Inside the Pilot Program Exploring Electronic Material Traceability
Fashion industry operations are increasingly becoming digitized, from product development to e-commerce. One area that is coming under focus for a digital overhaul is the chain of custody management of sustainable materials.
Over the last year, Textile Exchange and TextileGenesis have been collaborating on a project to develop an electronic solution for material traceability. Lenzing has been a part of the pilot program, along with companies including H&M and Mara Hoffman.
“Lenzing was quite supportive from the very beginning in terms of paving the way for the entire industry,” said Amit Gautam, CEO and founder of TextileGenesis, during a Textile Exchange webinar about the project.
There are three main aspects to Textile Exchange’s material verification. First, materials undergo physical testing at the point of the source, during which relevant certificates are issued. As the materials travel through the value chain and are transformed, the chain of custody is tracked. This includes reconciling that the amount of certified material said to be changing hands does not exceed the volume certified at an earlier tier in the chain. Rounding out the verification are site inspections.
In the past, each individual certifying body has had separate control over their documents, but there has been a move toward centralizing and digitizing the certificates.
The pilot takes this one step further by placing Textile Exchange’s chain of custody standards onto TextileGenesis’ blockchain platform. In the solution, each kilogram of fiber is represented with a token, or unique fingerprint, which transfers hands along the chain. This token can’t be duplicated or falsified, and it can only be created by the material producer. This tokenization also creates a standardized data language.
As materials pass along the chain, bots automatically read PDF files and run algorithms to validate certificates and composition of fibers. In contrast, even the digitized chain of custody process still requires manual auditing and approval by the certification bodies. In electronic chain of custody, certification bodies can still come in from time to time to perform audits to inject human oversight, but adding the automatic element reduces costs and improves accuracy and speed.
“They are excited that all of this can happen instantaneously instead of waiting on a pretty manual process right now to confirm,” said Lee Tyler, director of assurance and operations at Textile Exchange. “And the buyer and seller, even just a single transaction certificate and the amount of time it takes to issue one, that will save a lot of staff time.”
Evonne Tan, director of data management and China strategy at Textile Exchange, made a parallel between the banking industry and the pilot by comparing checks to the certificates used for materials. Before digitization, checks needed to be processed by tellers. With the rise of ATMs with deposit capabilities, physical checks could be processed digitally. The equivalent to the Textile Exchange and TextileGenesis program would be electronic banking transfers, which cut out the physical check entirely.
Just as consumers have varied preferences for banking and some still use checks, the partners recognize the need for different ways of tracking chain of custody. The blockchain solution would therefore be an available option rather than a mandated format.
“The digitalizing is crucial to centralize the information, to make the process faster,” said Evonne. “The electronic version of it may be the norm in maybe five years’ time—we don’t know, it depends on how fast the industry evolves—but it may not be the cup of tea for everyone.”
Following the testing and getting participant feedback, Textile Exchange and TextileGenesis are working on a whitepaper about the pilot program and engaging stakeholders.
Watch the full webinar here.