DPP: Restricted Visa or Global Entry | CHPT3 | PI Apparel
James Carnes, former Adidas VP of sustainability, explains why apparel brands need Digital Product Passports to track textiles the way governments track people. The EU will require them by 2026. DPPs let brands tell the story of where clothes come from and enable resale platforms like Vestiaire Collective to work better.
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Thank you. So the first thing I can tell you is that I don't have any more useful, relevant technical information than you already absorbed for the last 2 days. I'm here to kind of help you land the plane and get back to Earth before Joshua closes. So my name is James Carnes. I spent 28 years in the sporting goods industry, lifestyle, fashion, apparel, footwear. I worked at Adidas for 26 of those 28 years. And worked in roles in creative direction and in strategy and was the VP of sustainability. And what I can't tell you is how to convert DPC. I can't tell you who is the best AI. I will tell you a perspective mainly on why we should do these things and maybe how to approach these things. And I'll use the digital product passport as kind of the main conveyor of that. And the main thing for me is I've been fascinated in my career seeing how resistant we all are to change. And one of the things that I like to do is try to find parallels, particularly in history. Not such a history buff, let's say, but I find it fascinating that we redo or remake the same mistakes, or we have the same reaction today to things that people already went through in the past. And so when I thought about this topic of the digital product passport, I started looking at passports. And so today the idea of a passport is possibility. It's opportunity. If you have a passport and almost everyone does, not everyone, but you have the chance to go to new places, get new career, get new experiences. And for us, it seems like there's absolutely no reason why you wouldn't hand over completely private information about yourself to be able to get this passport, right? You're traveling to a new country, and now they know your full name, when you were born, how old you are, and a variety of other pieces of information, and they can track you. Why don't you have a problem with that? Because the benefit outweighs what you give over to them. Passports are were only invented really officially after World War I. The world was in a state of rebuilding. We needed to get people across borders to help rebuild countries, but we also needed to keep track of them. We needed to make sure that if you got misplaced or worst case you got in trouble, you needed to prove that you were there legitimately and that we could send you back to where you came from. So that was an interesting thing to me, is that it solved a problem of identity. It solved a problem of people being tracked and knowing where people were. So why do we need a passport for apparel? And hopefully when I explain this, you start to see the correlation. What's the idea behind that? Or maybe why did they choose the term passport? There could have been a number of different ways of describing this. So for that, I also looked at why are we doing this? Let's start at the beginning. And you've seen these. And if you haven't seen those, then you didn't do what I did, which is read the 67 pages of the EU documentation back from 2022 that explains the current conditions for why we need to start tracking what we make. In 2022, 62 million tons of textile was created. How's that feel? Is that big? Is that a big number? Is that a small number? I have no idea. And I think that's the problem is that we look at these numbers and we say, must go somewhere. I mean, the Earth is big. There must be places for that to go. We must not be overdoing it. 62 million tons— and I won't even touch 102— but 62 million tons is enough. We would fill this lake in less than 3 years. The entire lake would be completely filled in less than 3 years. That's crazy. But maybe that's not clear enough. The other way to look at it is that amount of textile for 8 billion people means that every year, every single person in the world, all of them, all 8 billion and plus, gets 77 kilos of new textile for themselves. Now, I'm not judging, but if you're consuming 77 kilos of new textile for yourself every year. I don't know when you wear it. I mean, I have a really, really heavyweight down jacket, and I think it weighs 5, and I don't buy one new one every year. So putting this into perspective in terms of the scale is really important as we go down this path of understanding why we need to do this. Now, it doesn't get better, so I'm going to take you down to the bottom before we go back up. That textile that we create globally is the fourth largest impact on the environment in Europe. And it got me thinking, like, well, what's 1, 2, and 3? Anybody know? Food. Transport. Someone say food. Yeah, unregulated farming is in the top 3, and the chemicals and the damage it does to the land. And transportation is close. It's air pollution. And I don't know about you, but I don't feel like we have bad air in Europe. I don't feel like it's making me sick. It is. And what we do is number 4, third largest on water and land usage. So the things we're doing are not okay. They're not having a positive impact. Even though I believe in the passion and the emotion behind what we do, I believe that what we do serves a purpose. As of today, we're not okay being naked. That means everyone needs to be wearing clothes. As far as I know, everybody really needs a pair of shoes. So what we do is essential to those 8 billion people. It's how we do it that's not working. Still not getting better. The majority of our waste here in Europe— and I moved here several times, but most recently 2011, so I'm an American married to a German, so I can say our— I feel very connected here. The majority, that means over 60% of what we have here, purchase and wear or don't purchase and dispose of goes to other nations. We're shipping our waste out of Europe. This will become illegal with the new regulations, but we're actually doing it even worse because we're labeling this as secondhand. Disgusting what we're doing. We are sending it to places in Central Africa, calling it secondhand when it's actually just our waste so that it doesn't create a problem on Lake Maggiore. And I have to give blame to consumers as well as brands. We're both responsible. Brands see the opportunity. The more we make, the more people consume. Consumers validate that behavior because the more we make, the more they consume. But it's this cycle that we're not willing to disrupt. And what we're not doing are investigating solutions like was discussed earlier, making our product more durable or helping people understand how they can take care of it so it can be more durable and last longer. It hasn't been a topic that we've discussed. How do we address that? And finally, the one that I don't know, it just hurts to think about every second, right? A truckload of waste is either going to landfill or it's going to incineration. And I don't know about you, but a lot of people think incineration, it's not so bad, right? We're burning it. It's becoming energy. It's terrible. It's pollution. Back to number 1. Every second. So that's 5 more truckloads during my pause. So the problem is, like the passport needing to keep track of people, we need something that keeps track of the things we create and our textile resources. We can't keep track of what we make. And it's up to us to figure out how to do that together, not just alone. And I'll get to that in a minute. So we need a real solution. It's been proposed. We didn't make it up ourselves. Product has to be physically labeled, digitally readable. There has to be actionable transparency in terms of information that's put in there. And it has to be publicly accessible. And this one I'll dive into a little bit in a second. That's a big game changer, right? As brands in particular, competitive advantage is so critical, right? But it becomes obsessive. Not everything you do is competitive advantage. In fact, most of what you do is not. It's just basic operation. So as of today, what will be required? I have to say, it was shocking to find out how many times this has changed when I dove into it. And the most recent information was confirmed on December 14th, but then slightly reconfirmed on February 14th. So it started with these definitely needing to be in there. What will be in the passport is origin. You already have that. You should. You should know where your product's made. The second is composition, which means what is it made of? And particularly fiber content is, is outlined, but also authenticity of leather, um, taking care of animals and livestock and the percentage of each material. Again, that's not new either. Care instructions. Most apparel products have care instructions. This is an expectation that we'll put on footwear as well. What has now certainly been confirmed is that we will have to put elements of circularity, and that's specifically recyclability and repair. So that will have to be documented in the Digital Product Passport. And finally, impact was the one that was hanging and actually is the one that lobbyists are rejecting, saying that this is going to add so much cost to companies and brands, you'll have to account for the water usage, energy usage, and the carbon for all of those products. Now, I'm not part of the EU, and so that's why I'm not going to give you a lot of chance to ask me questions because I can't go into these details. They haven't even been confirmed 100%. But we need to be prepared for that as the mandatory regulation. And again, remember why? Because we're not tracking it properly and we need to be able to do that. So I would say, luckily there's a little bit of time, but in reality, I know most brands are either working on 2025 or 2026 is coming up very soon if it hasn't already started. For some, probably close. The expectation is that this is ready and implemented by 2026 in the marketing calendar. and there's a grace period that's been discussed and originally was 30 months for full implementation and is now being discussed as being 18 months. So if you didn't think it was serious, it's pretty serious. Now the only thing I would say is if you're a small brand, the regulations state if you're below €40 million in revenue and based in Europe, you don't have to do this. But if you're an international brand and you have more than €150 million in revenue, in Europe, you have to do it. So you don't get out of this if you're in the UK or in the US and you're selling over €150 million in Europe. And you don't get out of it if you're €50 million and based in Europe. So pretty much touches almost all the brands that we have here today. So a little bit of question is like, is this really necessary? I already covered that, but more in the sense of, isn't this going to slow things down? Doesn't this count as regulation? And what I'm getting at is continually trying to remind you, It's really how you look at it. And I wanted to bring another example, again, my history fascination, because if you think of this as just a little history lesson, doesn't seem like that big of a deal. But if you remind yourself that what I'm about to talk about actually was a transformational time that led to where we are today, there's a lot of parallels. This guy who looks incredibly excited was based in Venice. He was more of an academic, but he basically is the one— Luca Pacioli was the one who documented this process of double entry bookkeeping. Sounds complicated, super simple. Already started in the 11th century, people were doing it. It just wasn't widely spread. All he did was put in a book, put it in the modern day internet, which was the printing press, and everybody had access to understand that this was the best way to run your business. And all it was was a tracking method. All it did was say, these people gave us money to order goods. They were merchants. These people are bringing us the goods. And you had to make sure that the amount of money you received and the amount of money that you had inbound, they matched. Just bookkeeping. It was a revolution. It was a technology. I mean, of course, it was pen and paper and math, right? Those are the three enabling factors of this technology. But without this, we wouldn't have had a huge increase in international banking during the Renaissance. We would not have accounting as it's known today. That is the genesis of accounting as a profession. And think about how big that is in our economy, whether you like it or not and enjoy your taxes, which led to the creation of finance, which is now a board position in every company. And because they were able to track the inbound and outbound finances, they were actually able to figure out how much they were spending for production once industrialization came, figure out the unit economics, and figure out that mass production is something they could capitalize on. So why don't we think of it this way? There was never once in Europe a regulation for double-entry bookkeeping for hundreds of years. It was adopted because it was seen as the best way to run business. Eventually, of course, it was demanded by governments to account for your taxes, to make sure there wasn't money laundering. But families like the Medicis picked this up immediately and said, this is the way to operate. This is how we can keep track of our finances. This is how we can keep track of goods. If a ship goes down in the Mediterranean, we know exactly how much was paid for it. The digital product passport isn't that much different. The difference is our willingness to embrace the opportunity. So for me, one of the pivotal factors to embracing that is we talk about circular economy, but most of us still think on a linear economy. And I'll be a little bit abusive about my former role in brands because the brand I'm in now is so small, it doesn't really matter. Most brands see themselves at the front of the linear economy chain or at the top of the pyramid. How many pyramids have you seen in documents? Yeah. We love pyramids, right? We don't really embrace this idea of a circular economy. And the reason is, as brands, we like to see ourselves over here. This is a system that feeds us. And we're on the outside as puppet masters sort of orchestrating. And we use words that I'll continue to use, like suppliers. Why don't we call them providers? Because they play a function. They're not partners. And we call them consumers. I've never felt like a consumer in my entire life. I met someone who called them citizens, purchasing citizens or shoppers. So this whole system requires us, for it to work, to realize we're just here. You're part of the system. And if you're part of the system, you're part of creating an economy. And all those opportunities that there are are part of what you can contribute to. There's a huge plus to this because as a brand, you're the dreaming part. The passion part of this whole thing. Everybody looks to you for changing the system in a good way. But you have to be benevolent to really capitalize on it and make it work. So I tried to look at opportunities to maybe inspire you to think about all the things that are already happening that you could be part of that the digital product passport will actually contribute to fueling this economy. And I looked at it from these different lenses— the supply chain capabilities that are coming up, consumer experiences that are starting to emerge, and some brand enablers, things— that's my key one there that I'm going to come back to at the end— that will help us as brands to convert the way that we do business to really embrace this digital passport as something that's new. So I'm going to dive into these real quick because I don't want to spend too much time on each of them. But if you look at the supply chain, things that are popping up— Recircle is a really small startup based in Prato, Italy, but also in Sydney, Nebraska, in the US. Scott Coleman is the CEO. He's basically agreed to collect everyone's— every brand that comes to him and says, we want you to take our stuff when it's finished, he's taking it. He has an 800,000-square-foot space in the middle of America where he's been just stockpiling everything to figure out what to do with it. You know what his problem is? Stuff comes in, he doesn't know what's in it. Digital Project Passport would transform his business overnight. He'll be able to connect directly to recyclers, resellers, and anybody who wants to get access to what this raw material can become. You have people like WeTurn and Nona Source in Paris who are basically taking all of the stock from luxury goods companies. They're taking finished product and recycling it. That's what WeTurn does. They're taking deadstock materials and redistributing it. This digital product passport will streamline their business and also create a new revenue stream for them to be able to do reselling like they couldn't do before. Darling Fiber is a more established company out of the US. That does polyester staple fiber. They've created a product that's carbon neutral, and through offsets, they'll enable the brands that purchase the fabric from the yarn suppliers that use their fiber to already build into the fiber itself enough offsets for their product. Right? So if you have a typical t-shirt that's 7 kilograms of carbon, you'll already start lower with using their carbon-neutral yarn. But if you want, you can define which places on Earth— there's 157 locations in the US, like windmills, wind farms, regenerative agriculture. This passport will enable them not only to give you an advantage with your carbon score, but they'll start to be able to promote themselves as a supplier that can do that. And finally, small startup out of New York City called SXD. They have revolutionized pattern making. If you want to do a zero waste pattern, a true zero waste pattern, they've built an AI, and I can't tell you whether it's really an artificial or an augmented intelligence that's able to take any existing pattern, replicate that to use the entirety of your roll, no matter whether it's, you know, 64 inches or 88 centimeters. Um, they will be able to capitalize on this because they're saving waste and saving carbon overall. Huge opportunities that by embracing this, you're fueling the growth of these companies if you work with them and you consider them providers and partners. For consumer experiences, I'll touch on one that everyone knows, Vestiaire Collective. Them like StockX, if you know StockX, the sneaker reseller. You know what their biggest problem is? Authentication. You know how they do it? StockX is even worse than Vestiaire. Manually, StockX hires interns, and they must train them, right? They need something like this just to validate each product that comes in. It will certify that it comes from a certain brand, and it'll tell them the content, and it keeps the economy going. La Petite Planète is actually a Spanish startup that realized this idea of longevity doesn't apply to kids. Unfortunately, if you want to buy really good stuff for your kids, you got to throw it out in 6 months at best. Why can't you manage your wardrobe? And their biggest problem to growth was that they have had to build their own certification system so that every time you buy, you get a digital card that goes with your product. That's completely eliminated once this DPP goes into activation. Detour sells all of their product based on the value of their influencers, which is rated exclusively on their reach, why couldn't it also be rated on their impact? Once you can calculate the total score of their selection, you can actually realize that the influencer you like the most might have the worst impact. And so it completely changes the value metrics that we can celebrate. And finally, you know Arcteryx started their repair. And when they did, they got a lot of criticism. And one of the reasons was they were accused of sort of greenwashing. Doesn't look so bad right now, does it? Now that you have to actually include repair in your digital product passport, all they'll have to do is say, bring it back to our store. So these things will also be changed through the digital product passport as well. And finally, for brands, this is the one I want to drive home. Um, when we talk about moving toward the digital product passport, and I'm gonna be done with saying that, digital product passport, when I'm finished, you need to look to outside enablers. This isn't something you should do internally. I know that there are discussions about how do we house our information? What do we keep competitive? My answer to you is there's nothing that you're putting in your product, almost nothing that shouldn't already go in there. Your brand, the identity of your brand, and your consumer's love affair with your brand is very rarely related to the material composition. It might be the percentages, but it's much more related to design, the sense of identity, and the image that they want to buy into with you. Because you can buy a really good t-shirt from Hanes still, and it's not that much different from the one that you buy from H&M. Or from Louis Vuitton. E.ON is a startup that actually began 10 years ago. Natasha Frank built this out of New York. They've been focused mainly on transparency. It's a cloud-based system where you can put all of your information already. But the idea behind it from the beginning was that you can actually use this as a marketing tool. And this is where I think the real opportunity lies once you get past the pain of the regulation of the digital product passport. There are stories you can tell. There are things that you can put in that do actually position your brand differently. Circularize has already got everything dialed. The whole list of 5 things that'll be in there, they've been doing this for companies already. They're already working with automotive and battery and electronic suppliers. So when I talk about carbon, water, and energy, they're a full-service supplier, but there are also things that we can think about in terms of legacy or history of the product. Of course, I couldn't help it being there for 26 years, but Adidas Originals, one of the most exciting things about some of those product is the belief that you're buying into something that's been worn before or comes from the past or has a heritage to it. Also product that's worn by celebrities. You have the opportunity to begin to capture those things digitally, and it might be that the passport is exactly the place you want to do it. Capturing the fact that Kendall Jenner, or Lionel Messi wore this sweatshirt will increase its value dramatically, increase its lifespan, and actually give the brand the opportunity to market themselves in a very new way. So there's an opportunity behind this. And even huge companies like Avery Dennison are providing not only the labeling but also a system that you can use. They've focused a little bit more on care instructions because that's an existing thing that's been used. The opportunities here are huge if you embrace them the right way, if you see yourself inside the problem and you don't see this as something that needs to be fixed by someone else for someone else. And so I'm really encouraging you to look at this in a very different way. All right, last two pieces in the final section. So where do I start? Well, I'm going to oversimplify this to the level where you're going to think, he doesn't even know what he's talking about, but I'm doing this for a reason. The first part of it is the operationalization of this, right? The cold hard facts, what you need to do. Number 1, you need to collect and audit all of your existing master data. And if you have a company that has 44+ legacy IT systems that you're gonna have to look after, you probably, sorry, a little bit of an inside joke. You probably will need to hire someone from the outside. It's not hard to do. It's just that that's not your specialty. You make clothes. Keep making clothes. Hire someone else to do this. There are experts probably in this room who can do this better than you can. And they'll find ways of working with your existing systems so that you don't have to really worry about that. You know what needs to be found. You know how to scrub that information. It'll help you very quickly figure out what you're missing. Two, you just need to figure out how you're going to label it. That's not that hard, but I also know that it can take days and weeks and months between design, development, sourcing, upper management to decide whether or not that little label is just perfect or not. It should be easier than it is, but I encourage you to get that out of the way very quickly. And third is to decide on the best data management tool. I think it was said earlier, data is the most important thing, and I agree, especially going forward. In this case, I wanna be super clear. This is not an event to keep your information somehow private or to even try to keep it private. Do not build your own platform to house this information. Do not think that you can make it publicly available on your website. You need to invest in a blockchain-based solution that will keep this information permanent and publicly available until your product no longer exists. You have to do that. And I'm relying on you and the integrity that I know is in this room to really advocate for that wherever you are. We cannot end up in a situation where, let's say Louis Vuitton goes out of business and nobody knows what their product actually is labeled as. They might not be the worst because they're not the biggest. This information needs to live forever, be available to everyone, accessible to everyone. So that's just the operational side. The most important thing for me though is how you actually manage people. And I heard some of these already come up over the day, uh, the, the last two days. And I was really excited to hear that because you guys are already ahead of me. The aspect of empathy is so important here. This change only works long-term if everyone who's involved feels like they're involved, understands the purpose, and wants to be part of it. Nobody wants to join in on something that's about regulation. Nobody wants to be ignored and told what to do. So to me, step one is assemble the experts you have in your company. The only thing you know is what you know. This may sound super dumb. They know the things you don't know. You're not an expert in pattern making, most likely. You're not an expert in 3D, most likely. I know I'm not. You cannot possibly drive this as a top-down exercise. The most important thing is that you spend a period of time— I'm recommending an accelerated 1 month, 1 month, 1 month— but you need to bring people on board and listen. If there's one thing I learned, if you're speaking, you're not learning. So I'm not learning right now. But if you're talking to people, you're not learning. And there's a big risk that they're not either if you haven't engaged them in the learning. This whole process is about learning the obstacles you're going to face to getting this done directly from the people involved and creating an engagement inside of your organization to make sure people come first. You need to create a scenario where you can remove yourself from the equation and this still gets done. The second part that maybe is a little different is I'm encouraging you to do that with your suppliers. We had a great conversation yesterday about how we treat suppliers, and there are still legacy attitudes like, you know, the people in Bangladesh just need to do what we need them to do. You know what the people in Bangladesh need? They need to understand what you need. You need to treat these people as human beings, not as people from companies that provide you with a service. And if you do and you include them in the outcome of your first step and say, hey, these are the problems we're facing, how about you? They have the same motivation to solve this with you and for you. Engage them exactly like you engage the people inside your company. And third, try to get the best understanding from your audience. I'm not calling them consumers, your audience. You probably have to start that in the beginning and brief someone to do the most basic thing possible in terms of a survey. You want to arrive at this end destination understanding all of the people involved. The people you have in your company, they're the most important. You rely on them. Human capital, it's a bad word, but it's the most valuable thing you have. You want to convert the relationship you have with your partners to really be partners. and you want to understand your audience the best way you can. If you have access to a community that's live, even better. So I bring it all to a close. Hopefully you could follow me. It's really just the how and two whys, or the why and two hows, sorry. Communicate the purpose to the people who are involved. Make sure that everyone you're working with, there's no, there's no number of times that is too many. To repeat why we're doing this. Until those people are saying the same thing you are, or you hear them interpreting the story in their own way, always go back to the reason why. It helps people understand that what they're doing serves a bigger purpose. Two, drive these partner opportunities, whether it's part of the ecosystem to help create a circular economy, and whether it's with your, your suppliers. Make sure that you're considering this a group effort. We are creating a circular economy, by being part of it. And third, treat people like human beings. I think we've had enough of business for business' sake, quarterly results, trying to get faster for the sake of being faster. Everybody in your network, whether they're a supplier, part of the organization, has the same motivation as a human being. And if you treat them like that, you'll get so much more energy and productivity out of that person. To get to this cause than you will in any other way. So good luck. I don't think we have time for questions. Thank God. But thank you for having me. It's been a pleasure to be here. I'm encouraged by what I've seen from all of you. You are leaders by being pioneers. I think you guys can change from the vantage point that you sit in your organizations. And I really hope to see progress over the next few years driven by you guys. Thank you.
