LONDON, United Kingdom — It’s 2050. The Arctic Circle, Earth’s once-pristine white snowcap, is now green. Its melting snowdrifts have been replaced with an irrepressible moss. Just south, across the formerly barren landscape of the Canadian tundra, a place in which permafrost prevented even trees from growing, enterprising cotton farmers are beginning to eke out low-yield harvests, having shifted production from America’s southern states which have been blighted by droughts and the ravages of monoculture on soil quality.
Environmental disruption has caused the price of cotton to spike by more than 2,000 percent. Its production also faces stiffer regulation in its use of fresh water, now so scarce it is becoming a commodity in itself. In Asia, rising sea levels have displaced millions of garment manufacturers and destabilised major industrial ports including Shanghai and Mumbai, and their trading partners New York and Miami.
By 2050, the materials used by the fashion industry — as well as its operational structures, global trade networks and workforce — could be unrecognisable if just a few of the wide-ranging predictions made by scientists come true.
Fashion's need for raw materials and labour intensive production processes make it an industry particularly vulnerable to environmental disruption — as are the profit margins of businesses that operate within it. “Based on conservative projections, fashion brands’ profitability levels are at risk by at least three percentage points if they don’t act determinedly soon,” says Javier Seara, the lead author of the Boston Consulting Group and the Global Fashion Agenda’s sustainability focused report, "The Pulse of the Fashion Industry." Certainly, inaction on climate change could result in radical risk-taking. But what are the most pressing threats to fashion businesses, and what is the industry doing about them?
1. Cost of Raw Materials
The fashion industry has evolved using a linear model when it comes to raw materials, often expressed as "take, make, and waste." However, as is becoming emphatically clear, some of the resources fashion relies upon to create its goods are finite, most critically — fresh water. Dyeing and treatment processes use vast amounts of water; to make a pair of jeans and a t-shirt takes 20,000 litres according to the WWF. Over 70 percent of that water usage is in the agriculture of cotton, which is among the fabrics with the highest environmental impact along with silk, wool and leather.
A McKinsey & Company report titled "Charting our Water Future" predicts that water consumption needs will outstrip supply by 40 percent in 2030. In addition to the cost implications of water becoming increasingly scarce, and its use becoming more regulated, a business model that operates on the single use of raw materials is now believed to be untenable long term. Products used and discarded by consumers are too valuable to lose to landfill or incineration. Unless technology can more efficiently recycle used garments, and collect enough material, current consumption rates are not sustainable.
Profitability levels are at risk by at least 3 percentage points if fashion brands don’t act determinedly soon
2. Labour Disruption
In addition to the inherent waste that fashion’s linear economy creates, many of the geographies that fashion relies upon for cheap labour are at high risk of environmental disruption. The extreme weather conditions expected to become more common in the near future are likely to impact the livelihood and mobility of millions of garment workers, leading to supply chain inefficiency and decreasing output.
According to the Organisation for Economic Co-operation and Development (OECD), four out of the five countries most affected by rising sea levels are fashion’s biggest manufacturing hubs: China, Vietnam, India and Bangladesh. In unaffected areas, the cost of labour is expected to rise significantly. As fashion manufacturers experienced over the last 15 years in China, when economic growth up-skilled the emerging middle class, continuing development in existing manufacturing hubs will drive up wages.
The transportation and logistics industries also face an uncertain future. As oil fields become more difficult to access and the cost of extraction rises, oil prices will increase.
“Should the oil price soar to a four-digit figure, regionalisation of supply chains and relocation of production sites would be the consequence,” say the authors of PWC’s report, "Transportation & Logistics 2030." If supply chains were to be regionalised, the ramifications for global fashion businesses would be extreme — perhaps insurmountable. Although that may be an unlikely scenario, the report argues that the significant price fluctuations experienced in oil markets in recent years, including a 45 percent increase from January to July in 2008, make clear just how sensitive oil prices are to short-term market imbalances.
4. Higher Regulation
The increasing scarcity of resources like oil and water means regulation will play an increasing role in the manufacturing of products such as cotton. "The Pulse of the Fashion Industry" report envisages two scenarios through which higher levels of regulation are incorporated.
The authors’ preferred scenario sees the industry establishing its own sustainability standards and bodies, which are then acknowledged and affirmed by international regulatory bodies. This scenario could be bolstered by legislation that incentivises sustainable practices such as tax breaks.
The second scenario sees international regulators “taking part much more aggressively, ushering in a new generation of profitability for everybody,” according to Seara. “Due to increasing cost pressures, increasing consumer pressure, and eventual regulator pressure of some form, whoever doesn’t get on the wagon of fixing the foundation, collaborating with others to improve, they will not be part of the game.”
5. Consumer Sentiment
By 2020, millennials will be the most numerous demographic in the global workforce, which means fashion businesses must now cater to their preferences, rather than those of Generation X. Millennials consistently identify sustainability as a factor that influences their purchasing habits. But while a third of millennials say they are more likely to buy from companies that are mindful of social responsibilities (just a quarter of those over 51 say the same, according to BCG) only “a tiny proportion of all consumers are willing to pay more for a sustainable product.”
A PATH TO SOLUTION
A number of leading fashion businesses are pioneering sustainability initiatives, motivated by both environmental concern and commercial opportunity. H&M has led the way in reducing the carbon footprint of its store network and has pledged to double its energy productivity by 2030. By that year, H&M also aims to use only recycled or other sustainably sourced materials in its products. In 2016, this share was 26 percent (although 43 percent of H&M’s cotton came from sustainable sources. The goal is to use only such cotton by 2020). “Strategic stakeholder engagement — like Organic Cotton Accelerator and Canopy Style — is vital,” says Eileen Fisher, founder of the namesake sustainable fashion brand.
In addition to increased use of sustainable and recycled materials, circular economic principles are being designed into products. In February 2012, Nike released its Flyknit trainers, with uppers made from micro-engineered polyester that is lightweight and form-fitting. The design reduces waste by about 60 percent compared to traditional cut-and-sew footwear construction. And this month, Adidas launched three new trainer styles made from recycled ocean plastic. Each pair uses 11 plastic bottles and the company's goal is to make a million pairs from recycled plastic this year alone.
Positive steps are also taking place in the luxury sector; Kering’s "Clean by Design" programme was developed in 2014 with the Natural Resources Defense Council to improve the water and energy efficiency of textile mills. In April, it completed the first phase of the programme at 24 of the group’s suppliers.
“It is about linking our business operations and our sustainability goals — how we source, how we manufacture, how we sell our products — and ensuring that sustainability also adds business value,” says Marie-Claire Daveu, chief sustainability officer and head of international institutional affairs at Kering.
Four out of the five countries most affected by rising seas levels are fashion’s biggest manufacturing hubs
Working Towards a Circular System
It's not just big businesses championing a circular economic model, in which materials are repurposed to create new products at the end of use by consumers. “We have always used the highest quality fabrics. Over time, we found out how well they hold up," says Eileen Fisher. "That quality is what allows us to create a profitable circular business model. With our take-back program, we are trying to find a solution for garments we ourselves no longer wore.”
For a circular economy to really scale, however, the industry must act together. Fifty percent of the industry is made of small to medium sized enterprises that have limited control over their supply chains. A circular, closed-loop system depends on supply chain transparency and big data resources that can identify where used materials are around the world at any one time, for businesses to up-cycle into new products.
“Trying to set up something as big as sufficient recycling mechanisms — no single brand can do that. So collaboration is necessary for the smaller brands as well as the big brands,"says Seara. "To do that, there needs to be some agency, some enterprise — much bigger, much stronger and much more accepted by everybody than the hundreds of NGOs and other agencies that exist now." If that system is successful, it could dramatically decrease the need for raw materials and the resources required to extract them.
Self Assessment and Data Sharing
In another call for industry-wide collaboration, businesses need to commit to publishing their sustainability targets, says Eva Kruse, president and chief executive of the Global Fashion Agenda and the driving force behind the Copenhagen Fashion Summit.
“Businesses should start measuring their own sustainability performance in order to benchmark against the Pulse Score [a measurement devised within 'The Pulse of the Fashion Industry' report] and develop relevant strategies for performance improvement,” she says.
Investment in New Technology
“On the R&D side we need more investment in fibre manufacturing, and then I think more people need to be braver about testing the market with new fibres as well,” says Esther Maughan McLachlan, who advised former UK Prime Minister Tony Blair on sustainability and has held roles at Sony and Interbrand, before becoming the in-house sustainability consultant at The Communications Store.
“Obviously the cost will come down the more volumes that are produced," Maughan McLachlan says. "I do see a general reluctance to invest there over for example, something more immediately important like digital.”
Fashion’s ability to overcome rising costs in materials, labour and transportation, while tackling more active regulation and shifting consumer sentiment remains to be seen, however the severity of the problem and its sheer scale create a pressing argument for change.
“It will be feasible, because it will be necessary,” insists Seara.