Not acting on sustainability threatens fashion companies‘ growth trajectory
At the Copenhagen Fashion Summit in May 2017 the Boston Consulting Group and the Global Fashion Agenda published the “Pulse of the fashion industry” report. A Review by Mark Starmanns, BSD Consulting Switzerland, July 2017
The report argues that (a) worlds’ population will grow to 8.5 million until 2030 and that (b) the apparel consumption worldwide will rise by 63% to 102 million tons in 2030 – and that both changes will threaten the industries’ current raison d’être: “With resources becoming even scarcer, the industry will face rising costs from labor to materials and energy. Based on conservative projections, fashion brands’ profitability levels are at risk in the range of at least 3 percentage points if they don’t act determinedly, and soon. The facts show a clear need for acting differently.”
The report warns that the trajectory of the current low sustainability action by companies will most likely lead to irreversible planetary damages and consequences to the world economy: „… the planet is already beyond its safe operating space in terms of climate change, waste pollution, changes in land use, and biochemical outputs.“ … “we face increasingly higher risk of destabilizing the state of the planet, which would result in sudden and irreversible environmental changes with potentially large damaging impact on the world economy.“
The report claims that there is a large business case in sustainability for the industry, and it analyses how fashion companies and the fashion industry in total will have to address its environmental and social footprint in the future: “As this report will show, there is a viable business case for environmental and social measures. In summary, GFA and the BCG contend that there is a Euro 160 billon-per-year upside for the world economy that can be realized through more efficient and diligent use of scarce resources, by treating workers fairly, and by making progress on a range of issues up and down the value chain … .” However, if fashion brands take no action, it argues, they will find themselves likely squeezed between falling average per-item prices, deeper discount levels, rising costs, and resource scarcity along the value chain. The report recommends action in five environmental areas, three social areas and three overreaching areas. Many of the recommendations the report provides, go into the right direction.
However, the report was recently criticized, for instance, by Greenpeace „How NOT to make the fashion industry more sustainable“ and from the wool industry “Fibre vs Fibre”. While I think that the report lays out an interesting analysis of the current state of the fashion industry and of necessary actions, I have my doubts with some of its conclusions, like the recommendation to replace 30% of cotton by plastic fibres by 2030. I see three main shortcomings:
First, the Pulse report bases most of its argumentation on monetarized externalities, but it does not disclose how these were calculated. This is problematic because the monetarized externalities just of one single process in the value chain can vary vastly, depending on how the environmental impacts are calculated and depending on how these impacts are then monetized. Without a deep and scientific understanding of the assumptions and models behind the calculations, the figures use in the report remain vague claims but not sound scientific data. To give a concrete example: The report presents a fibers benchmark based on the SAC Higg Materiality Index. This benchmark scores various plastic fibers as “low impact fibers”, whereas three natural fibers are scored as “high impact fibers”. Cotton, for instance, is considered as having a high impact, mainly due to its water footprint. Organic cotton, which as a much lower impact, is not considered. As a policy recommendation, the report says that cotton consumption should be cut by 30%. Why does the report not list organic cotton, which would have had a much lower score than conventional cotton? Does it differentiate between different regions and, for instance, consider that much cotton from Africa is rainfed? Does the calculation integrate possible long term effects of replacing cotton with plastic – i.e. African farmers that will migrate to Europe when they cannot grow cotton anymore, and does it include the impacts and costs of the microfibre pollution by plastic fibers (most certainly not) – just to name a few examples. Basically, the reports draws conclusions on the basis of intransparent and most likely scientifically unsound data – and these conclusions have vast consequences on many people.
Second, the report indicates that fast fashion companies score high on a so-called ‘Pulse Score’ and claims that the report “reveals” that ‘fast fashion’ does not automatically represent a threat to the environment and the world economy. Their argument is based on the ‚Pulse Scores’, which does not measure impacts in general but management systems. A company can therefore have a high ‘Pulse Score’ but produce very unsustainable impacts for the planet – through the means of so called „rebound effects“.
Third, the report oversimplifies the challenges ahead because it does not question the industry’s prevailing growth path. Why does it take for granted that the economy continues to grow, which in long-term is doubted to be possible with limited planetary boundaries. Instead taking this growth trajectory for granted, it could have shown new and innovative business models that make the industry work in a different way. Sustainability leaders like Patagonia are showing how this can look like.