Fashion’s damaging environmental and social impact is drawing scrutiny. Where once retailers focused on two collections a year, consumers’ passion for fast fashion now means continuous release of new, sometimes low quality, products. How can the industry combine affordability with responsibility?
Fast fashion could be costing the earth. The industry uses more energy than the aviation and shipping sectors combined and contributes 10% of all global greenhouse gases according to the UN.1 At the same time natural resources are being increasingly depleted to meet rising clothing demand, while waste is becoming unmanageable.
There is increased scrutiny on the social impacts from cheap clothing, with many instances of poor working conditions, forced labour and child labour. Parts of the fashion industry need a makeover, but how?
New business models
Fashion retailers must transition from the current model of disposable fashion to longer-lasting and more sustainably manufactured products. We see two routes forward for fashion brands:
Committing to make fashion “circular”. This has the potential to couple significant economic and sustainability opportunities, through initiatives like rental, resale or repurposing of clothes. It is estimated that clothes are worn an average of seven times before being discarded,2 resulting in 85% of clothes being incinerated or piling up in landfill each year.3 The potential for circularity in the industry is enormous.
Addressing social issues around workers’ rights. We expect to see clothing companies setting higher labour standards, providing guidance for suppliers, and setting up mechanisms to make supply chains more transparent.
The textile industry is largely unregulated. Yet policymakers have the opportunity – and responsibility – to introduce stronger environmental standards. They should also make fashion brands accountable both for their negative impacts along the entire supply chain, and for their products at end-of-life.
Recent European Union regulations are expected to change how the industry operates by banning the destruction of unsold products, monitoring greenwashing – whereby it might overstate its green credentials – and setting new design requirements for longer-life products. But more is needed to tackle overproduction and accelerate the trend towards recycling.
Investment managers have a significant role to play in increasing fashion companies’ awareness of the sustainability implications of their operations, and in encouraging them towards circular business models. Our approach to informing our investment decision-making is broadly two-fold: analysing the sector’s most material issues and monitoring for potential company controversies. These processes often feed into our engagements with investee companies and are integral to our role as a responsible investor.
Thriving biodiversity is essential to basic human rights – such as the right to life, clean air and water, health, and adequate food and culture as enshrined in the International Covenant on Civil and Political Rights. How do we protect it?
Carbon markets enable companies to reduce their carbon emissions by trading them for purchased carbon credits or carbon offsets. But the role of these markets in decarbonisation has divided opinion, highlighting that change is needed.
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