Last month saw two significant developments within the fashion world. As fashionistas around the world waved adieu to fashion legend and Chanel creative director Karl Lagerfeld, the UK government’s Environmental Audit Committee (EAC) was submitting the final paper in its investigation into the sustainability of the fashion industry.
While the haute couture of Chanel and the apparel churned out by online ‘fast-fashion’ retailers may be at opposing ends of the style spectrum, both sit in a sector that demands a new economic model, the EAC said. As its paper Fixing fashion: clothing consumption and sustainability puts it: “Business as usual no longer works. The way we make, use and throwaway our clothes is unsustainable.”
The EAC paper sets out five ways in which the fashion industry is damaging the environment:
- Forced labor and other illegal labor practices
- Synthetic fibers shedding plastic particles
- Excessive water use in the production of garments
- Growing consumption and demand for newer, faster fashion
- Large-scale clothes wastage
The committee also suggests five possible solutions, or ways the government can help, namely:
- To ensure the rights of workers in the UK and abroad
- To combat the pollution caused by synthetic fibers
- To reduce the excessive consumption of water
- To reduce the wastage caused by the industry
- To reduce the rate of fashion consumption
The primary recommendation that has been seized on by the media is the 1 penny (just over 1 cent) tax on every garment produced. The committee estimates that this could raise £35m (US$46m) to invest in improving clothing recycling in the UK. Other key recommendations include:
- Reform taxation to reward fashion companies that design products with lower environmental impacts and penalize those that do not
- Consider applying the plastic tax to textile products to stimulate the market for recycled fibers in the UK
- A ban on the incineration or landfilling of unsold stock that can be recycled
- The introduction of an ‘extended producer responsibility’ scheme for producers, which rewards those that take positive action to reduce waste
- Greater collaboration between industry and government to tackle labor abuses in supply chains
The government’s proposal of a penny charge per garment to clothing manufacturers would be a positive step towards better clothing collection and sorting in the UK and address at least some of the issues raised in the EAC’s report, given that the majority of fabric currently ends up in landfill.
The potential solutions mooted by the EAC are indicative of the fact that the global sustainability impact of clothing runs deeper than simply the lack of recycling and pollution from synthetic fibers. According to McKinsey, once consumers leave the store with newly purchased apparel, washing and drying 1 kilogram (kg) of clothing over its entire life cycle, using typical methods, creates 11 kg of greenhouse gases.
McKinsey estimates that cotton, which accounts for around 30% of all textile fiber consumption, is normally grown using plenty of water, pesticides and fertilizer, and, given that most apparel-making countries rely primarily on fossil fuels to provide their energy, 1kg of fabric can generate 23kg of greenhouse gases on average.
While admittedly from a pretty low base, one Nordic retailer stands out for making active progress on sustainability. The clothing company used 96% renewable electricity across its operations in 2017, while 59% of the cotton it used was sustainably sourced, and it has a goal of 100% by next year.
Furthermore, the company runs a recycling scheme that encourages customers to donate unwanted clothing – of any brand – in exchange for a gift voucher. In 2017, the firm claims to have collected more than 17,771 metric tons of textiles – equating to 89 million T-shirts – through the initiative.
We expect changes in perception and behavior around the issue of sustainability to follow the same path as our collective awakening to the problem of global plastic pollution over recent years.
Need for Scale
Recycling schemes like the one mentioned above are starting to become more commonplace but the issue is often that demand for repurposed clothing isn’t there yet, meaning most companies still lack the incentive to run such schemes and achieve economies of scale.
While the initial cost to businesses of improving sustainability may be high, these costs are necessary, because, in the longer term, either market forces or regulation are likely to force the hand of clothing companies anyway.
Either customers will vote with their pockets, or rules will be imposed on the industry, and that means those businesses that have already made their investment will be the ones which are most likely to benefit further down the line. The online fashion retailers named among the worst offenders in the EAC report are likely to be slower to react because they are so focused on making and distributing products as cheaply as possible, so any short-term cost increases are a major headwind for their model.
Consumers must bear some of the responsibility too. We can focus on companies all we like, but if consumers are perfectly happy to wear something for just one week, they are supporting that disposable attitude.
This is a financial promotion. Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. You should consult your advisor to determine whether any particular investment strategy is appropriate. This material is for institutional investors only. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell this security, country or sector. Please note that strategy holdings and positioning are subject to change without notice.
This is a financial promotion. Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. You should consult your advisor to determine whether any particular investment strategy is appropriate. This material is for institutional investors only.
‘Newton’ and/or the “Newton Investment Management” brand refers to the following group of affiliated companies: Newton Investment Management Limited and Newton Investment Management (North America) Limited (NIMNA Ltd). In the UK, NIMNA Ltd is authorized and regulated by the Financial Conduct Authority in the conduct of investment business and is a wholly owned subsidiary of The Bank of New York Mellon Corporation. Registered in England no. 2675952. NIMNA Ltd is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. NIMNA Ltd’s investment business is described in Form ADV, Part 1 and 2, which can be obtained from the SEC.gov website or obtained upon request.
Personnel of certain of our BNY Mellon affiliates may act as: (i) registered representatives of BNY Mellon Securities Corporation (in its capacity as a registered broker-dealer) to offer securities, (ii) officers of the Bank of New York Mellon (a New York chartered bank) to offer bank-maintained collective investment funds, and (iii) Associated Persons of BNY Mellon Securities Corporation (in its capacity as a registered investment adviser) to offer separately managed accounts managed by BNY Mellon Investment Management firms, including NIMNA Ltd.
Certain information contained herein is based on outside sources believed to be reliable, but their accuracy is not guaranteed. Unless you are notified to the contrary, the products and services mentioned are not insured by the FDIC (or by any governmental entity) and are not guaranteed by or obligations of The Bank of New York or any of its affiliates. The Bank of New York assumes no responsibility for the accuracy or completeness of the above data and disclaims all expressed or implied warranties in connection therewith. © 2006 The Bank of New York Company, Inc. All rights reserved.