The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
LONDON, United Kingdom — A fashion business exercises careful control: over its image; its business growth; where possible, over how consumers respond to its brand. But even the world's most prestigious luxury houses cannot control the climate.
According to a report released this month by Kering and non-profit consultancy Business for Social Responsibility (BSR), climate change is already having noticeable effects on global cashmere supplies — and this impact is likely to get worse.
Currently, cashmere products make up €4 billion of the €60 billion global luxury apparel market, according to data provided by Bain & Company. “The cashmere knitwear market is definitely outgrowing the luxury apparel market,” says Federica Levato, senior consultant at Bain & Company, who cites “casualisation of the market” — dressed-down, comfort-led trends like athleisure — as the main driver of demand.
In the last few years, the “democratisation” of the fashion industry has caught up with cashmere. Once a highly expensive commodity, available to an exclusive few; today, affordable, casual cashmere products have permeated the high street. At Uniqlo and H&M, pure cashmere knitwear starts at $79.90; while athleisure retailer Kit & Ace has built its brand around "technical cashmere," — blends of cashmere and sport-friendly materials like spandex.
But, cashmere is under threat. Made of the fine winter undercoat of Hircus goats, the global cashmere clip is estimated to be between 15,000 and 20,000 metric tonnes, or 6,500 tonnes of "pure" cashmere after it is cleaned. Luxury brands are more selective in their sourcing, centring on Mongolia and Inner Mongolia (an autonomous region within China that borders Mongolia), and using only the finer, longer and whiter fibres. However, most of the global cashmere output comes from China, where The Nature Conservancy estimates there are over 100 million goats. According to the National Resources Defense Council, it can take four goats to produce enough fibres for one sweater.
While cotton, silk, or leather — all key raw materials on which the luxury fashion sector depends — can be produced in modified farming systems, cashmere production relies on natural grasslands in limited geographies. As a result, it is especially vulnerable to environmental change.
“The availability of cashmere has suffered because of the degradation of the native grasslands, which the animals depend on for their food,” says Elisa Niemtzow, consumer sectors director at BSR and co-author of Kering and BSR’s report. “We’re talking about changes in temperature, in water availability and in the extreme winter conditions.”
According to the United Nations Development Programme, 90 percent of Mongolia is fragile dry-land, under increasing threat of desertification. In 2010, the combined impact of a drought the preceding summer (which reduced available forage in the grasslands) and a dzud (an extremely severe winter), saw more than nine million livestock perish in the country, of which most were cashmere goats.
According to Pier Luigi Loro Piana, deputy chairman of Italian fashion house Loro Piana, which specialises in luxury cashmere and wool products, the recurring dzud has seen Mongolia and Inner Mongolia suffer cashmere shortages for 50 years. “You learn over the years how to balance these potential shortages,” he says. “Unfortunately, they continue to have an impact on the shepherds and their communities, on the animals, the environment.”
However, in recent years, the environmental obstacles facing cashmere have worsened. To tackle rising demand, many producers increased the size of their herds — from 1993 to 2009, Mongolia’s livestock population grew from approximately 23 million to 44 million — creating a vicious cycle. More goats mean more grazing; which, in turn, leads to degradation of the grasslands. The result is undernourished goats with coarser hairs, causing the supply of high-quality cashmere to shrink. To make up the lost revenue, herders breed bigger herds, setting off the cycle again.
“There’s been an absolute avalanche of people wanting more and more cashmere, and pushing the price, pushing the supply chain,” says James Sugden OBE, a director of luxury cashmere clothing label, Brora, and former managing director of Scottish woollen mill, Johnstons of Elgin. “It has created a problem, insomuch as in some areas, some growers, tempted by higher volumes have gone for volume rather than quality.”
“Lately what has really worried us as a potential risk for the whole industry is the quantity approach: quantity seems to be overtaking quality,” concurs Mr Loro Piana.
Cashmere’s future is even more precarious. While the dzud is an extreme, cashmere yields depend on harsh winter conditions to grow their high-quality undercoats. Looking forwards to 2036 to 2060, Kering and BSR warn that rising temperatures due to global warming could also constrain goats’ winter hair growth, causing further decline in the quality of cashmere. “There’s sort of a perfect storm,” says Elisa Niemtzow.
So, what does this mean for fashion businesses? According to Niemtzow, luxury brands are already seeing decreases in availability of high quality cashmere. “You can either take it as a decrease in quality or a decrease in availability,” she says. Either way, the raw material is running out.
Two years ago, the Chinese government put restrictions on farmers’ acreage, in a bid to reduce the stripping of the pastureland. However, Outer Mongolia and other producing regions like Afghanistan have no such controls. Even within China, “The problem still remains in terms of finding quality fibre, consistently,” cautions James Sugden.
These changes present not only an environmental concern, but a business risk too. So how does an industry respond, when a raw material that its products — and, therefore, its profits — rely on, becomes endangered?
"Our industry's challenge is to change this unsustainable system and put new, sustainable practices in place," says Marie-Claire Daveu, chief sustainability officer and head of international institutional affairs at Kering. "Companies need to recognise that their business depends on natural capital and also impacts many livelihoods at the base of their supply chain."
According to Daveu, Kering’s brands are working with their suppliers to create “production systems that are more resilient to the shocks of climate change impacts,” such as sustainable herding practises and holistic management of pasturelands, or implementing early warning/disaster management systems to respond to negative weather events.
But, with demand for cashmere still high, companies must consider the herding communities in their supply chains, and make it worth their while to farm less, but better. “Desertification also exacerbates economic hardship for herders and drives them into poverty and displacement to urban slums,” says Una Jones, chief executive officer of the Sustainable Fibre Alliance (SFA), which was formed in 2015 to unite companies, governments and NGOs to tackle sustainability issues in the cashmere industry, by establishing the first Sustainable Cashmere Standard, which will pilot in 2016.
In 2009, Loro Piana, which was acquired by LVMH in 2013, launched a five-year selective breeding programme, involving about 24,000 cashmere goats in China. By breeding only the most productive animals, the scheme aims to elevate the quality of hair on each animal, resulting in smaller herds but higher yields of quality cashmere — thus easing pressure on the land and avoiding desertification.
The project has “improved standards of living for goats and pastors, as well as a restored balance between animals and environment,” says Mr Loro Piana. A luxury fashion business, he says, must choose “Integrity, investments, research, respect and aiming for the best quality versus mere exploitation.”
“In bad years, we pre-pay. We give the farmers advance money, in order to see them through the winters,” says Sugden of Brora, which processes its garments in Scotland and sources its cashmere from Inner Mongolia, where goats are not just sources of cashmere, but meat and milk for the herding communities. If the commodity price of cashmere drops, “Our responsibility is to try and not take advantage of that. We want consistency of quality, number one. The price is secondary,” he says.
"A number of luxury brands and retailers are stepping up to the plate," says Una Jones, to tackle the industry's current "unsustainable production and consumption patterns and how the sector will have to change to meet their future demands." Last year, for example, Burberry added protecting its cashmere supply to the company's environmental targets for 2017.
But is it too late for the so-called “diamond fibre?” Should fashion business also adapt their strategies to the possibility of shrinking cashmere supplies?
As more environmental changes make farming more challenging, and modernisation across Asia tempts younger generations away from their families herding businesses, James Sugden says luxury brands have a “duty” to support their suppliers, by protecting the price, and ensuring suppliers understand, “It’s better to be at the top end of the market, and not to be tempted by the larger orders from Uniqlo or the like.” But, he adds, “The bulk producers have a responsibility.”
At Kering, Daveu, remains positive. “Ultimately, availability will also be positively affected,” she says, of Kering’s collaborative efforts. “We have a tremendous opportunity now to work on this issue to create a vibrant cashmere industry that helps regenerate natural systems and supports the livelihoods of millions of people. Let’s look to the solution, not just the problem.”