Wealth Management: The Conscious Consumer
Hi Michela, we've watched your TEDx talk on the importance of textile supply chain visibility: How have customers' attitudes to supply chain transparency changed in recent years?
Thank you. Consumers want to know more about where and how their goods are produced and they are willing to pay more for sustainably sourced goods. This trend is particularly visible in the food and fashion sectors where sustainability is at the forefront of consumers' minds – in the latter it is estimated that over 50% of consumers are willing to pay 10% - 25% premium for sustainable clothes.
How much more are you willing to pay for sustainable fashion?
Chart 1: How much more are you willing to pay for sustainable fashion?
Source: KPMG Sustainable Fashion "A survey on global perspectives" 2019
Reasons for this sustainability premium are multiple. In the fashion industry the tragic collapse of the Rana Plaza factory in Bangladesh in 2013 - where over 1000 textile workers lost their lives and several thousand were injured - acted as a wake-up call for greater supply chain transparency in the sector. In the years following this disaster, we also saw a growing climate-change movement that made consumers more aware of the environmental footprint of the goods they buy. Finally, since 2020, the Covid-19 pandemic has driven the sustainability agenda forward and encouraged consumers to buy and support locally. The pandemic has also accelerated the shift to online retail, where customers have greater access to information about a product's sustainability credentials.
What role did ETH Zurich play in the origins of the company?
I completed my PhD in Chemical Engineering at ETH Zurich and with my Co-founder Dr. Gediminas Mikutis, we developed a technology for tracing products which we spun out as a commercial enterprise in 2016. We received a grant from ETH and its Foundation which gave us access to laboratory and office space. We stayed in that innovation space until 2020 when we reached a critical size and we had to move – in the middle of a pandemic! Thankfully we found a great space in Givaudan's old headquarters near Wintertur and that's where Haelixa has continued to grow.
How does DNA marker technology address the need for supply chain transparency?
Our work addresses consumer demand for transparency, which is a first and necessary step to implementing a credible sustainability strategy. Haelixa's product is a DNA-based liquid formulation which can invisibly mark, trace, and authenticate products such as cotton, textiles, diamonds or gold, along their supply chains. We supply marker kits and send them to manufacturers who apply our markers at source. The incentive for manufacturers is clear - our markers allow them to become a trusted and preferred supplier whilst brands are incentivised to use our tracing technology so as to validate the sustainability claims they make to consumers.
How specific can DNA marker technology get at tracking goods?
Each marker for each set of goods can be unique. You can also make the marker specific per supplier, location, collection or season of clothing, it really just depends what you want to trace and why. We store the information for each marker on our database. To identify the marked products, we carry out a forensic swab to extract the marker from the product and read-out the information with a PCR device (technology currently deployed in Covid-19 testing). The benefits of using a DNA marker are clear, whereas previous supply chains credentials were captured by extensive paper trails and certificates, Haelixa's DNA markers provide an unfalsifiable, forensic proof of a product's origins. The markers are also able to endure extreme processing - for instance with cotton they can withstand spinning, dying, washing and finishing - whilst leaving no physical trace to the naked eye.
Why does tracing matter for companies today?
Being able to prove product origin, authenticity and integrity is a topic that is highly relevant for so many industries today. Not only because of increasing consumer demand for transparency, but also because of regulatory pressure calling for companies to be accountable for what happens in their supply chains.
What is the future for supply chain transparency and the area you work in?
Digital tracing through the use of blockchain technology is increasingly important in the fight to improve supply chain transparency. For example, in the luxury and apparel industry, the Aura Blockchain Consortium - a collaboration between Richemont, LVMH and Prada Group - gives consumers access to product history and proof of authenticity of luxury goods, in an effort to combat counterfeits.
As a ledger for storing data, blockchains are a good way for businesses to move away from the fallibility of paper-based trails. That said, blockchains are only as reliable as the data you put into them. Haelixa addresses this issue by ensuring the reliability of that input data through its technology.
I'm excited to see that traceability as a topic has gained so much traction and that, most listed companies are now actively looking at ways to improve their sustainability credentials. It's been hugely satisfying to see our label “Marked & Traced by Haelixa” in retail shops in Switzerland and that despite the pandemic, demand for our services continues to grow.
Sustainability has many aspects and I would recommend your readers to do some research into what type of sustainability issues affect the specific brand or product they are purchasing. What specific social and environmental standards do these companies adhere to? How do they manage the issue of product traceability? If you are missing additional information, do not be afraid to contact the brand to ask. It is this inquisitiveness which will ultimately make our supply chains more accountable and businesses more responsible.
By William Haggard, Head of Investment Insights at Rothschild & Co, Wealth Management, Switzerland
View from the analyst
When looking at luxury and apparel businesses such as LVMH, Richemont and Inditex, transparency and traceability of raw materials and supply chains are increasingly important issues both for their business models and investors. As these businesses choose to embrace the UN's Sustainable Development Goals (SDGs), they need to show that they are taking steps to help achieve (amongst others) Goal 8 of the SDGs:
We are encouraged to see LVMH and Richemont are sector leaders in the adoption of blockchain technology to assist with supply chain traceability. We also see that LVMH and Inditex are rated above industry average for their raw material sourcing and product carbon footprint whilst Richemont scores favourably in combatting product carbon footprint and controversial sourcing. As part of the companies we review, we will continue to monitor these businesses and how they rise to the demands for supply-chain transparency from investors and consumers in the coming years.