How can Blockchain Tech Bring Sustainability & Transparency to the Apparel Industry?
BSN LONG STORY SHORT SERIES #18
In this latest episode of BSN’s Long Story Short Series, we focus on educating the general public about the applications of blockchain technology in the apparel sector, with a focus on why blockchain is essential, how it can help apparel brands achieve transparency and sustainability, and how businesses can use it.
Today, we welcome three incredible speakers who will discuss how blockchain technology can be used to address transparency and sustainability concerns, allowing products to receive more attention and paving the way for innovation in terms of transparency, ownership, sustainability, and access to garment products.
Today’s stellar cast of panelists includes Amit Gautam (CEO & Founder at TextileGenesis), Stephanie Benedetto (CEO & Founder at Queen of Raw) Phil Derasmo (CTO at Queen of Raw). The talk was moderated by Ben Yorke (Cointelegraph Research and Wootrade).
To begin with, please give a little background on yourself.
Stephanie: She is the CEO & co-founder of Queen of Raw and comes from a family background of over 100 years in fashion and textiles in New York City. She found fashion, textile, and supply chains quite powerful but dislikes the waste produced by this industry. She claimed that the waste generated from raw materials and finished goods is terrible for the people living on the planet. Queen of Raw aims to solve this problem by providing integrated software so that businesses of all kinds (both large and small) can spot such waste in their supply chain, market it, and sell it and earn profit out of it.
Phil: He is the CTO & co-founder of Queen of Raw and comes from a family background in the textiles industry similar to Stephanie. He used to walk in the factories and watch piles of clothes on the table, and when he first met Stephaine, they discussed a problem about the lack of sustainability in the textile industry. Two decades later, the problem still exists and has become a global issue that needs to be addressed. He has a background of working in Wall Street for ten years with high security, high transactional data being shared globally among multiple stakeholders. He found that blockchain is a great technology to collaborate data in an immutable way and attain integrity.
Amit: He is the CEO & co-founder of TextileGenesis, a blockchain-based supply chain traceability platform. The organization has invented a Fibre coin (a digital token) for every kg of sustainable fiber at the point of origin, transformation to yarn or fabric (different tiers in the supply chain). With such a platform, TextileGenesis aims to solve the 95% traceability gap in the industry, i.e., the top 100 fashion brands that collectively drive about trillion dollars have set 100% sustainable and traceable fibers by 2025. However, only less than 5% can achieve this vision because there is a lack of visibility across the supply chain. Before TextileGenesis, he led the global textile business at Lenzing Group, an innovation and sustainability leader in Fashion in Austria, Hong Kong. He also worked with Mckinsey in Amsterdam and the World Economic Forum in Switzerland, helping companies in terms of commercial excellence and sustainability in the apparel industry and the agriculture and renewable energy industries.
What are the critical issues within the fashion industry today, and why do you think blockchain is the solution to such problems?
Stephanie: Through the pandemic and even before that, the world experienced trade wars, shipping delays in China, California, which portrays the need to rebuild the fashion supply chain. More unused inventory than ever before signifies a supply crisis because of canceled orders, shipping delays, closed stores, huge returns, and mishandling of collections. Queen of Raw quantified this issue and found that unused stuff sits at stores for 120 billion dollars a year, and the amount has grown to 288 billion dollars a year (and growing) due to the pandemic. According to her, such waste is an excellent point for businesses to start and rethink and rebuild their supply chain. Queen of Raw focuses on marketing, selling this waste so that companies can invest the revenue back to enhance their supply chains, such as for digitalization, use of sustainable fibers. From an economic point of view, it is essential to make supply chains more sustainable as this is what consumers are demanding, according to her experience.
Amit: Pandemic has brought a fundamental shift in the way fashion brands will source their collections. Moreover, sustainability has become a top priority for businesses. Both sustainability and traceability are deeply interconnected- these are two sides of the coin. For instance, to prove the sustainability of a material, it is essential to trace the source of such material. Sustainability without traceability has lots of hot air (which will blow out the moment it is challenged), and traceability without sustainability has no value because no one wants to focus on commodity products. Moreover, brands are becoming severe, and CEOs and boards announce 100% sustainability targets for the next five years.
Phil: The affordability and accessibility of technology like Artificial Intelligence, Machine Learning, affordable hosting, free trials, etc., allowed businesses to spin up their infrastructure. Businesses no longer need dozens of network administrations to build servers (taking weeks to months). In just a matter of 30 minutes, they can spin blockchain and immediately start creating contracts on their contract. The decentralization of data is playing a significant role in making technology accessible for all.
Do you believe that technology brings you this return to localization, or do you think it’s actual consumer demand for the technology pulling it back in?
Stephanie: The time and resources that determine the ROI and explain how much businesses are saving decide the return. She believes that people do want to participate in the system, but they do not know how? This can be achieved through the democratization of resources, as Phil mentioned. Queen of Raw is focused on democratizing access to these technologies to boost widespread adoption.
Queen of Raw is focused on waste, resources, and circularity initiatives in Europe, the US, and now in Asia- joined hands with H&M, Unilever, and Cisco. Additionally, for the New York Circular City initiative backed by the government, the company has produced a whitepaper showing how many good jobs can be created and money can be saved by focusing on the circular economy models. The aim is to create a win-win situation for all: People, Planet, and the Profit.
Amit: He believes that localization is already happening. Label costs play an essential role in cutting the costs of sewing operations, which is costly without automation or the use of Robots. However, it is hard to say if local resourcing is happening or will happen shortly. In Europe and the United States, material innovation to transform waste into fibers using biotechnology is happening to accelerate localization.
How are your companies using blockchain? How do you decide to use blockchain?
Phil: From a high-level perspective, data is spread worldwide, making the supply chain a global problem. Multiple stakeholders like internal employees, contractors are part of the supply chain, and blockchain helps securely transmit data between such parties. Furthermore, the integrity of data is critical that can be achieved through blockchain. During the pandemic, the businesses that shut down were not aware of what was happening with their supply chain due to the lack of traceability. This is where blockchain helps in collaborating data to a single source of trust.
Stephanie: Initially, Queen of Raw was just a marketplace that matched buyers and sellers to trade textile waste. However, with growth, it realized the customers’ pain points (e.g., where the material comes from, etc.). It deployed blockchain to help customers understand data regarding where the waste comes from and minimize it for a better tomorrow.
She also mentioned that the question of which blockchain an organization uses does not matter. What matters is the underlying benefits for the customers and how it drives value for them.
Amit: It has been a steep learning curve for TextileGenesis. The organization has deployed blockchain to create a token (digital asset) and has 38 distinct fiber coins. US Cotton is also one of the specific fiber coins of TextileGenesis. However, the organization has realized that it cannot run its entire technology infrastructure on blockchain as it is costly. So, it has designed the infrastructure, so that signature or balance of the transaction sits on the ledger and computation to be performed off-chain to make the system scalable. Also, smart validation rules and algorithms need to be written to prevent poor data quality or to catch insufficient data before it gets processed into the system. Moreover, creating a platform that connects the physical world with the virtual one, i.e., a physical textile sample to be verified in a lab through DNA.
What blockchain protocol are you using when clients approach you asking what the right solution is?
Stephanie: The choice of blockchain protocol depends upon what benefits you are looking for, why you want to use it, and what matters to you the most? Lots of activities can be performed on-chain and off-chain depending upon the answer to these questions.
Phil: Queen of Raw uses a fork of Ethereum and has built the centralized transaction engine. The choice of blockchain protocol is all about data collaboration and helping customers solve their problems. Queen of Raw has two types of tokens- one for traceability and the other for the end-users for environmental impact.
Amit: Textile Genesis has a core engine called Middleware that processes transactions between different supply chain actors. The organization is soon launching version 2.0 and is using IBM’s Hyperledger Fabric to keep a record of the transactions. He also mentioned that blockchain and cryptocurrency are different, and the tokens of TextileGenesis are not publicly traded; there is no monetary value, do not bring risk to the business. The role of digital tokens is to digitize the physical volume. The company is not engaged in mining and is using blockchain to store data imminently so that there is a clear audit trail and no one can fool around such a trail.
What type of clients do you generally work with? Are they giant corporations or smaller shops that realized there might be advantages targeting a niche audience seeking sustainable goods? Since you entered this space, have you noticed a changed perception towards blockchain technology in terms of increasing awareness?
Stephanie: Queen of Raw initially focused on building a community and grew the marketplace to more than 400,000 users, including medium and large brands. The organization is working with Fortune 500 companies and is on the blockchain to build brand loyalty and bring more customers on board.
Amit: Textile Genesis is working with large global brands as they have significant investment and resources capacity, which helps make the business scalable. The clients are most interested in solving the core business problem regardless of which blockchain is helping to solve it.
Phil: Queen of Raw has a centralized engine where all the connected parties can work together. Solving a problem locally using blockchain ignited the spark to use this technology globally.
How do you see this industry changing, and what role does your respective company play in the future of sustainable fashion?
Stephanie: Queen of raw is a recycle, reuse, and resell engine and hub that helps companies start circularity to build tomorrow’s scalable and automated supply chain. Trust, transparency, sustainability, and quality are the core values that Queen of Raw has incorporated in its business strategies (just like Amazon). On a personal level, she wants clear water to drink for her children and reduce toxicity on the planet.
Amit: In the future, TextileGenesis is looking forward to implementing carbon traceability on top of block traceability as lots of brands use life cycle assessment (LCA) numbers. With product traceability in place, companies can determine what percentage of carbon emissions their products produce (say Denim). TextileGenesis is soon launching Version 2.0- where the organization is eliminating (but not digitizing) the transaction certificates. Still, he thinks there is a long way to go as the real transformation of the supply chain takes time (between 18 to 24 months). He looks forward to collaborating with Stephanie and Phil to transform the fashion and textile industry.