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Friday, January 28, 2022

The trillion dollar question: How to fix the fashion industry

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In 2018, fashion stakeholders came together with the UNFCCC to identify ways in which the broader textile, clothing and fashion industry can “move towards a holistic commitment to climate action”. What they created was the Fashion Industry Charter for Climate Action, containing the vision to achieve net-zero emissions by 2050.

‘Unlocking the Trillion Dollar Fashion Decarbonisation Opportunity’, co-authored by Fashion for Good and Apparel Impact Institute (Aii) and sponsored by HSBC, is a new report that breaks it down. It “charts a trajectory for the industry to meet the net-zero ambition, mapping the integral levers across existing solutions, such as renewable energy, and innovative solutions, such as next-generation materials”.

The carbon footprint of the fashion industry is globally significant, evidenced by a growing number of studies, most recently World Resources Institute (WRI) and Aii (2021). This report estimates that the industry’s share comprises 2 per cent (1.025 gigatons CO2eq) of annual global greenhouse gas (GHG) emissions, with most impact taking place in the raw material and processing steps of the supply chain.

But we’re past the days of the fashion industry hand-wringing about its role in the climate crisis. So there’s no use listing all of the ways in which it contributes to the international waste crisis, the dumping of chemicals in rivers and seas or the degradation of human rights in the Global South.

We know what the problems are, what we want now is to see solutions.

Where is the money to finance the green transition?

The report focuses on an “investment opportunity of $1 trillion” to finance the transition. It breaks down the funding needed by solution category and identifies the types of funders best placed to take advantage of the opportunity and benefit from the positive returns. The solution categories in the scope of this report apparently enable a net-zero industry to be achieved by 2050.

On the first Monday since COP26, investors dumped mining stocks during the first day of trading on the London Stock Exchange since the Glasgow agreement was finalised. For investors prioritising environmental, social and corporate governance (known as ESG or Green Investment) the prospect of investing in decarbonising one of the most destructive industries on Earth would be a tantalising one.

“Reducing carbon emissions will be one of, if not the, defining challenge of our generation and indeed the fashion industry. The good news is that a strong pipeline of solutions – both disruptive and ready to be implemented – can drastically decarbonise the industry,” says Katrin Ley of Fashion for Good. “This report highlights that not only are the opportunities plentiful and financially attractive, but they are key to getting us to a net-zero, circular industry.”

Anyone who works in climate change knows that, for the most part, what’s needed for any kind of systematic change is willpower and a lot of money. So the report is correct insofar as any kind of transition of this scale will require a huge amount of capital, much of which has to come from the private sector.

This is because government’s in the Global South simply cannot afford a project of this scale, nor should they be responsible for financing it.

But what’s the real cost?

“Unlocking the Trillion-Dollar Fashion Decarbonisation Opportunity” estimates 47 per cent of CO2 reductions come from implementing existing solutions, while 39 per cent comes from scaling innovative solutions, and 14 per cent from other solutions.

These solutions include:

  • reducing overproduction
  • material efficiency improvements
  • scaling circular business models

The report evaluates seven solutions to reach net-zero in the fashion industry by 2050, including a shift to renewable energy, sustainable materials and processes, accelerating the development of next-generation materials, and phasing out coal, amongst others. The total cost to implement these solutions and achieve net-zero is $1.04 trillion (€928 billion), including $639 billion (€570 billion) towards existing solutions, 61 per cent, and $405 billion (€361 billion) towards innovative solutions – 39 per cent.

Philanthropic and government grants represent $50 billion (€45 billion) – only 5 per cent of the total – but according to the report they are critical for catalysing “industry and financial capital”. The report covers insights, key actions and recommendations to unlock the $1 trillion financing opportunity – but is this really just about the right amount of money?

The fashion industry isn’t known for being poor, in fact, its worth was predicted to reach $1.5 trillion in 2020, according to previous estimates.

“The fashion industry is becoming increasingly aware of its environmental impact and of the need to swiftly transition to net-zero…Collective action is critical. The financial system must play its part by providing the investment to fund net-zero solutions at scale,” says Zoë Knight, Managing Director and Group Head of the HSBC Centre of Sustainable Finance.

But some of the manufacturers dominating the industry are the highest-earning companies in the world. So why haven’t they already started investigating where the unsustainability lies in the supply chain? Simply put, it’s because that’s what makes the money.

“The problem is not lack of financing – the industry has continued to make huge profits during the pandemic,” says a supply chain and regulatory expert, close to efforts to push through legislation to regulate the industry in the UK. “The problem is the fashion industry is unwilling to shift away from a low-cost, high-volume, endless growth business model that not only damages our environment, but also exploits workers all over the world.”

The hypocrisy of the fashion industry

“The people who make our clothes – mostly women – are at disproportionate risk from climate change impacts due to their location in vulnerable regions in the Global South,” says Ruth Maglip of Fashion Revolution.

“The fashion industry’s race to the bottom to find the lowest labour costs from its suppliers, combined with its significant climate impacts, has now created a paradox where fashion’s most profitable supply chains are threatened by the very business model that props them up.”

Sure the report calls for “reducing overproduction” but until we see a full-scale shift away from dropshipping models, where so much more clothing is produced than is required and then mass-marketed to consumers only to be burnt or dumped in a landfill, we’ll keep facing the same problems as before.

Make no mistake, renewable energy, next-gen materials, fossil fuel phase-out and green investments are vital to fighting the climate crisis and this report puts forward an excellent case for financing these within the fashion industry. But there is an overarching issue that is missing here, a golden thread of how to truly “decarbonise” the industry that is being overlooked or wilfully ignored.

In 50 years time, if you stand on one of the growing mountains of discarded clothing in Ghana or Chile, which pollute the local water sources and the soil, will it make a difference if half of the garments in that pile were made using renewable energy? No, it will not.

Will workers in Leicester, UK, penned as modern slaves by human rights groups, feel better about their poverty pay if they’re part of a ‘low-emissions supply chain’? Unlikely.

Methods of production are a crucial part of solving the fashion crisis, that is not up for debate, but this report is a high-cost papering over the cracks. A trillion dollar one.

The source working on legislation efforts in the UK gives a damning indictment of the “solutions” presented… “This report gives a green light to “business as usual” and is a far cry from what we need to prevent climate catastrophe. What we need is urgent regulatory action by governments to tackle the abuses of the fashion industry and incentivise a shift away from the current exploitative economic model.”

There is no “green” solution here, no silver financial bullet to make the problems go away.

It couldn’t be simpler, if the fashion industry wants to tackle its role in the climate crisis, it needs legal enforcement of mass industrial reform. What is referred to as ‘post-growth’ means moving beyond simply producing less, to reach a point where the concept of a successful industry is not based on endless pursuit of growth and profit.

Any attempts to better this industry must embrace the idea that there is value in conserving precious resources and restoring the environment, and where the culture of transparency and accountability is at the core.

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