"The way the fashion industry is working right now, it can't be allowed to stay"

The start-up Retraced from Düsseldorf helps fashion companies to record and disclose their supply chains in detail. Conventional brands are also increasingly interested in transparency, the two founders explain in an interview.

In Berlin, the catwalks are currently set up again: Fashion Week! The topic of sustainability has long since made its way there as well, but how honest is the fashion industry with its promises anyway? The founders of Retraced, Philipp Mayer and Lukas Pünder, want to bring transparency to an industry that is changing very slowly in many parts. But the pressure on fashion brands from new regulations plays into the pair's cards.

They want to make it transparent for companies which steps a garment goes through during its production. How sustainable is the fashion industry already?

Lukas Pünder: It always seems, especially in our bubble, that the sustainable fashion market is already extremely large. But the figures show that it's just one to three percent. That means we're still at the very beginning.

Do you see a trend towards more sustainability?

Pünder: The greatest pressure we are currently seeing in the market is coming from political regulations, such as the German Supply Chain Act. What companies are doing in this context is passing on the pressure of the law unfiltered to their supply chain. This means that here in Germany, as well as in Europe and Asia, there are many suppliers who are not directly affected by the law, but who have to comply with the regulations because they work with large companies. This pressure is leading to the issue of sustainability being taken more seriously.

You should benefit from this with your start-up Retraced.

Philipp Mayer: Yes, in the beginning we focused exclusively on sustainable companies that already knew a lot about their supply chain and used the transparency we offered primarily for their marketing. This way, customers could see on the product page where, how and by whom the garment was produced. To make this happen, it was important to offer a platform where all the information from the supply chain could be collected and organized.

Please explain how exactly you want to help companies with Retraced.

Pünder: First, we digitize all the information we get about production. Companies usually know at least their direct suppliers. The next step is to find out who the suppliers' suppliers actually are. Step by step, we bring everyone onto our platform so that communication and data exchange take place directly via Retraced and are thus much more standardized. Each company has a profile with us where all the information is collected. So we help companies get to know their supply chain, manage the information and evaluate it so that it can then be shared with all relevant stakeholders, like us consumers.

So you're just creating transparency.

Pünder: Yes, at least for now. So far, we are showing how good the standards of the companies are. If companies are satisfied with little, then that's exactly what we can communicate. But that is changing: we are providing more and more assistance. We are in the process of building a risk analysis: That is, we are using specific information to determine what risks there are in sustainability for which industry or region. This could mean, for example, that we note for China that there is an increased risk of human rights violations taking place there. At the same time, we are collecting more and more data to tell companies how they compare and show them where they have levers to influence their sustainability.

You have focused on the sustainable market so far, why?

Mayer: Because it was easier to convince those brands. But with our sustainability management solution, we now want to move more into the conventional fashion market, also because that's where the volume is. We are currently in an exchange with some of the large companies who, due to the Supply Chain Act and a clear movement in the end customer sector, have noticed that they have to deal with the topic of sustainability. Also to stay relevant.

Sustainable fashion is still very expensive. Can sustainability and an affordable price be reconciled?

You have to ask yourself the question: What does sustainable fashion mean? As long as it is not circular but linear, it is not sustainable, no matter what material it is made of. That being said, more sustainable production isn't that much more expensive in and of itself. Organic cotton, for example, only costs around 20 percent more than conventional cotton, and fair wages, which are still pretty low in many countries of the world, only make the product a few euros more expensive to produce.

Pünder: However, the additional costs for sustainability do not only arise in production. Sustainable labels simply invest a lot more time in working with their suppliers. Apart from the product and the costs, they find out, for example, where production takes place, who their suppliers are, and ensure that standards are adhered to and checked. That also costs money and is reflected in the price.

What do you think of the Supply Chain Act?

Plünder: Economically, it is very beneficial to us (laughs). Basically, we think it makes a lot of sense to introduce regulations into the market. Because the fashion industry should not remain the way it is right now. It needs to feel more pressure. There are already draft laws in 18 different countries that are planning or already have regulations similar to Germany. The EU is also working on standards that will probably replace the supply chain law in Germany and then be much stricter.

Your startup closed a funding round earlier this year and is growing. What is the next step for Retraced?

Pünder: The next few months will be an exciting phase for us. Right now we are developing the platform so that we are exciting for the conventional fashion market. Whether we are successful with this remains to be seen. We are aiming for our next round of financing in the middle of next year. Due to the current developments in the market, we are making very good progress and are struggling more with the internal start-up problems of rapid growth. Since the beginning of the year, we have been doubling in the quarter. As a result, we are getting bigger in the team and have to pay attention to creating new structures, making customers happy, but at the same time working towards profitability.

Thank you very much for the interview.

to the persons: Philipp Mayer and Lukas Pünder have known each other since their school days in Düsseldorf. In 2016, they founded the shoe brand Cano and realized that transparency in the supply chain was a gap in the market. In 2019, they therefore launched Retraced, together with their school friend Peter Merkert. In February 2021, Retraced closed its first funding round of one million euros. The Spanish investor Samaipata thus holds 16 percent of the start-up. The management team consists of all three school friends: Pünder is CEO, Mayer CPO and Merkert CTO.