What is the future of fashion?
The fashion industry has a massive impact on the world – its footprint on people and the planet is huge and reaching crisis point. We have a role not only as consumers but as responsible investors to affect positive change in the fashion industry.
Here’s what’s happening and what you can do.
Fashion’s Footprint
As one of the world’s largest consumer industries, the fashion industry is a true powerhouse for global development, worth an estimated $2.4 trillion and employing around 60 million people along its value chain. Astoundingly, global production now exceeds 100 billion garments a year!
But the environmental and social issues associated with the industry are also huge. And these issues are complex and wide-ranging … from putting pressure on extremely limited resources to protecting the rights of all those involved in the value chain.
Stats to Make You Sit Up
- The total greenhouse gas emissions from textile production – estimated to be 1.2 billion tons annually – are more than those of all international flights and maritime shipping combined.
- The International Labour Organization estimates that 170 million children are employed in child labor. This is an issue for the fashion industry – because factories are often in a ‘race to the bottom’ to provide cheap fashion fast, resulting in many children being involved in the supply chain.
- In 2013, more than 1,100 people died in the Rana Plaza garment factory collapse in Bangladesh. Despite this shocking event, safety issues continue to plague factories across the developing world and many claim little has changed.
- More than $500 billion of value is lost every year due to clothing underutilization and the lack of recycling.
- It takes 2,700 liters of water to make a cotton t-shirt – representing about three years worth of drinking water for one t-shirt. That’s a lot of water!
emissions more than all international flights & maritime shipping
Water needed per t-shirt
What’s Going Wrong with Fashion’s Sustainability?
The harsh reality is that we are buying more and wearing less. In the fifteen years from 2000 to 2015, clothing production almost doubled. To over 100 billion units per year!
At the same time, garments are being worn less often and discarded quicker than ever before. According to the EPA, Americans threw away 16.22 million tons of clothing in 2014, 71% more than in 2000 and 822% more than in 1960.
GROWTH OF CLOTHING SALES AND DECLINE IN CLOTHING UTILISATION SINCE 2000
Why is this? A number of reasons but primarily driven by the growing middle-class population across the world, compounded by the ‘fast fashion’ phenomenon seen in mature economies, whereby clothes are offered at lower prices, with quicker turnaround of new styles and more collections produced each year.
At the same time, there are some really big systemic issues that the industry is grappling with. Recently, Burberry admitted destroying $37m in unsold clothes, accessories and perfume in 2017 instead of selling it off cheaply – taking the total value of goods it has destroyed over the past five years to more than $117m. Why? In order to protect the brand’s exclusivity and value.
In a world facing growing environmental and societal challenges, many believe that this is not only astounding, but also unacceptable. However, it seems that many of the high-end brands are up to similar tricks.
And it’s not just high end brands, fast fashion is also at it. In 2017, H&M reportedly burned about 19 tons of obsolete clothing (the equivalent to 50,000 pairs of jeans) in a waste-to-energy facility run by one of Sweden’s energy giants — meanwhile making a lot of noise about its in-store recycling points and so-called ‘Conscious Collection’.
Burberry destroyed stock 2017
Which Fashion Companies are Taking Sustainable Actions?
The good news is that, over the last decade, a number of brands in the fashion industry have begun to do things differently.
Pioneers like Stella McCartney, Raven + Lily, Akola Project, Reformation, Patagonia and Apolis are really changing how clothes are made and how the industry works. These front-runners are coming up with innovative ways to protect our environment and to take care of the people who make their products.
What they are doing to change how clothes are made
- Patagonia’s mission statement – ‘Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis’ reflects the company’s sustainability priorities. Having been at the forefront of devoting time and money to environmental challenges, Patagonia has really taken action – from environmental campaigns, to switching to organic cotton, from launching Patagonia Action Works, to offering repair and recycling services in stores.
- Reformation’s strapline ‘Being naked is the #1 most sustainable option. We’re #2’ says it all – the company claims to put sustainability at its core. Reformation invests in green infrastructure to minimize waste, water and energy footprints, and produces quarterly sustainability reports allowing stakeholders to track progress. At the same time, fabrics used are carefully selected, including TENCEL™ Lyocell – a semi-synthetic fiber with properties almost identical to cotton and part of the Rayon family, made from renewable wood materials.
- Apolis’ business model is based on one of ‘Advocacy Through Industry’ – the company claims this is a revolutionary way to harness the power of business to create social change. While committed to global advocacy, Apolis also puts emphasis on the importance of sourcing and manufacturing locally.
Does Acting on Sustainability Benefit the Business of Fashion?
With such enormous challenges facing the industry and with so many opportunities to reduce impact on planet and people, sustainable fashion is worth thinking more about as an investment trend.
What’s more, taking action not only improves the social and environmental performance of the industry, but results in a strong business case for adding value. For example, The Boston Consulting Group found that taking action on sustainability can raise their earnings (EBIT) margin by 1-2 percentage points for apparel companies.
Looking to the future, the fact that the number of fashion brands describing themselves as ethical or sustainable is on the rise shows that consumers are prioritizing this. And, in turn, this tells us that it’s not going away – the future of fashion is sustainable. The future of fashion is responsible. For investors, this is a green light.
GFA & BCG project that the business case is positive. By 2030 fashion brands will be able to see an increase in EBIT margin of 1 to 2 percentage points – if they invest in sustainability
How Investors Can Change the Fashion Industry
As consumers, we know how we can affect positive change in the fashion industry – through the purchasing decisions we make. But as investors – particularly those of us motivated to address environmental and social challenges through our investment decisions – the fashion industry is a harder nut to crack.
But we can make change happen and here are some ideas on how…
1
Get fashion smart
The first step is to learn more about the environmental and social issues that are plaguing the industry – there’s some pretty extensive research out there and it’s worth starting with this. Understanding more about the companies you may invest in is a very important first step.
Take a look at Pulse of the Fashion Industry, published by the Global Fashion Agenda, in collaboration with The Boston Consulting Group. It’s long but worth a read – assessing the industry’s environmental and social performance, revealing where the industry stands and highlighting case studies of companies doing good stuff.
2
Audit your investment portfolio
Chances are you may not know which fashion and apparel companies you are investing in, particularly if you are invested in mutual funds and ETFs. Take some time to run through the company holdings in those funds.
Fashion United lists the 100 largest listed companies worldwide within the apparel and fashion industry – the Fashion United Top 100 Index – these top 100 companies (by market capitalization) represent a market value of over 1 trillion dollars. That’s a big influencer on how we value our people and planet.
While you may not be able to do a lot with your existing holdings, being aware is a critical first step. Also use this to inform future investment decisions, particularly when looking at different investment funds you could move into.
3
Push for transparency
Transparency matters – at the product level (for example, information on how a product is sourced, its environmental footprint, etc). But transparency also matters at the corporate level (for example, the processes a company has in place to source sustainably, protect its employees, report to its stakeholders, etc).
As investors, we should look for what information apparel companies provide – in particular, start with their sustainability reports. The more companies know these are being read, the more attention they will give to their contents. And if you think shareholders (however big or small) need more information then don’t be shy – tell them!
4
Thought about crowdfunding?
Crowdfunding – raising many small amounts of money from a large number of people, typically via an online platform – is a great option for supporting startups in the sustainable fashion field. Many crowdfunding platforms host campaigns for different types of early stage fashion companies – such as Kickstarter’s campaign for Sustain – which makes ‘all-natural clothing’. We love The Very Good Bra – the world’s first zero waste bra – which was fully funded on Kickstarter within 48 hours. Many platforms, such as Crowdfunder Fashion, include a specific page for fashion companies.
Rewards-based crowdfunding is also getting traction in the fashion sector – check out Next Chapter, a Hong Kong based platform that focuses on funding for female founders. Recently raising investment for Basics for Basics, the funding campaign rewards backers with clothing from their ethical range.
5
Be an angel
Angel investing – acting as a private investor by providing capital for a business start-up, usually in exchange for convertible debt or ownership equity – is also worth exploring if you want to get into the sustainable fashion space.
Rather than going alone, check out whether there are local angel investor networks to participate in. With an increasing number of female-focused angel groups – seeking to support companies with female founders – sustainable fashion companies may fall into the investment pipeline.
6
Use your voice
As well as demanding more transparency, we can also use our voice to encourage apparel companies to participate in the various industry initiatives that are attempting to drive change in the sector. For example, the 2020 Circular Fashion System Commitment – born out of the shocking reality that 73% of the world’s clothing eventually ends in landfills or is incinerated. Big names like Nike, Asos and Gap have signed up, and we can play our part in encouraging more to commit publicly to targets.
As investors, we want to see that the companies we invest in are collaborating with others to build a better industry. Sharing of best practices is needed if the future of fashion is to be sustainable.
GO FURTHER
Looking to make your investment portfolio more sustainable? Use our 8 step Roadmap to make your money matter.