Sustainable Fashion: Will COVID-19 accelerate a greener future?
24 Jun 2020
Conversations around sustainability in the fashion industry were escalating prior to the coronavirus outbreak. But the global pandemic may have provided a watershed moment, propelling deficiencies within the sector to the top of the sustainability agenda.
Pollution and emissions: the other face of fashion
As we reported in Global Fashion: Green is the new black, the fashion industry is one of the largest contributors to climate change, producing around 10% of global greenhouse gas (GHG) emissions annually. Exacerbated by inefficient supply chains and the explosion in disposable ‘fast fashion’, the sector could take up a quarter of the world’s carbon budget by 2050.
Source: McKinsey, Greenpeace, Barclays Research.
COVID-19 will leave many fashion brands fighting for survival…
Historically, there has been little economic incentive for brands to invest in more responsible production models. But the COVID-19 pandemic has hit fashion hard.
Store closures and a drop in discretionary consumer spending have seen global sales plummet 60-70% from April to May 2020*. With 56% of companies not earning their cost of capital in 2018, the likelihood of many fashion brands going bankrupt over 2020-2021 appears high.
*Source: Boston Consulting Group.
…but could be the driver for change
While fashion companies fight for their existence, the pandemic has also intensified public debate around textile waste, overconsumption and irresponsible business practices. As consumers shift away from extreme consumerism, brands that genuinely embrace sustainability are presented with a compelling opportunity for differentiation – as well as the potential to future-proof their business.
Sources: BCG, December 2019; McKinsey, April 2020; Lyst, April 2020.
A catalyst to rethink supply chains…
For example, COVID-19 has highlighted fragility and poor practice across fashion’s opaque supply chains. Technology that enables greater supply chain visibility – tracking how and where goods are made – could see growth in demand as brands look to improve resilience and efficiency, and demonstrate greater transparency and accountability to stakeholders.
….and dismantle the ‘take-make-dispose’ model
The pandemic could also be the catalyst to drive the fashion industry to shift from its wasteful ‘take-make-dispose’ model of perpetual growth to a more reactive approach. Faced with vast amounts of unsold stock following the shutdown, brands could deploy a range of methods to manage inventory.
Four solutions to transform the ‘take-make-dispose’ model
Implementation timeline: 2030 and beyond
Assuming lockdowns are lifted over summer 2020, the fashion industry is likely to be focused on cost-cutting and offloading of excess inventory in the most cost-effective yet sustainable way. But looking towards 2030, our Research analysts anticipate that new thinking, backed by ambitious targets and certification, will start to transform the industry.
The sustainable fashion timeline
Short term (2020-2023)
Sustainability commitments strained
Focus on cost-cutting
Heavy discounting to clear inventory
Resale stores thrive
Unsold inventory repurposed
Medium term (into 2030)
Diversification of manufacturing locations
Adoption of traceability technology
Development of digital sampling and design
Growth in recycling technology
Shift to ‘drop season’ model
Long term (beyond 2030)
Reshoring of production
Shift to production on demand
Mainstream adoption of new materials
Remodelling of the fashion calendar
Source: Barclays Research
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About the analyst
Anushka Challawala is a member of the Sustainable & Thematic Investment team, Equity Research. Anushka joined the team in September 2018 following two years covering European Telecoms. Anushka graduated with a BSc in Management from the University of Warwick.