Higg MSI Pt.2

This isn’t the intended part 2 to our series on the Higg index (read part 1 here), but here we are anyway. So what happened? 

The what:

We first heard of the story from Brett Mathews, the editor of Apparel Insider back in June.  “We first started looking into the Higg MSI in 2019. Poor quality, old datasets on license from a third party were obvious red flags to us,” said Mathews.

"It seemed inevitable that once these datasets have begun to be used to underpin consumer-facing labels, Higg would potentially run into a collision with regulators and/or ESG investors.”

From there, the New York Times sparked the flame and brought the topic to a broader audience with the pointedly titled article, How Fashion Giants Recast Plastic as Good for the Planet”

This is all about the Norwegian Consumer Authority, which stated in a series of official warnings to H&M, Norrøna Sport AS, and the Sustainable Apparel Coalition (SAC) that the Higg MSI index is misleading consumers with inaccurate environmental claims on their products. 

“With this letter, we would like to emphasize that using the Higg MSI and/or data from the Higg MSI data in marketing towards consumers easily will be considered misleading and constitute a breach of the Marketing Control Act.”

What is the SAC, and who are the members of the SAC? It’s a coalition of heavy hitters like H&M and Patagonia, but also Nike, Walmart, and others. This article by The Intercept breaks it down: 

“Fashion’s bid to rescue its image began in 2009 when Patagonia and Walmart wrote a joint letter “inviting CEOs of leading global companies to come together to develop an index that would measure the environmental impact of their products.” The Sustainable Apparel Coalition was formed in 2010, and the group and the companies behind it worked together to produce their measurement tool, the Higg Index.”

Make sense? Let’s get back to the Norwegian Consumer Authority. According to the letters, Norrøna had until mid-august to remove claims found by the Higg MSI from their website. H&M was also explicitly addressed and acted to remove Higg's claims on their site by September or face economic sanctions.

“The NCA only has authority to ask for a stop of marketing in Norway. However, please be aware that the relevant regulations in the Norwegian Marketing Control Act are based on a harmonized EU directive, as explained in the Norrøna letter. What constitutes a breach of the Marketing Control Act will thus presumably constitute a breach of the law in the other EU/EEA countries.”

This last bit is essential to pay attention to as it echoes what we mentioned in our previous post about the UK green claims code. These regulations set a global precedent and framework for other countries to follow suit and if they don't abide by what is being directed they could be banned in other countries.

“This is a global issue, so it’s only right that we look at it in a global context. Our joint work with other regulators will help us identify the big issues facing consumers and protect people from paying a premium for fake ‘eco-friendly’ products.” 

Andrea Coscelli, chief executive of the U.K.'s Competition and Markets Authority

Since the advent of these letters, we have met with the Norwegian Consumer Authority and given them full access to our methodology and approach. As a result, they have recognized Arbor's methodology for making crucial information available to everyone who needs to see it. This includes how we get and use our data, how we conduct our calculations, and how we communicate our data back to the brands we work with and their consumers. 

What Happened Next

In response, The SAC has moved to pause its consumer-facing transparency program but continues to keep the Higg MSI operating in the background. "We have known for some time that the Norwegian authorities were looking into this issue, and their decision to effectively ban Higg labels is no surprise,” continued Brett Mathews,  “The SAC had no choice but to pull these labels from the market after that decision had been made."

And according to this piece by the Sourcing Journal that has lit up Arbor’s internal Slack channels more than the newest Drake album:

“The SAC announced Monday that it will be commissioning, ‘with urgency,’ an independent third-party expert review of the data and methodology behind the Higg Materials Sustainability Index (MSI), a module of the popular Higg Index suite of tools that scores the environmental impacts of materials. A review was last conducted in 2016, it said.” 

A lot can change in six years, not just with data collection but also with regulations. And for reference, Drake has released four studio albums since 2016. But is there enough data to be collected? 

Our co-founder and CIO, Abdullah Choudhry,  spoke to Vogue Business about that.  “Climate change is a big problem, and having data around it is not,” he says. “Saying that the data is unavailable in 2022 when the whole world is trying to focus on climate change — it's not available because the fashion industry hasn’t prioritized it. If we're going to run automated cars on the road and we can send rockets that don't require people to the moon, we should be able to calculate the impact [of a t-shirt] the same way that we calculate any other thing in our industry.”

You can read the full article here

The why:

This is coming out on the heels of The EU’s proposed directive on corporate sustainability and due diligence which was announced in February 2022. 

This proposal applies to not just a company's operations but also those of “their subsidiaries and their value chains (direct and indirect established business relationships.” What does this directive do? It would require EU member states to make corporate due diligence laws to identify, prevent, be accountable, and put an end to operations that negatively impact the environment and violate human rights. 

Some EU member states have taken the first step and didn’t wait for the directive to pass. France and Germany have already introduced due diligence laws, and many companies operate such initiatives voluntarily. In Germany, the law, Lieferkettengesetz, (The Supply Chain Due Diligence Act) imposes substantial fines starting at several hundred thousand euros if a company’s contractors abroad are found to breach human rights or environmental regulations. Under this new law, companies will be held responsible for every step in their supply chains –from the raw materials to the finished product.

Didier Reynders, Commissioner for Justice, said:

“This proposal is a real game-changer in how companies operate their business activities throughout their global supply chain. We want to stand up for human rights and lead the green transition with these rules. We can no longer turn a blind eye on what happens down our value chains. We need a shift in our economic model. The momentum in the market has been building in support of this initiative, with consumers pushing for more sustainable products. I am confident that many business leaders will support this cause.”

The Council and European Parliament also recently reached a provisional political agreement on the corporate sustainability reporting directive (CSRD). 

“This agreement is excellent news for all European consumers. They will now be better informed about the impact of business on human rights and the environment. This means more transparency for citizens, consumers and investors. It also means more readability and simplicity in the information companies provide, which must play their full part in society. Greenwashing is over. With this text, Europe is at the forefront of the international race to standards, setting high standards in line with our environmental and social ambitions.”

Bruno le Maire, Minister for economic affairs, finance and industrial and digital sovereignty

This reporting directive must be verified by external accredited independent auditors or certifiers. But all these regulations take time and are not coming into play until the distant future, right? Well, the future is fast approaching, and the first stage of the CSRD will roll out in January 2024.

How we are different:

As mentioned in our press release, we are on the same mission as Higg: to increase transparency and build a product with a purpose, BUT we approach things differently at Arbor. From our trusted methodology to our UN award-winning precision, we transparently let brands and consumers know the limitations of our data to prevent misleading consumers. The Higg MSI set the bar by putting sustainability data on companies' websites, but at Arbor, our job is to raise the bar — and keep it high.

Three key ways:

Transparent:

Consumer Protection is Fundamental to UN SDG Goal 12, ‘Ensure Sustainable Consumption and Production Patterns,

“Consumers need to form links and understand how their consumption choices, use, and disposal of products and services can reduce their overall impact on the environment. They also need to feel confident that the information they are given is both reliable and accurate.”

Our methodology for calculations is transparent and constantly improving. We use industry-standard and scientifically backed data and check it against other data sources, studies, and reviews to ensure that our data is always up-to-date. Cross-verifying every data point allows us to validate supply chain events accurately.

We use the Environmental Footprint methodology (EF v3.0), as it is the methodology that the European Commission recommends for measuring product environmental footprint (PEF) (Commission Recommendations 2013/179/EU ). We also base our product comparisons on the International Organization Standardization's declarations, ISO 14025 for product categories and ISO 14040 for Input and Output flows. 

Using frameworks from the EU, Arbor’s engine is a system that uses different types of datasets to produce the most up-to-date information keeping businesses one step ahead of regulations. Our engine goes through monthly updates based on the following key features:

  • availability of better quality data
  • PEF and PEFCR updates.
  • Region-specific calculation of a products value chain
  • Product transparency page for any showcase of data



We also compare products to products instead of materials to the conventional version of those materials.  We break this down in our previous post about Higg here:

“For example, a polyester t-shirt would be compared to all  t-shirts –conventional cotton, organic cotton; you name it… Comparing LCAs with different scopes or methodologies is like comparing apples to oranges. The LCA used by Higg to get the impact data from the cotton starts at the actual cotton seed, but the LCAs used for polyester don't start with the oil extracted from the ground. If this were taken into account, it would drastically add to the emissions footprint from polyester.” 

The Dutch Authority for Consumers and Markets (ACM) after over a year of investigations into six businesses has finally cracked down on unsubstantiated claims with substantial fines.  Product comparison is one of the five rules set out in their Guideline on Sustainability Claims, ominously known as The Guidelines, with practical examples of how businesses can phrase their sustainability claims.

Number three clearly states: “Comparisons to other products, services or companies must be fair: any comparisons with other products, services or companies must be “fair” and not misleading. The claims must explicitly mention what the products or services are compared with.”

Trustworthy:

“Arbor is applauded for being more thorough and transparent than its predecessor data platforms."

-Rachel Cernanky, Sustainability Editor, Vogue Business, Higg Index controversy exposes deep cracks in fashion’s sustainability efforts

In addition to the SDGs, we have created and will continue to develop our product in line with the GHG Protocol, IPCC, the EU taxonomy, the EU Green Deal, and the CBAM. 

We use industry-standard and scientifically-backed data and check it against other data sources, studies, and reviews to ensure that our data is always up-to-date. Cross-verifying every data point allows us to validate supply chain events accurately.

What about greenwashing? Not happening. We will always use worst-case scenario estimations.  If missing data is necessary to conduct impact analysis, we automatically assume the worst.  Therefore, when verified data is input through our platform, it increases the Data Quality Rating (DQR) and the product's estimated impact. For example, in the apparel industry, rather than just looking at the impact of a specific material, we look at what material certifications a product has, where the product was manufactured, and what particular processes the material went through (knitting vs. weaving) to increase the accuracy of the information. You can read more about the steps we take here on our website. 

Most data points are updated regularly, but some aren’t. Being clear about this is essential for our transparency and to show that even though data may be perfect, it can be misused. This DQR system also flags missing data points within the cradle-to-gate process for our LCA experts to calculate and fill in the details based on other peer-reviewed studies. 

Innovative (Automated & Fast):

Innovation drives everything we do here at Arbor — whether it's coming up with new design ideas or improving existing processes — we strive to push boundaries every day so that we can continue to build a better product for our clients and a more transparent, sustainable present for their customers.

That’s why we built a tool that is automated and easy to use. 

What automation does is offer businesses a way to increase the accuracy of the data they need by reducing human error. It saves time automating pulling in all your products, identifying the material composition, and categorizing it all on a product-level basis, all the while using methodologies that keep brands in check with regulatory guidelines. We also increase accuracy by mapping out essential stages of a product's journey making it easier for scope 3 reporting, where the majority of carbon emissions are emitted. 

 

The automated inputs feed into the Arbor engine to produce outputs that are valuable to businesses and consumers.

 

Like insurance, we need a standardized way to calculate. There is a need for the majority of impact measure solutions to have a standardized way to compare between industries. The EU is pushing for this standardization with its Green Deal, which states: “Companies making ‘green claims’ should substantiate these against a standard methodology to assess their impact on the environment” This ensures that information regarding the environmental performance of businesses and products are reliable, comparable, and verifiable across the EU, to mitigate deceptive claims and greenwashing practices. 

What this means for the future:

Arbor is more than just an impact measurement tool; it is an engine that analyzes environmental data to educate businesses with tools to help them get it right. For brands and platforms who are looking to make a difference in the world, our engine provides the speed and automation needed to see the data more clearly and understand the impact of products. This insight is critical for making decisions that not only benefit stakeholders but also help preserve our planet. With regulations, and legislation –and not to mention climate change– being real and pressing concerns, our engine can save time in collecting data so that brands can begin working on their transition to a more sustainable future.

As Drake said, “I am trying to do better than good enough.”  We're very proud of what we've achieved, but we're even more excited about where we're headed next.