- Despite claims of sustainability, the fashion sector’s emissions are more than four times higher than those of the airline industry.
- Textile companies show an inadequate link between sustainability efforts and executive pay.
- Insufficient reporting and lack of standardised data collection hinder progress.
The coronation of King Charles in the UK at the weekend was a lavish and international affair, putting Britain at the centre of the world stage, but at the same time, sparked heavy criticism. For those of a more republican mindset, the cost of the pageantry was very much front of mind.
SEO firm Loopex Digital estimated the £100m ($126.5m) fund allocated for the event could have paid for up to 1,000 new affordable homes or up to 66 megawatts of renewable energy capacity.
Perhaps the most laughable claims to emerge ahead of the event were those of its emphasis on sustainability. King Charles wore clothing previously worn by his predecessors, including his mother and grandfather, for the coronation including, Reuters reported, the coronation glove made for his grandfather, George VI.
“We’ve got this wonderful, sustainable, eco-friendly king who’s reusing something rather than having a new glove,” Deborah Moore, chief executive of London-based glovemaker Dents, told the news agency.
Good PR for Moore, but it is a typically grandiose and meaningless statement about sustainability from the fashion and textile sector. Fashion, it should be remembered, accounts for four times the emissions of the airline industry.
This is backed up by a new report from London-based non-profit financial think-tank Planet Tracker, which found more than half (57%) of textile companies lack any link between sustainability practices and executive compensation.
Last is not good
The report looked at the sustainability and remuneration policies of the top 30 consumer-facing textile companies.
The sector’s approach is encapsulated by New York-based sportswear retailer Foot Locker. “One of the most meaningful ways in which we deliver on our purpose is integrating ESG considerations across all areas of our business,” wrote Richard Johnson, then president and chief executive in the group’s 2021 impact report.
It sounds great and the company is making all the right noises, but although Johnson retired in September last year, the group has yet to publish its 2022 report. More to the point, the company doesn’t link executive performance to sustainability at all.
In a report in October last year, Los Angeles-based executive compensation consulting firm Semler Brossy analysed Fortune 500 companies that had adopted ESG metrics into their incentive plans. While sectors like energy and utilities showed almost all companies had such metrics in place, the consumer discretionary spending sector – which includes fashion – scraped 50% at the bottom of the list of 11 industry sub-sectors. As the Planet Tracker report laconically notes: “Last is not good.”
Six months later, the results remain poor. Although all 30 of the companies looked at have sustainability policies and 28 have executive remuneration policies that incorporate performance-based executive pay, more than half – including Anta Sports, Gap, Levi Strauss, Nordstrom, Under Armour and Victoria’s Secret – have no link at all between pay and ESG metrics, a credible way to ensure a company’s top brass are suitably motivated to pursue the corporate agenda.
But even for the 13 companies where there is a link made between ESG and performance, there are problems. For seven of the 13, the link is based on qualitative rather than quantitative criteria.
The six that have quantitative criteria are Adidas, Hermes, Kering, Puma and Zalando in Europe and Ralph Lauren in the US. Of those, only Adidas and Puma, – which have a common founder and are headquartered in the same small town in Bavaria – have clear annual targets and reporting.
“Every textile player we analysed is publicly committed to embedding sustainability into their operations and growth,” says Richard Wielechowski, head of the textiles programme at Planet Tracker. “These pledges are mere window dressing if the leaders of these companies are not held accountable for delivering sustainability goals.”
Too many loopholes
The Planet Tracker report calls on companies to disclose what has and has not been delivered, rather than only reporting on the direction of travel.
Sweden’s Hennes & Mauritz’s (H&M), for example, appears to be one of the better fashion houses. The SBTi (Science-based Targets initiative) has verified the group’s goals to reduce its absolute emissions by 56% by 2030 and to achieve net zero by 2040.
To help it get there, it has taken advantage of the capital markets too. The group sold a €500m ($549m) 0.25% 8.5-year sustainability-linked bond in February 2021 and a €1bn sustainability-linked loan in April last year. In both cases, key performance indicators were linked to the reduction of Scope 1, 2 and 3 emissions and increasing the use of recycled materials, reported on an annual basis.
But at the same time, the company has repeatedly come under fire for greenwashing from advertising standards authorities across Europe for its sustainability claims. Last summer it was accused of showing environmental scorecards that were inaccurate and inflated.
Here too Planet Tracker questions the actual impact of H&M’s sustainability claims.
Although there is a link between executive pay and ESG, as Plant Tracker says, there is “no real idea of how important this is vis-à-vis the ‘objectives in the business plan’ and no guidance on what is actually being measured and whether this is qualitative or quantitative”.
The problem, as with so many sectors, is that it remains easy to find an excuse not to address sustainability properly and too many loopholes remain for companies to wriggle through.
As Stéphanie Bernier-Monzon, consultant at Franco-Canadian impact rating agency Impak Analytics told Capital Monitor in an email: “The lack of standardised data collection in the industry results in unreliable sustainable claims and, with a business model not linked to the SDGs (unlike the healthcare sector for example), measuring the real positive impact of initiatives is difficult, to say the least”.
Other than its styles, nothing else is likely to change any time soon. A bit like the King’s gloves.[Read more: Fast fashion: The story behind the spin]