It's never easy going green, but it's especially challenging for apparel makers that outsource production to countries thousands of miles away. Here's what one apparel company, Adidas, is doing to make its supply chain more eco-friendly.
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
You may not have given much thought to the carbon footprint of that T-shirt or Armani suit you're wearing, but apparel makers are paying a great deal of attention to their garments' environmental impact these days.
That might strike some as odd—after all, jackets, running tights, and jeans are hardly in the same league as a Hummer when it comes to environmental impact.What many people don't realize, however, is that apparel items often have a surprisingly large carbon footprint—particularly if they were manufactured in a country thousands of miles away.
There are a couple of reasons for that. For one thing, apparel is typically supply chain more eco-friendly. manufactured in low-cost countries where the factories are likely to run on coal-generated power and use antiquated—and highly polluting—equipment. For another, these garments typically travel long distances from the point of manufacture to the store shelf. The farther they travel, of course, the more fuel is burned and carbon dioxide emitted.
As Americans become more and more concerned about global warming, some garment makers have been taking aggressive steps to clean up their act—particularly their supply chain act. Take athletic footwear and apparel maker Adidas, for example. "It's pretty clear that global warming, emissions, and energy efficiency are in everybody's mind," says Marcus Kuerner, senior environmental manager at Adidas. To help battle global warming, Adidas has established a far-reaching cradle-to-grave environmental program for its products. Its multifaceted initiative includes strategies to reduce the environmental impact of its merchandise from design and sourcing to production and packaging to end-of-life disposal and recycling.
Cleaning up the factories
One of the primary fronts in Adidas' war on pollution is the network of plants that produce its footwear and apparel. "Our programs are ... focused on the environmental impact we can most influence, which is during manufacture at the supplier sites of our mostly Asian-based factories," says Kuerner.
That's an ambitious undertaking for an operation of Adidas' scale. Adidas outsources production to approximately 1,280 independent factories in 65 countries, with the majority located in China, India, Indonesia, Thailand, Turkey, and Vietnam. In some cases, it contracts directly with its suppliers. In others, it works with them through intermediaries. The amount of influence it has with any given partner varies according to the type of relationship it has and the volume of business Adidas does with that company.
In working with suppliers to reduce pollution at their plants, Adidas has opted for the soft sell approach—offering advice and support rather than handing down mandates. For example, to encourage its suppliers to upgrade their equipment to lower-emissions machinery, Adidas recently joined with a number of other international companies to promote a public-private sector partnership known as "P2E2."
P2E2 (the name stands for "pollution prevention and energy efficiency") is essentially a government- backed match-making program that seeks to bring together environmental services companies, banks and other investors, and Asian factories, according to an article in The Wall Street Journal. "Banks and equity investors provide the funding and loans to environment and energy service companies, as they are called, which then strike deals with the [Asian] factories, offering to upgrade their equipment free of charge," the newspaper reported. "The factories will pay back the environmental service companies over time by giving them a cut—to be agreed on between the two parties—of the savings the plants are achieving on energy costs." Though the focus has been on Chinese factories, factories in other Asian countries are also eligible as long as the business has a legal or financial presence in Hong Kong.
Attitude adjustment
Though the P2E2 program has both the U.S. and the Chinese governments' backing, persuading Asian factories to participate in the initiative will likely take some doing. Adidas is well aware of the challenges it faces. "It's a daunting task when you think about all of the factories, especially the 300 or so in China, that need to be educated about the program," says Lyn Ip, Adidas' areas manager for the environment for the Asia-Pacific region. "We can't force them to change because that's not part of the Adidas culture. You can change the equipment, but not the mindset."
Ip and other Adidas executives have set out to educate the management of supplier companies about the benefits of going green as well as the financial benefits—mostly from potential energy savings—they can reap by installing new equipment. Education must come before implementation, Ip says, especially since so many manufacturing sites have done things the same way for years and are reluctant to change.
"What we want to try to do is change the cultural thinking that the factory management has and help them visualize what the economic benefits are," says Ip. "There are environmental benefits as well, but at the end of the day, they are businessmen. They have to see the economic sense in it. If they don't, you will see resistance to making any changes in the factory.
"We've moved more away from a compliance effort to more of really partnering with our factories," she adds. "We'd like to see them succeed. It's a win-win situation for both parties."
Taking the sea route
Even as it works to raise environmental awareness at suppliers' factories, Adidas is also scrutinizing other links in its supply chain for opportunities to become greener. One of those areas is transportation.
To reduce the amount of carbon emitted in the distribution process, the company has made it a priority to cut down on the distances its goods must travel. For example, Adidas is making a conscious effort to locate raw material suppliers around the big factory locations in Asia to reduce transportation between these links in the supply chain.
It also tries to use factories in China that are located close to ports, cutting down on the trucking required to get products to the docks. In cases where it can't find a suitable factory within easy driving distance of a port, Adidas uses railroads for transportation.
The company is also looking at the way its products are transported to market. Specifically, Adidas makes it a point to ship by ocean whenever possible. Shipping via ocean container is more cost effective and more fuel efficient (and therefore, more environmentally friendly) than the alternative, shipping by air.
Although the company occasionally resorts to air freight (see sidebar), it has largely achieved its objective of shipping mainly by sea. In 2006, 97 percent of the shoes and sneakers made by Adidas were moved by ocean containers.
Kuerner says he's optimistic that ocean transportation will soon become even more eco-friendly than it is today. He points to recent experiments using giant computer-controlled sails on container ships to take advantage of wind power. Advocates of the wind sails say use of the devices could cut diesel usage by up to 20 percent.
As for the future, Kuerner says that Adidas is in the process of surveying its primary carriers to learn what environmental management systems, if any, they have in place. Adidas will review the idea of creating a scorecard for its carriers to measure their performance against a set of green metrics. To show that it's serious about going green, Adidas might even consider getting tough and shifting business to those carriers that follow the best environmental practices.
no fly-by-night decision
Although Adidas makes every effort to ship its products by the greenest mode possible—which usually means ocean carrier— sometimes market demands take priority over the environment. That was the case in 2004, when the Greek national soccer team stunned the world by capturing the UEFA (Union of European Football Associations) European championship.
Greece's upset victory caught the whole world off guard (at the time it entered the competition, Greece had never won a match in a major tournament). But for Adidas—an official licensee of Euro 2004—the upset also had business implications.
Almost out of nowhere, demand exploded for caps and other goods proclaiming Greece the champions, as well as for T-shirts emblazoned with the name of Angelos Charisteas, the lanky striker who helped to write history by scoring the winning goal for Greece.
"As they moved through the tournament, there was increasing demand, and when they won the final, there was an explosion of demand," says Marcus Kuerner, senior environmental manager at Adidas.
That kind of unanticipated demand places enormous pressure on production facilities, of course. But it also puts a strain on the supply chain. In this case, Adidas was forced to ship its goods by air freight. Air is less fuel-efficient and more costly than shipping by sea, but the company had no choice: Shipping the goods by ocean would have taken six to eight weeks.
"Because the victory was such a big surprise, nobody had these fan items like T-shirts and caps in stock," says Kuerner. "But the [stores] were saying they needed it today. If it got there in eight weeks, the hype would be gone and they wouldn't be able to sell those products."
Though the company remains committed to using container ships, Kuerner concedes that the same thing could happen again. Despite Adidas' preference for ocean, he says, "air shipments will continue to be used when market demand requires quick response times."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."