Hitting the headlines: The ultra-fast fashion business model and responsible business conduct

In the same week as ultra-fast fashion brand Shein announced an expansion strategy into France’s most iconic department stores, the French government’s National Contact Point for Responsible Business Conduct (France’s body in charge of supporting the implementation of OECD standards on RBC) issued a stark criticism of the firm’s business practices.

Responsible business conduct – or RBC – expects companies to avoid causing or contributing to adverse impacts on people and the planet and take steps to address them when they occur.  The OECD Guidelines on RBC and due diligence set internationally agreed standards for how businesses should act responsibly across their operations and supply chains. 

Across industry-sectors, digitalisation of business models can bring both opportunities and risks.  Digitalisation can enable transparency and disintermediation of supply chains, which can in turn make them nimbler and more resilient, while also enabling manufacturers to be closer to the end-customer, potentially capturing more value-added in producing countries. Digital tools, if harnessed effectively, can support due diligence for responsible business conduct. Advanced data analytics, real-time monitoring, and flexible manufacturing processes can enhance traceability, information sharing and the identification of environmental and social risks across supply chains.  

But in the case of ultra-fast fashion, the question is whether the risks inherent in the business model outweigh any such benefits. 

Designed for speed, scale, and flexibility, the ultra-fast fashion business model can structurally amplify labour, human rights, and environmental risks. When risks are structurally linked to the way a business model operates, enterprises are expected to identify and address those root causes, including by reassessing their business and sourcing models. This is important, for business model innovation and responsible business to go hand-in-hand. 

While responsible business conduct is an expectation for all enterprises, the ultra-fast fashion industry presents unique challenges: extra short production cycles (only days), collections of up to 10 000 units launched daily, and automated sourcing sending products straight from factories to consumers worldwide. 

Compared to traditional supply chains, which are typically forecast-driven, rely heavily on inventory, and depend on physical retail networks with lead times of several weeks or months, ultra-fast fashion operates on a demand-driven supply chain model, via digital e-commerce platforms, with average lead times of just a few days to two weeks. 

Let’s take a look at some features of the ultra-fast fashion business model and responsible business conduct: 

• Production model and purchasing practices

Ultra-fast fashion orders are produced in small batches (typically between 30 and 10 000 units), frequent and flexible orders with high product variety are used to test market response, accompanied by short lead times. Production is driven by real-time demand and predictive algorithms that continuously adjust output to consumer behaviour, limiting excessive inventory. This business model has made ultra-fast fashion highly competitive and appealing for consumers. But at a cost.

Ultra-fast fashion can increase production pressures and lead to more aggressive purchasing practices. This can result in cost-cutting at the expense of working conditions. Challenges that exist in traditional garment supply chains, but that ultra-fast fashion can turbo charge. Real-time consumer feedback loops complicate planning and risk forecasting. Suppliers under pressure to meet short deadlines or sudden volume shifts may resort to excessive overtime, informal or subcontracted labour, and unsafe working conditions.

• Distribution model and consumption patterns 

Distribution is quasi-exclusively business-to-consumer (B2C), with most sales occurring through proprietary e-commerce platforms and global marketplaces, bypassing traditional brick-and-mortar retail channels. The volume and fragmentation of B2C shipments increase the number of suppliers, logistics partners, and subcontractors, limiting visibility and making monitoring and reporting more difficult and come with sizeable environmental impacts. 

While limiting excessive unsold inventory, the ultra-fast fashion production model can incentivize continuous production of many designs, which can result in higher total volume of clothing produced than traditional fast fashion. The model can also accelerate consumption patterns - amplified by marketing and product release strategies - and the normalisation of ‘speculative shopping’, therefore increasing the volume of returns. Returns and overconsumption can strain reverse logistics and disposal systems, creating additional environmental burdens.

• Supplier relationships

Ultra-fast fashion buyer-supplier relationships are predominantly short term.  Their supply chains consist of highly fragmented, specialised and multi-tiered networks, including subcontractors, informal entities and small workshops, which can be scaled or shifted rapidly. This can make supply chains overall nimbler and more resilient. But at the same time highly fragmented and decentralised supply chains complicate control and oversight and can increase labour and human rights risks. Continuous supplier turnover may undermine long-term supplier relationships and limit engagement and capacity-building opportunities. 

• Digitalisation and data use

Ultra-fast fashion relies on extensive use of real-time data analytics and algorithmic forecasting. This enables automated allocation of production to manufacturers with available capacity, using online platform data to anticipate styles and volumes. The use of continuous stock monitoring and automated replenishment ensure inventory is efficiently aligned with demand. The use of digital business models facilitates communication, data sharing and can enhance traceability across the supply chain. When combined with responsible business models and sourcing standards this can help drive better practices.  But on its own, reliance on technology and data-driven decision making can also create challenges for transparency and accountability; the system is only as good as the data quality being input. For example, if working hours reported at a factory are tempered with, then a pure data-driven decision-making model may allocate additional production to a factory and report working hours as normal when in fact they are excessive.

The OECD due diligence approach sets out a framework for identifying and addressing many of these challenges and the Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector offers recommendations for companies in the sector - some of these with relevance for companies in the ultra-fast fashion industry:

• Most importantly, assess the business and sourcing model, which may increase the likelihood and severity of RBC risks and how these activities and models can be adapted to mitigate risks. 
• Implement responsible purchasing practices: integrate RBC criteria into pricing and lead-time decisions; ensure that production planning allows for supplier compliance, monitoring, and worker engagement; for example, use demand forecasting and inventory buffers to reduce reactive orders and excessive production pressure.
• Consider using digital technologies to support supply chain due diligence and disclosure, including to identify, prioritise, and track RBC risks and impacts effectively and to publicly report on risks and mitigation activities.
• Foster collaborative longer-term supplier relationships: conduct supply chain risk mapping and prioritization and ensure RBC expectations are embedded across all tiers of the supply chain, including subcontractors and informal entities; for example, set contractual RBC expectations and support suppliers through training and capacity building.
• To address systemic risks, use collective action and stakeholder engagement: involve workers, trade unions, civil society, and regulators in due diligence processes, and collaborate with other brands and governments to address systemic risks. 
• Embed sustainability and circular economy principles into design and business models, using recycled materials, designing for durability and recyclability, and piloting repair, resale, or rental schemes to achieve more sustainable production and consumption patterns.