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Fast fashion: The story behind the spin

Despite all its spin, the fast fashion industry remains fundamentally unsustainable, but key investors don’t seem all too bothered.

By Polly Bindman

fast fashion, circular economy
Fast fashion and sustainability struggle to work together, but do investors care? (Photo by Mlenny via iStock)
  • Despite launching ‘responsible’ clothing lines and making positive statements on workers’ wages, the fast-fashion industry remains fundamentally unsustainable.
  • While key investors show little evidence of wanting to resolve the industry’s catastrophic impacts on the planet and its poor treatment of workers, implementing a full traceability system in the textiles industry should be ‘non-negotiable’ for them, says think-tank Planet Tracker.
  • Other experts suggest tighter mandatory disclosures and taxes on synthetics will help resolve the industry’s woes.

Consumer sentiment towards the fast-fashion industry is changing. Despite its evident allure, 58% of consumers claim they will move away from the habit of using their clothes for a very limited time, while 61% are planning to reuse or upcycle their clothes more, according to market research firm DJS Research

By definition, fast fashion samples ideas from the catwalk or celebrity culture and turns them into garments in high-street stores as quickly as possible to capture consumer demand. As such, it is a practice that causes untold damage to the planet, while also exploiting its workers.

On 30 May, news that fast-fashion staple Missguided had collapsed due to unpaid debts prompted a wave of headlines promising the end of the fast-fashion era.

Brands such as Boohoo or Pretty Little Thing typify fast fashion and have for many years benefited from such consumer excess, but the wavering appeal of these brands appears to be reflected in the market.

In May, Boohoo warned that sales growth would slow for the fourth time this year, while it and similar company Asos warned investors to expect dour earnings in 2022. The share prices of both have plummeted following a high during the pandemic, while that of high-street chain Marks & Spencer’s remains stable.

How does fast fashion work?

The fast-fashion business requires high consumer demand to fuel the supply chain models needed to produce quick-turnaround, low-cost items. High-street chain Zara’s fastest pieces have a six-week process from design to sales, for example, while Boohoo’s turnaround is just two weeks, according to IT Supply Chain, a trade publication.

In recent months, rising energy prices and the cost-of-living crisis have thrown a spanner in the works, as the likes of Asos and Boohoo are now struggling to maintain tight supply chains that rely on cheap labour, paper-thin margins that are not resilient to economic instability, and changing consumer sentiment.

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What’s more, the industry accounts for up to up to 8% of global carbon emissions. Despite slight progress in some areas, “systemic issues remain and progress is too slow”, says a report published in June by Global Fashion Agenda, a non-profit that fosters industry collaboration on sustainability in fashion. “Conventional virgin resources and emissions must be significantly reduced” and “systems must be established to pay a living wage to all garment workers”, it concludes.

Greenwashing rife in fast fashion

Growing public awareness of how the fast-fashion industry operates – fuelled by scandals such as Boohoo paying workers in its Leicester factories below minimum wage – is leading to some outward change. For example, many offer ‘responsible’ clothing lines, yet as a report from sustainability campaigners Changing Markets Foundation reveals, greenwashing in these collections is "rife". For example, of the brands with dedicated ‘sustainable’, ‘conscious’ or ‘responsible’ collections, synthetics produced from fossil fuels – particularly polyester – "remain omnipresent". H&M’s ‘responsible’ collection, for example, contains more synthetics (72%) than its regular collection (61%).

Almost all of these brands now report on various sustainability metrics – both Boohoo and Asos are signatories of Textiles 2030, a voluntary agreement to collaborate on carbon, water and circular textile targets, for example.

But voluntary sustainability reporting is not enough to move the needle, argues Kenneth Pucker, senior lecturer at the Fletcher School at Tufts University and former COO of boot brand Timberland. “Measurement doesn't guarantee management. Reporting is not a proxy for disclosure. And disclosure does not assure action”, he tells Capital Monitor.

For example, while the Global Reporting Standard, arguably the most comprehensive sustainability standards framework, was initiated in 1997, Pucker says emissions from the apparel industry have grown by more than 100% since, adoption of synthetics has risen dramatically, and the average time people wear a garment is down by about half.

The brands’ own reporting supports this. While Asos and Boohoo are also signatories of the Science-Based Targets initiative, Asos reported its overall global emissions increased by 6% between 2020 and 2021, while Boohoo reported its market-based emissions increased by 29%, "largely driven by a 27% increase in tonnes of material produced, [and] Covid-19-related transport and distribution impacts".

This explanation highlights a fundamental problem: as long as these brands continue to increase production, their emissions will increase.  

According to Brett Staniland, a fast-fashion industry activist, who successfully lobbied UK TV station ITV to sever its sponsorship ties with the industry on its flagship Love Island show (which Staniland was a contestant on last year), the only thing a brand can do to convince him of their commitment to sustainability is to “decrease their output… and make substantially [fewer] clothes”. Discussions about recycled or sustainable collections or in-site collection bins or resale sites are “just greenwash”, Staniland argues.

Investors re-active rather than pre-emptive?

Crucially, it appears investors are not doing enough to push for change. None of the biggest investors in Boohoo and/or Asos – T. Rowe Price, Jupiter, Baillie Gifford, Camelot Capital Partners, Capital Group and Invesco (see below) – responded to Capital Monitor’s queries about how they are engaging these companies on ESG issues.

There are subtle signs they are taking action; for example, in an analysis of Boohoo shareholder engagement from 2020, data firm IHS Markit finds that its investors expect brands to complete Task-Force Climate-related Financial Disclosures (TCFD) reporting.

However, the current approach of investors appears tilted towards social issues. For example, T. Rowe Price, which has a combined stake of 26% across both companies, reported three engagements with Boohoo last year: one on social issues and two on governance. At Asos, it conducted eight engagements, of which only one was focused on environmental issues.

In its 'Stewardship Code' report, T. Rowe Price expands on its engagement with Boohoo, which was conducted in response to the latter's 2020 labour exploitation scandal, in which the company lost £1bn in market capitalisation in just one day. That it took place after a "controversy that uncovered major shortcomings in Boohoo’s factory working conditions" shows how engagements with the industry are often reactive, rather than pre-emptive.

The importance of supply chain transparency

It doesn't have to be this way. According to a report published this month by financial think tank Planet Tracker, investors can insulate themselves from such scandals (and losses) by forcing companies to disclose full supply chain transparency and traceability, which is critical to tackling the dual impacts of social and environmental issues.

Just 19 (37%) of 52 listed retail companies analysed in the Planet Tracker report published a supplier list. Of those, only 11 published any suppliers beyond their top tier, which includes production partners and manufacturers.

Planet Tracker argues that of implementing a traceability system in the textile industry, which should be "non-negotiable" for investors, could save the industry $3bn to $8bn a year, through avoiding reputation losses or other efficiency measures. Specifically, Planet Tracker calculates that making sure orders are completed on time could reduce air freight costs by 50-70%.

Investors must pre-empt these issues, Richard Wielechowski, Planet Tracker’s head of textiles research, tells Capital Monitor. “If these companies… are using suppliers that aren’t on top of what's happening in their factories… [they run the risk of] someone doing an exposé or reputational hit.”

Certainly, some asset owners, such as Australian retirement fund Aware Super, are ahead of the curve on assessing supply chain risks – such as instances of modern slavery – at companies in which they hold stakes.

But while investors act fast on statutory issues like pay, they are less likely to show concern for issues that are not legal requirements, such as the use of virgin polyester made from fossil fuels, he adds.

Fast fashion: legislation on horizon

That is why, for Pucker, taxing synthetics like nylon and polyester is the only solution. Shifting usage towards more natural renewable materials, by incentivising regenerative agriculture and de-incentivising things that sit in landfills and leak methane for four generations is the way to accelerate change, he claims.

Pucker is advocating for the New York Fashion and Sustainability and Social Accountability Act to be passed. Proposed in January, it mandates that global companies with revenues in excess of $100m that choose to sell in New York State have to do due diligence on their supply chains and provide annual public reporting on indicators such as the percentage of materials they recycle or the amount of water they use, as well as scale up data on their suppliers.

In the EU, legislation looks imminent. In March, the European Commission unveiled a proposal to boost the sustainability of consumer products including clothing, as part of its efforts to advance the circular economy. New rules will include mandatory minimum use of recycled fibres by 2030 and would ban the destruction of many unsold products. 

Only if investors step up their game can they, together with policymakers, mitigate against the industry’s harms.

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