The new global sustainability reporting standards will be published by June, having been approved in February by the International Sustainability Standards Board (ISSB). 

It is linked to the International Accounting Standards Board (IASB) whose financial reporting rules are compulsory for listed companies in 167 jurisdictions. That includes all European Union (EU) countries, the UK, Canada, South Africa and Australia, for example. That reach of mandatory application is the goal of the ISSB, whose reporting standards will measure how companies protect themselves against environmental (especially climate) risk and other sustainability concerns, such as avoiding the use of forced or cheap labour.  

The ISSB’s first two standards are IFRS (International Financial Reporting Standards) S1 General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2 Climate-related Disclosures, which will now be released by the end of Q2 2023.

These two standards lay down in practical detail how clothing and textile companies, and those from other sectors, can report how they are impacted by climate change and the environment and how they are preparing to deal with these issues, which can impact their bottom line. Their goal is to help global investors better assess the long-term value of listed companies, with sustainability reports issued alongside standard financial statements.  

The ISSB chair, Emmanuel Faber, said: “There’s a need to address the fact that business cannot be as usual, and therefore accounting cannot be as usual. We need to change.” He said the standards would help deliver this through new reporting language reforming company cultures, organisation and processes. Investors would now receive reliable reporting data that will enable them to assess which companies are better prepared for climate change.  

The final draft of S2, on climate disclosures, has a special appendix saying how clothing brands and manufacturers should go about this specifically – the ISSB has confirmed this will be written into the final standard as something companies must follow if they deliver data on “sustainability risk and opportunities”. The annex defines these as those handling the “design, manufacturing, wholesaling, and retailing of various products, including men’s, women’s, and children’s clothing, handbags, jewelry, watches, and footwear”. Stressing that industry products are “largely manufactured by vendors in emerging markets, thereby allowing companies in the industry to primarily focus on design, wholesaling, marketing, supply chain management, and retail activities,” the standard says reporting needs to cover suppliers. 

It tells brands and clothing manufacturers to report the “percentage of raw materials third-party certified to an environmental and/or social sustainability standard”, declaring the proportion covered by each standard. It also tells reporters to declare the number of their suppliers that transact directly with them (called ‘tier one suppliers’), “such as finished goods manufacturers (e.g., cut and sew facilities)”, rather than companies higher up the supply chain, such as "manufacturers, processing plants, and providers of raw materials extraction (e.g., mills, dye houses and washing facilities, sundry manufacturers, tanneries, embroiderers, screen printers, farms, and/or slaughter houses)." 

The annex stresses that declaring such information is not just about demonstrating how a company is helping combat climate change or can honestly demonstrate good environmental practice against potential claims of greenwashing. It also is about demonstrating the longer-term value of a company to investors in an uncertain world: “The ability of companies to manage potential materials shortages, supply disruptions, price volatility, and reputational risks is made more difficult by the fact that they source materials from geographically diverse regions through supply chains that often lack transparency. Failure to effectively manage this issue can lead to reduced margins, constrained revenue growth, and/or higher costs of capital.” 

And this is a key goal of the standards – helping investors identify companies truly charting a path towards sustainable profits. Martin Moloney, secretary general of IOSCO (the International Organization of Securities Commissions), said the aim “is to facilitate capital flows within and across countries...It's about transparency to look across the world and view the facts about a security you were trying to evaluate,” he told an ISSB symposium staged during February in Montréal, Canada.  

The UK, Singapore, Japan and others have already said they may base their own sustainability standards on ISSB guidance or authorise them as a formal option for reporting. The EU is considering adding on additional sustainability reporting requirements that would see companies declare information about their impact on the environment and climate as well as how climate and the environment affect their own profits – its detailed compulsory standards should be released by June (2023), with recent drafts reflecting ISSB standard structures. And while the USA is developing its own national sustainability reporting standards, it may authorise the use of ISSB standards for foreign companies operating in the US. The US Securities & Exchange Commission (SEC) should release its own rules by April.

Not all sustainability reporting organisations have rolled themselves into the ISSB, however. The GRI (Global Reporting Initiative), which remains independent of the ISSB, has announced it will create its own sustainability reporting standard for the clothing, footwear and textile sector. This new GRI Textiles and Apparel Standard will help assessments of human rights, waste and recycling challenges within retailers, manufacturers and their supply chains. The GRI is to establish a Textiles and Apparel Working Group to guide this work, looking for members from the industry, investors, labour organisations, mediating institutions and civil society.

Mia d’Adhemar, the GRI’s head of sector programme, said: “Production of textiles and apparel has numerous impacts, including on working conditions, health and safety, water consumption and pollution, waste, greenhouse gas emissions and the use of hazardous materials. Significant progress is needed to improve how textiles and apparel companies identify, manage and disclose their impacts on the economy, environment and people”.

GRI is widely used as a sustainability reporting model, for instance in South Africa, and is mandatory for listed company sustainability reporting in the United Arab Emirates (UAE). 

But this year is the year when sustainability reporting comes of age, and clothing and accessory companies start to face up to mandatory declarations. The ISSB standard is likely to be most influential – but brands and manufacturers will have to keep a close eye on domestic legislation implementing reporting rules. 

During an exclusive discussion with Just Style, the senior manager of industry and commerce at non-profit Tony Blair Institute for Global Change (TBI), Chema Triki, explains: “West Africa can benefit further from AGOA. Cote D’Ivoire, Ghana and Togo in particular, are all aware of this, but there’s no reason why they can’t be much bigger in the AGOA space as long as it’s renewed for another ten years.”

Both US apparel sector and West Africa seek AGOA renewal

Her comments follow last month’s US International Trade Commission (USITC) report, which analysed the trade and economic impact of the African Growth Opportunity Act (AGOA).

The report was requested by the US House of Representatives Committee on Ways and Means in January 2022, however it’s still unclear as to whether AGOA will be renewed for another decade when it expires in 2025.

The US apparel sector supports the preferential trade programme, which gives countries in sub-Saharan Africa, including West Africa, preferential access to US markets and the ability to export products tariff-free.

In fact, last summer, the American Apparel and Footwear Association (AAFA) made it very clear its members want it renewed for another ten years as it believes Africa is the logical sourcing alternative for those wishing to diversify away from China.

But, Triki admits she’s concerned by the lack of speed with the renewal process, and points out it needs to get started as soon as possible to get through congress, especially with a US election on the horizon next year.

How can West Africa help with the fashion world’s sustainability problem

TBI believes once AGOA is renewed there is a huge opportunity for West Africa to help solve the fashion world’s sustainability problem.  

Triki highlights: “Second-hand clothing will potentially go hand in hand with AGOA – it’s something that’s part of the negotiations and we advise governments to push for AGOA renewal, but also for a US investment in renewable clothing recycling and waste management as that then becomes a win-win situation whereby West Africa can differentiate its capabilities and position itself as a supply base for the industry of the future.”

She adds: “We need a more nuanced approach to this second-hand clothing issue and there needs to be a dialogue on how AGOA is renewed to deal with it.”

Triki also cites sustainability as being a key selling point for West Africa’s garment manufacturing industry.

TBI’s textile and apparel senior advisor in Ghana, Tim Armstrong agrees and explains the aim is to make West Africa the go-to apparel sourcing destination. He notes that West African countries already have an advantage considering their energy-mix. For instance, the main energy source for Ghana is hydropower which is both clean and sustainable.

Elisabeth Goncalves, TBI’s industrialisation advisor in Togo believes West Africa’s infancy on the world apparel sourcing stage is a huge advantage: “West Africa can learn from the mistakes made in other countries in the past and can avoid repeating them. In terms of labour and the environment – people care about where their goods come from. Plus, companies have a clearer picture of where they’re going and how they’re going to get there now.”

She emphasises: “We have the advantage of choosing properly and making a difference.”

In terms of garment recycling West Africa arguably still has time to make its mark and Armstrong is confident there is a window of opportunity given it is one of the largest recipients of second-hand clothing and therefore has a ready fibre or feedstock available that many brands would like to use since it is circular by nature.

He explains that it makes more sense to recycle where the waste is since labour costs are lower for sorting it and it causes pollution if not recycled.  

In other words, Armstrong believes verticality with recycled fibre would give West Africa a new proposition which would differentiate it from many other garment origins.

Collaboration is key to success

It’s all well and good painting a picture of West Africa being the new sustainable hub of apparel manufacturing but how will the nations within it work together as opposed to against each other to attract and retain fashion brands?

TBI’s investment lead in Cote d’Ivoire, Sylvain Eddy remarks honestly: “The collaborative discussions are in their early stages because it’s all quite new within the region. But this is a project that will make the region stronger.”

Triki agrees, adding: “In these three key countries [Togo, Ghana and Cote d’Ivoire] textiles and apparel is a top priority, and these nations know how the sector has been a building stone for industrialisation in the past elsewhere”.

“We’re also clear on the individual regional opportunities and we want to bring these opportunities to brands and suppliers. As said, Ghana has its strong second-hand clothing market and therefore an opportunity in developing a full circular economy by investing in recycling capabilities. While Togo has the potential to become an apparel and logistics hub for the whole region, and Cote d’Ivoire has the potential to allow it to develop a vertically integrated industry, and become a textiles regional hub by transforming its high-quality cotton.”

Eddy continues with Triki’s thread of thought and shares that Cote d’Ivoire also has a high quality of cotton for any type of denim or garment. Plus, he states: “Cotton in Cote d’Ivoire represents about 40% of the country’s export revenue at the moment.”

Getting fashion brands on board

West Africa is slowly but surely building up its apparel sourcing capabilities and a roadshow event that took place last November garnered even more interest from several key fashion players.

The aim was to highlight West Africa’s potential to develop a vertically integrated and sustainable industry with capabilities in recycling, renewable energy and traceability of materials.

It proved to be a success and since the event, United Aryan which supplies brands like fashion retailer H&M has announced its aim to invest in Cote d’Ivoire. Plus, Kontoor Brands, the parent company of denim brands Lee and Wrangler, expressed its interest to source from the region.

Shoe supplier Ningfeng Shoes said it wants to build a factory and create 500 jobs and children’s retailer The Children’s Place maintained its commitment to Togo and Benin while wanting to explore options in Ghana and Cote d’Ivoire too.

All the representatives maintain this is just the start for West Africa and the goal this year is to continue selling the opportunity to apparel brands and retailers at international events.

Building a strong infrastructure for West Africa and AGOA

Another bow to West Africa’s arrow is the fact it is investing in infrastructure for both today and tomorrow, which is the type of certainty fashion brand and retailers need following the disruptions both during and after the pandemic.

Armstrong states that Ghana has a new railway line to Lake Volta, plus, a new container port, which is claimed to be the most efficient in the region so cargo like cotton from inland origins like Burkina Faso can move by barge, which is ecologically-friendlier than moving it by truck. It also has direct flights to Europe and the US with competitively priced air freight costs.

Similarly, Goncalves states Togo’s Government has put infrastructure in place to ensure road, air and freight are all accessible. She’s also keen to highlight the Plateforme Industrielle d'Adétikopé (PIA) Industrial Park, which has a dry port that means the nation can act as a logistical platform for a number of land-locked countries with investors shipping and receiving everything through it to simplify the process.

Similarly, Cote d’Ivoire’s port has received a massive investment and an ongoing extension project, which is helping the country to export products to consumer markets, says Eddy.

West Africa’s national as well as international potential

TBI is keen to relay the fact West Africa has a huge opportunity to become an apparel sourcing major. The organisation also says it cannot go unnoticed that the region has its own growing customer base as its middle class continues to expand. 

Triki points out this untapped potential includes not only fashion brands and retailers wishing to supply to the region but also to retail within the region.

She admits the reality today is that 70% of consumption still comes from Europe, the US and developed countries but in the future, there will also be a compelling Africa-based market.

“We’re seeing a number of American brands coming to Africa to supply the market, so that’s going to be an interesting dynamic in the next decade.”

But for now, she concludes we can expect to see West Africa benefitting from $1bn worth of investment in the next five years’ that fashion brands and retailers would be foolish to ignore.