We have to be logical: the incentive is finance, so provide a good share pricing. For farmers, every square hectare brings in a certain amount of money. They always have the ballpark figure of revenue versus expenses. The incentive is that the ballpark figure increases with the effort they put in. That is 99 percent of what motivates them: fair pricing and fair remuneration. The other 1percent is improving operational performance, but that takes years to show. Pricing is simple: ‘You used to get 100 US dollars per kilogram, now you are getting 110.’

Do you find that younger generations are helping to mobilise this digitisation?

This may be the case in India but India is quite different from the rest of the world. Adoption is high because of access to cheaper smartphones and plans. I have not seen the same attitude in other nations where the cost is high or priorities are different. In Spain and Italy, nobody is in the villages anymore; these are dying villages. In developing economies, the manpower is still there. What works is the tech model—employing group certification managers who do all the data collection for, say, 50 farmers. Cooperatives. As long as they get fair pricing, it is a win-win.

How can people be incentivised to share sensitive data like origin and cost?

People are realising that this is going to be a level playing field going forward based on regulations like EPR and the digital product passport (DPP). Brands are signing transparency pledges and going beyond Tier 2. Slowly, a realisation is happening that they cannot play around with a dollar here and a dollar there anymore. They have to compete on performance and ESG, not on hiding data to charge more. This realisation is painful for the sector because it was a trade advantage they had for decades. In some cases, it is ripping off the bandaid.

There are also disclosing data incentives in terms of bank loans. If you have ESG data and third-party audits, you get a preferred financial rate. On a 15 million US dollar loan, a 1 percent reduction is 150,000 US dollars—that is enough for your ESG projects and reporting. Almost all standard banks are offering better rates now because they have an obligation from the EU Commission to invest in greener companies.

It is said that audits do not provide a real-time picture. How can one implement continuous monitoring?

An audit is five days out of 360. You cannot say that a successful audit means that the work is done; there is so much more to a day. An audit only checks the integrity of the process. Triangulation is important. For an organic cotton audit, we look for each lot to be uploaded on the platform. It checks input, output and conversion losses. Once you have these data points on a platform, you see the signals.

We are working on our platform to go to the third level. If cotton production in India, for example, was low this year, is it even possible for a certain tonnage to be produced later? This takes years of data standardisation. Today it is a lot of ad-hoc case-to-case scenarios, using World Bank reports and risk parameters to identify what is happening on the ground so auditors know where to focus.

What technologies are actually used to ensure that the material in a garment comes from a specific farm?

The technology could be Excel, or a digital platform, or blockchain. It depends on how complex the supply chain is. I think ‘risk tooling’ is the best phrase. If you are a brand, you need to identify the branches’ and ‘leaves’ of your supply chain. From 100,000 farms, you narrow it down to 20 farms that are your risk areas—biodiversity or water hotspots.

What we use is a digital platform that works on blockchain because of data integrity, but it depends on your budget. The goal is to avoid cornering people. Sixty-seven percent of the market is polyester; organic cotton is only 2 percent. If we push them into a corner before they can scale, we kill the incentive. We have seen cases where farmers move to unknown crops that do not require the same scrutiny just to survive.

What about informal and home-based workers? Will they ever be formalised into the supply chain?

The percentage of informal workers is more than 60 percent today, it is huge, especially in the rise of the waste economy. There is a major risk for informal workers regarding wages, chemical hazards and social hazards. We are trying to see what we can provide as an assurance, because for a brand, it is a reputational risk.

It can be formalised if there is a proper margin of profit. Government incentives, like EPR laws in Europe, will slowly formalise the sector. These workers were hidden for a long time. Ten years ago, social standards were not even clear. We need to acknowledge we lost people along the way and figure out an action plan to include them. Brands can act as role models—if a big brand includes the informal sector in their policies, others will follow.

How do you handle cases where sustainable fibres get mixed with conventional ones at mill level?

The mixing scenario started with ‘mass balance’ as a way to scale—the intention was positive because of the non-availability of sustainable fibres. But at Oeko-Tex, we have rejected all kinds of mass balance approaches.

We apply the segregation approach. Material has to be strictly separated in the warehouse and production lines, otherwise, lab tests for GMOs and pesticides would fail. Other schemes that are only paper-based might allow mass balance to focus on the overall increase of sustainable fibres, but our strength is the lab and physical traceability.

What needs to change?

Many people think consumers decide everything, but I do not believe in that. Business decisions, regulatory needs and financial incentives drive change. If the people in the industry have the right knowledge and access to finance, they will act. If you do not have profit, you cannot scale these sustainability these projects. There is no doubt about that in my head. There would be no rise of Temu and Shein in Europe if all consumers decided that they will only buy sustainability materials or can afford the premium.It is proven that Sustainability pays for the bottom line. We are running out of excuses. We have too many sustainability managers who have never set foot in a factory; their decisions come from a handbook rather than what is feasible. We need to apply the Pareto Principle: focus on what creates the most impact, rather than nitty-gritty details that nobody has the money to pay for.

In difficult times like these, how can risks be navigated?

If we look at the last few years, shaped by Covid, climate-related disruptions and current geopolitical instability affecting so much more than just shipping, energy and raw materials, it is quite clear that our supply chains cannot just be built on the cheapest price option but on resilience.

For brands, honestly, it goes down to investing in long-term partnerships, clarity on risks and avoiding short-term decisions. I think that for suppliers, the risks are even higher. They cannot continue to operate in a black box and need to understand their own supply chains better, whether in terms of raw materials, water or energy as these disruptions are not only operational or financial, but they also have a direct impact on livelihoods across the supply chain.

This is where traceability becomes very important and it should not be seen as just another compliance requirement, but as a tool to visualise risks and manage them more effectively.