The textile industry has often been present in the great industrial breakthroughs. This is how it has been ever since the first Industrial Revolution and the Spinning Jenny. 

Now, in the 2020s, we are actually on the brink of several transformations. There is talk about the fourth Industrial Revolution led by artificial intelligence as well as changes in our lives brought on by Web 3.0 and the blockchain technology. 

Digitalisation and data are changing several sectors in a way that there is no going back. The change arises from artificial intelligence and machine learning and other underlying megatrends such as limited material flows and responding to the sustainability crisis. 

One example of what this development trajectory – also known as data economy – might mean in practice, can be found in the heart of the European car industry. Around 1100 kilometres south-west from Helsinki, Finland. 

Catena-X is a project launched by the German car manufacturers. It sets an example of how to create a collaborative data ecosystem for an entire industry sector and the different participants involved with its complex value chains. 

Why the car industry? The electrification of transportation and the battery industry require increasing amounts of critical raw materials. Materials are scarce and supply chains are complex and fragile. Also, traffic emission reductions are a key contributor to the green transition. 

The objective of the standards created by Catena-X is to seamlessly integrate the systems of the automotive industry in order to share the huge amount of necessary data between all parties smoothly, safely and in a compatible manner. 

The data ecosystem will help, for example, in recycling car materials more efficiently as the origin of parts can be determined down to a single electric circuit. 

Simultaneously, the specific carbon footprint of each component in a vehicle can be calculated precisely. Previously forming an overall picture like this would have been virtually impossible. 

Blockchains and transparency 

A similar system is being gradually built also in the textile industry. One factor in the process is the Digital Product Passport determined by the EU regulation. The aim is to enhance traceability resulting in more sustainable textiles and decreased environmental burden. 

Inka Orko, Lead, Circular Economy at VTT Technical Research Centre of Finland, considers this development as part of a natural continuum to the years of effort that companies have put into their own processes. 

“Companies already use data for in-house purposes succesfully. But the next step would be to gather and move information throughout the entire the value chain starting from raw materials.“

– Companies already use data for in-house purposes succesfully. But the next step would be to gather and move information throughout the entire the value chain starting from raw materials.  

This requires joint agreements and standards to which all parties commit to. According to Orko, it is the rules of moving information that is the critical variable in the development of data economy. 

–  Technically anything can be done – collecting and transferring all kinds of information as much as possible. But first we need to agree together on the type of information that is transferred, the form of information, how and where it is collected, and who can utilise it. 

Forerunners have already rolled up their sleeves. EU level regulation regarding traceability is just around the corner, but there are proactive companies that strive to keep one step ahead of others. 

– Some larger brands have launched their own projects. For example, the joint blockchain pilot project of UNECE (United Nations Economic Commission for Europe) and Stella McCartney has recently been in the news. 

According to the Stella McCartney press release, the innovative pilot project explores the use of technologies like satellite images and environmental DNA to trace the origin of clothing. The data is gathered in the blockchain. That transaction cannot be altered or falsified retroactively. 

Storing information regarding the origin, authenticity and delivery history of products using blockchain technology can result in new circular economy models and enhance transparency. It can also prevent counterfeiting and product frauds. 

Luhta sees the potential of data 

Many Finnish clothing companies are already in on it. Luhta Sportswear Company’s ICT Operations Director, Henri Nöjd, sees the company’s ability to make effective use of data as a crucial competitive advantage in the future. 

 “We at Luhta consider gathering and distributing of data as well as utilising it for management purposes as a prerequisite for success in the future.“

– We at Luhta consider gathering and distributing of data as well as utilising it for management purposes as a prerequisite for success in the future.

Nöjd believes that data plays a major role in the future for both sides: for the internal decision-making of the company manufacturing the garment as well as for the forming of the consumer’s purchase decision. 

– Companies can use data to better anticipate demand, minimise waste, steer sales and marketing, and make better business decisions. 

Consumers, in turn, will benefit from the impact of data and shared data ecosystem especially when it comes to transparency and reliability of product information. 

– In the future the buyer can access information about the product’s origin, manufacturer, used materials, and recyclability by using, for example, the QR code in the item. In other words, the product information throughout the entire product lifecycle from purchase of materials all the way to one’s own wardrobe is available. 

– Furthermore, artificial intelligence presents a lot of new opportunities to produce information in different languages, to different consumers and in different situations. More competence in artificial intelligence is needed in the textile industry. 

According to Nöjd, Luhta has for long been studying the possibilities of utilising data in business development. This is an investment that will start to bear fruit only after a number of years. 

– Both our own as well as external systems are a huge source of information, which we will aim to harness in the future and use near real-time to benefit our business. 

Finland has excellent starting points 

More transparency, information on responsibility and sustainability. The issues the textile industry data ecosystem is pursuing are exactly those that give an advantage to the Finnish companies, believes Taru Rastas, Lead Specialist, Data Economy & Design, at Finnish Innovation Fund Sitra. 

– The most important competition factors of the Finnish textile companies are these same ones: responsibility, sustainability and quality. 

 “ Data can be used to make the responsibility efforts of the Finnish companies more visible than ever before.“

– Data can be used to make the responsibility efforts of the Finnish companies more visible than ever before. It will make a tangible distinction to fast fashion and cheap production when you can provide guidance to consumers with product information.

In addition, Finland’s capacity to make use of data and deepen the digitalisation is very good compared to almost any other country subject to study. Finland ranked first in the Digital Economy and Society Index (DESI) report in 2022. 

– We are world-class in skills and infrastructure when it comes to digitalisation. We should make the most of this situation. How to utilise this great framework also for business opportunities? 

Rastas herself emphasises the importance of co-operation and open-minded attitude. Those who have the courage and want to participate early on, will be the biggest winners in the change. 

– Some companies might feel swamped by the upcoming regulation. But still, you should not see it as a burden confining yourself to solely fulfilling your obligations. Together we can also impact the regulatory actions, so that the requirements would suit our needs in the best possible way. 

This way companies could, without prejudice, try something new and benefit from it. We do not yet fully comprehend the future business prospects that may arise from this. 

– What we are creating here is new opportunities for companies to convey quality and sustainability to their customers, and to develop their business with data management. I believe that Finnish operators should take this leap together.

Finnsh Textile & Fashion is part of the pan-Nordic Nordic Blockchain Alliance. This article was created in co-operation with the Nordic Blockchain Alliance project.