STICA PROGRESS REPORT 2022

CEO Perspectives

Anders Carlsson, CEO, Blåkläder 

1. This is the first time your company has calculated and reported on your Scope 3 emissions within STICA. What insights did you gain from doing this?

At Blåkläder, we are aware of the fact that the absolute majority of our climate footprint originates from the manufacturing process, from fibre to garment. We can conclude that around 98% is generated outside the internal business and comes from use of energy in all process steps. The obvious focus is to continue to cut the emissions generated in the supply chain – how we can convert to renewable energy sources, help to improve manufacturing processes and look at alternative materials. Our sewing factories already use solar panels and we will continue our mission to encourage similar investments throughout our entire supply chain. This will not only benefit the emission reduction for Blåkläder, but all parties in business with the same manufacturing units.

2. What significant challenges or opportunities will you face as you try to reduce your greenhouse gas emissions during the coming years?

The overall behaviour of consumption is a challenge to overcome, as most  garments are not worn out but lose their attraction for one reason or another when it comes to fashion. Recycling or other initiatives to reduce emissions are good, but for workwear, longevity is key. The garments are most often completely worn out under tough conditions. The challenge here is the balance between recycling, organic cotton and the lifespan, as the choice almost always comes with a compromise. It’s not obvious that they are a part of the solution, but this we need to explore more to gain better knowledge. The longer a product is kept in use, the better it is from all perspectives.

It’s clear that we need to address the supply chain even more going forward, since it’s here we can save emissions. But again, to compromise on longevity of the garment will not be a viable solution.

3. What help do you need from politicians and policy makers, banks and investors, and other key stakeholders to make it possible to achieve your goals?

We truly believe that there already are a lot of strong ongoing initiatives as well as ground breaking developments of new technology in the textile industry. Driving this progress in the right direction will require a balance, to implement the most effective actions for the time being and not to force changes prematurely with opposite effects. A concrete example is the textile recycling technology, which today is very limited but where a lot of new, exciting development is happening. Recycling waste in general and implementing circular economy is key to our common future, but the circular flows could be approached from a more holistic perceptive and not industry by industry. It would be great if we, the textile industry, could have a common road map to make it easier for consumers and decision makers to understand the complexity within the textile industry when it comes to sustainability and emissions in a bigger context.

Leo Zhuang, CEO, Lei Tak Fung (Supplier to Peak Performance) 

1. What significant challenges or opportunities will you face as you try to reduce your greenhouse gas emissions during the coming years?

We have applied all available technology such as solar panel systems, LED lights, VFDs, and installation of high efficient motors or machines. We are still seeking new technology for reducing energy consumption or GHG. But this will be difficult without new innovations from technology companies. Another big challenge is our local (Bangladesh Grid) electricity (Scope 2 emission), where about 75% of our energy comes from, as this source is currently not green energy. We are expecting the Bangladesh Government to focus on this issue very soon.

2. What do you expect from your business partners, like brands and retailers, to help you achieve your greenhouse gas emissions targets?

We expect full engagement of all brands and retailers in order to be able to introduce new technology, and require financial support to reduce GHG.

3. What help do you need from politicians and policy makers, banks and investors, and other key stakeholders to make it possible to achieve your goals?

We need support on easy and available loans and investment without interest in response to highly efficient machinery and technology setup. Policy makers will need to create policies in favour of GHG reduction.

Susanne Ehnbåge, CEO, Lindex 

1. This is the first time your company has calculated and reported on your Scope 3 emissions within STICA. What insights did you gain from doing this?

This is the third time we calculate our Scope 3 emissions but it is the first time we have integrated actual data from some of our biggest suppliers. The most important insight is that a consolidated supply chain and close dialogue with suppliers is key. Also, we see that it will be important to frequently collect this data to understand it, compare different suppliers’ data to one another and verify the data. This will be a journey and an ongoing recalibration process where we will have to recalculate our base year as more data becomes available to us.

2. What significant challenges or opportunities will you face as you try to reduce your greenhouse gas emissions during the coming years?

Reducing our greenhouse gas emissions by 50% latest 2030 will require courage, innovative thinking, and transforming the way we do things today. We believe that our biggest challenges will be to decarbonize the large fabric mills who we do not yet have a relationship with. This is where our biggest impact is, and this is where decarbonization needs to happen. We will face challenges with lack of access to renewable energy in some of our production markets. However, we will have opportunities to explore new business models and ways of creating value without increasing our emissions. We also see opportunities in new partnerships, new types of investments and new innovations when pressure for transformation increases and legal frameworks are being put into place.

3. What help do you need from politicians and policy makers, banks and investors, and other key stakeholders to make it possible to achieve your goals?

We need legal frameworks that are sharp and to the point and that drive actual change while creating a level playing field. We need support in investing in our existing supply chain in for example Bangladesh both through finance support like green loans backed with government guarantees, reduced taxes and tariffs as well as advocacy in production countries. We need transformation to circularity to be incentivized through reduced labor costs. Legislation must create a level playing field and must not allow competitors from outside of the EU to put their goods in the EU market without being subjected to the legal requirements. This would heavily undermine all the efforts and investments that the EU member enterprises are undertaking.

Camilla Deichmann, CEO, Garment Division, and Karin Simondon, Global Sustainability Manager, LTP Group (Supplier to Peak Performance) 

1. What significant challenges or opportunities will you face as you try to reduce your greenhouse gas emissions during the coming years?

As LTP Group has factories in 5 different countries, the main challenge is to have a group level reduction strategy that takes into account local specificities framing available solutions. For example on the topic of renewable energy sourcing, we need to understand local energy rules regulating power purchasing agreements (PPAs), renewable energy certificates, and the various related EPC and BOT models which are always specific to the countries. We also need to keep a close track of geopolitics driving the climate transition, for example the EU definition of renewable energy with the current debate about nuclear energy and the open question on gas. If nuclear is listed as a renewable energy with zero emissions, we should not invest in solar capacity in some countries, etc. This complexity makes it very difficult to build solid carbon reduction business cases on renewable energy sourcing and energy efficiency solutions. But the good news is that today, there is a real opportunity to source solar energy at a competitive and stable price, given the fast price increase of electricity from national grids and of gas.

2. What do you expect from your business partners, like brands and retailers, to help you achieve your greenhouse gas emissions targets?

As LTP group has committed to the SBTi targets, we will have to significantly reduce our Scope 3 emissions. Brands and retailers directly impact the downstream Scope 3 emissions considering transportation of goods, storage and retail, but also and mainly the upstream Scope 3 considering choice of materials. This topic of material selection has a high impact for us as it also directly impacts our ability to recycle or not recycle fabric waste from the manufacturing processes. Today, synthetic fabrics with mixed composition are impossible to recycle. And although there is ongoing research to come up with ways for recycling these in the coming 2-3 years, one can argue that we should start by looking at the materials we select to make garments, and find ways to minimize the use of such fabrics. So we expect collaboration with brands to rethink this already in the design phase, and together improve on the actual full lifecycle impact of different fabric types.

3. What help do you need from politicians and policy makers, banks and investors, and other key stakeholders to make it possible to achieve your goals?

For now, we are following the new EU regulations on sustainability disclosure closely. The best case scenario for us would be to see new reporting requirements align with certification and vice versa. Concretely on greenhouse gases emissions, we need to have clear alignment between EU guidance on carbon equivalent reporting, SBTi / GHG protocol standards and Higg Product Module LCA methodologies. But we are hopeful that this will be the case as the mentioned standards/certifications are the leading ones today, and are concerting with one another.

Jarno Vanhatapio, Founder & Former CEONAKD 

1. This is the first time your company has calculated and reported on your Scope 3 emissions within STICA. What insights did you gain from doing this?

The most important thing for NAKD is that we know the baseline for our emissions as we continue to work relentlessly to reduce them. As an e-commerce company, our Scope 3 emissions stand for close to 100% of our emissions. This makes collaboration with our value chain partners critical for us to succeed in reaching our climate reduction target of 50% absolute reduction by 2030, compared to our 2020 baseline.

2. What significant challenges or opportunities will you face as you try to reduce your greenhouse gas emissions during the coming years?

Our biggest challenge by far is our growth. We will continue to grow as a company and even though we reduce emissions per product (& service) sold, we will still have a huge challenge to reduce our absolute emissions. We see great opportunity in expanding NAKD Circle, our fully integrated marketplace for customers to sell and buy NAKD preloved fashion. Growing circular business models to become a significant part of our revenue in the future is fundamental for us to be able to reach our climate reduction target by 2030.

3. What help do you need from politicians and policy makers, banks and investors, and other key stakeholders to make it possible to achieve your goals?

To reach our 50% absolute climate reduction target by 2030, we need to collaborate with our customers and within the industry. As a brand, NAKD alone cannot change the industry. We need to collaborate as peers to drive this change, and we need policy makers to make it profitable to invest in and create circular business models. We also need policy makers to take part in the challenge of inspiring consumers to choose more sustainable products and brands.

Joakim Levin, Co-Founder & CEO, Nudie Jeans Co. 

1. This is the first time your company has calculated and reported on your Scope 3 emissions within STICA. What insights did you gain from doing this?

We have mapped and calculated our Scope 3 emissions since 2018, but it’s the first year we report the result through STICA. We have focused on collecting a large share of actual data from our suppliers, which has been possible thanks to our long-term transparency work and direct contact with many of our suppliers, in all tiers. The emissions mapping has given us an understanding of our emissions hotspots, which in turn is essential when creating our action plan. In 2021 we have focused on having individual follow-up meetings with our key suppliers to increase their awareness on this subject and understand how we can support them in the work of transitioning to renewable energy.

2. What significant challenges or opportunities will you face as you try to reduce your greenhouse gas emissions during the coming years?

62% of Nudie Jeans’ total emissions come from our supply chain. For us to reach our targets, we are very dependent on our suppliers to decrease their emissions. Creating close communication with our key suppliers about our climate work, presenting our challenges and their role in this work has therefore been important for us. The first step is to increase the knowledge of this topic among our suppliers and to find ways to support them in their development. Even though we know that this is a process, we are optimistic about the developments we see among our suppliers. If we get our largest supplier on board on this work, we will hopefully see large reductions in our total emissions.

3. What help do you need from politicians and policy makers, banks and investors, and other key stakeholders to make it possible to achieve your goals?

In our supplier countries, we can see a need for support in the transition to increased use of renewable energy. There are large investments needed at our suppliers, both in terms of onsite electricity production through solar cells and wind power but also in updating the equipment to more energy-efficient machinery. Support from a national level in the transitions would be valuable for our suppliers. Regulations and economic incentives such as taxes or subsidies for CO2 emission can also be effective actions to speed up the transitions on a larger scale.

Ponraj Arumugam, Sr. General Manager – Fabric Division, Textown (Supplier to Kappahl) 

1. What significant challenges or opportunities will you face as you try to reduce your greenhouse gas emissions during the coming years?

The textile industry is one of the most energy intensive industries. In Bangladesh, 90% of all energy comes from natural gas, which releases less GHG compared to any other fossil fuel. Getting commercially viable green energy is the biggest challenge we are facing just like rest of the world, yet solar energy is coming up as one of the alternative energy sources in Bangladesh. One of the important challenges is the higher cost of solar energy and its price impact in finished products. Apart from energy sources, we are investing in new technologies and machineries that help us save a significant amount of GHG emissions. For example, we are using enzyme based chemicals instead of conventional harmful chemicals in pretreatment of wet processing which need less energy to process, and reuse energy wherever possible. We are expecting new technologies in the energy sector with cheaper green energy.

2. What do you expect from your business partners, like brands and retailers, to help you achieve your greenhouse gas emissions targets?

As renewable energy comes at a higher cost, brands/retailers should differentiate products made with green energy versus conventional energy sources by providing incentives or other financial aids. Up until now, products made with either of the energy sources are on the same level, creating unfair competition. It’s still not possible to use 100% renewable energy for the entire supply chain, but encouraging the use of green energy with incentives will definitely boost green energy investments, and gradually renewable energy sources will increase which will result in a cut in GHG emissions.

3. What help do you need from politicians and policy makers, banks and investors, and other key stakeholders to make it possible to achieve your goals?

Investments in renewable energy sources and upgrades in machineries with less energy usage should be recognized. Loans for these should be made available with very minimal interest rates, and other financial aid should be provided to make green energy commercially viablea

Johanna Andersson, CEO, Totême 

1. This is the first time your company has calculated and reported on your Scope 3 emissions within STICA. What insights did you gain from doing this?

In this process we have gained further insight into our supply chain when it comes to greenhouse gas emissions. We have benefited from STICA’s expertise in the field and the joint experience of all member companies. The information-sharing between fashion brands has been particularly helpful.

2. What significant challenges or opportunities will you face as you try to reduce your greenhouse gas emissions during the coming years?

Our biggest opportunity is to keep strengthening our relationships with all stakeholders across the supply chain. We rely on close collaborations and open dialogues with our partners to find solutions that work in favor of the business and the climate. Our biggest challenge is the complexity of our supply chain and the fact that we, in some cases, are not in direct contact with the supplier where the most impact is taking place. Strengthening these relationships will be a key focus going forward.

3. What help do you need from politicians and policy makers, banks and investors, and other key stakeholders to make it possible to achieve your goals?

Climate action is a collaborative effort where all stakeholders play a part. There is an innovation gap in our industry which needs to be addressed, and this is where financial institutions and politicians come in. For new solutions to be invented and implemented, financial institutions and investors will need to provide funding and invest in lower impact processes. Politicians and policy makers can support the process by creating new legislation and policies.

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