As Fashion Revolution Week kicks off with the publishing of their fifth Fashion Transparency Index, part 3 in this industry insiders series examines how brands, manufacturers and thought-leaders are analysing current metrics and adapting sustainability and climate change initiatives in the face of COVID-19.
In recent weeks it has been debated whether sustainability initiatives will take a back seat during and after COVID-19, largely due to the economic hardship likely to result from it. I spoke to Francois Souchet, Lead of Make Fashion Circular at the Ellen Macarthur Foundation about whether sustainability initiatives and investment at fashion brands are under threat. He believes that for brands who have adopted waste management and sustainability initiatives at the core of their business, their sustainable transformation plans are secure. In contrast, it is the brands who have used sustainability as a marketing tool, rather than integral to their processes, that are likely to halt progress in this area.
“The closer (sustainability and investment) are to the core and the more integrated, the harder they are to cut off. For some businesses, it will be a question of survival, so it is quite difficult to predict what will happen.”
Francois Suchet, Lead, Make Fashion Circular
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Souchet cautioned that one of the key threats to sustainability progress is that in times of insecurity and uncertainty the impetus may be to revert to proven (and less sustainable) approaches.
Echoing Souchet, Dr. Hakan Karaosman, fashion supply chain and sustainability expert at the United Nations Economic Commission for Europe declared “Sustainability as a marketing tool will go—inherent sustainability will stay.” Also, he claimed the biggest problem in the fashion industry is the “fragmented supply chain,” calling for a “restructuring” across all tiers. Lean, simple and transparent supply chains are proving the most resilient during this crisis, he said, and this is what brands are likely to favor as they emerge from this crisis.
Karl-Hendrik Magnus, Senior Partner at McKinsey and Company in Frankfurt and leader of the Apparel, Fashion & Luxury Group said that: “Sustainability has dropped off the agenda for the past few weeks at the top executive level in the industry as even strong companies have had to fight for sheer existence.”
In Western Europe, the well-performing companies have secured their finances and can now bring sustainability back onto the agenda in two ways, he said. The first is with the clear expectation that consumers will accelerate the demand for sustainable clothing. The second is that communicating clearly the brand purpose and commitment to the safety of customers, staff and those involved in the industry must continue. This has been escalated, Magnus says, by the positive impact of the shutdown on global ecology (reduced air pollution above major cities, for example) which has tangibly shown what businesses can do to address climate change through the lockdown. More directly, Magnus says that “consumers have seen how vulnerable the entire world is, and the whole crisis has raised awareness for social and environmental sustainability, even among those that were not previously onto the topic.”
For this reason, he believes that a return to pre-crisis consumption behaviors is unlikely. There was a gradual shift towards a preference for goods branded sustainable before this crisis, and he expects that to be accelerated, based on data McKinsey collected from 6000 consumers across the UK, Germany, France, and Spain. The results showed that an additional 16% would now seek products with sustainable credentials once shops reopen, 20% intend to reduce their overall spending for the rest of the year and 45% would look favorably upon companies that communicate with concern and purpose rather than prices and products.
On the subject of social and supply chain sustainability, Magnus reported that their research indicates over two thirds of Chief Purchasing Officers across the industry are now focusing heavily on supporting their suppliers to ensure they avoid bankruptcy. He expects COVID-19 to accelerate close partnerships between brands and suppliers across all market segments, from value products to luxury.
Eva Kruse, CEO of Global Fashion Agenda, which founded the Copenhagen Fashion Summit, declared: “Now we are in de-growth,” before asking the question: “What is the perfect size of the industry in volume, considering planetary boundaries?” In a conversation with Kruse, she explained to me that the industry can maintain profitability and a high volume of transactions (and therefore earnings) without “just producing new products.” She points to rental and resale business models that are driving economic growth without the need for new products.
As our conversation unfolded it was clear that Kruse is advocating for a radical rethink that works backward from the available planetary resources to extrapolate feasible production volumes. This would take the place of the current false seasonal model that leads to overproduction and attempts to drive demand through constant new and undervalued products. In the immediate term, Kruse worries that brands will “have so much inventory that is deadstock (and) there will be a major race to the bottom to get rid of it.” She suggests the industry needs to “come up with some smarter solutions to make use of all these great products (that are) just sitting there.”
Echoing Karl-Hendrick Magnus, Kruse believes that brands need to “invest in building closer relationships with their suppliers across the value chain for better insights and impacts, and for (the supply chain) to become more agile and resilient.”
“If there is a green lining, it may be that we jointly have an opportunity to reset the (fashion) business. We have to rethink and rebuild the business and not try to go back to business-as-usual. If we fail to utilize this opportunity for change, we are going to see a crisis much bigger than coronavirus.”
Eva Kruse, CEO, Global Fashion Agenda
Social Sustainability and Climate Change
Offering a holistic view on the fashion industry’s greatest need for change in the face of this crisis is Céline Semaan, Founder of Slow Factory
, a sustainability literacy non-profit that hosts global sustainability education summits and works in partnership with global brands, including Adidas. Semaan is a vocal spokesperson for societal and environmental analysis of fashion’s sustainability goals and misfires. To the question ‘What should the fashion industry change post-COVID-19?’ Semaan said:
“Everything. From the fast-paced fashion calendar to the overproduction of goods that encourage (and depend on) overconsumption to sustain its broken economic model; to the exploitation of land, labor, and exotic animals, to the way it capitalizes on movements such as Earth Day and all efforts around that day/month focussing on profit-driven initiatives. Everything.”
Céline Semaan, Slow Factory
Leaving no doubt over who is paying the highest price during the COVID-19 crisis, Semann explained that “Communities living in war zones, in refugee camps, in occupied territory, or on reservations” have little access to necessities and can’t self-isolate due to proximity and makeshift conditions. Bringing into focus the irrefutable link between poverty and climate change, with fashion being the industry second only to technology that perpetuates modern slavery throughout its global supply chain, Semaan advocates for sustainability and climate change action during and post-COVID-19 to address humanitarian issues as a priority, and calls for brands to “redirect its marketing budgets into impact funds to support and fund food banks, give out grants to the creative community it has long taken inspiration from, and support more grassroots nonprofits working in climate and human rights impact.”
Overstock as Consumer Demand Plummets
Nursing a large inventory is global brand H&M, who, in light of fears over unsold stock being landfilled or incinerated, reported via their press office that they expect: “Most of the products that have already been produced to be sold in our stores or online, sometimes through a promotional sale and via other commercial campaigns.” They say they are continuing to place production orders, based on current forecasts, and will “evaluate the situation daily.”
They went on to say “the major changes in consumer behavior we are now seeing will further increase the digitalization of society as well as the focus on sustainability,” a sentiment shared in parts 1 and 2 of this article series. This week, H&M Group’s CEO Helena Helmersson, signed the European alliance for a Green Recovery alongside Ikea, Unilever and others who are committed to contributing to the post-crisis investment decisions needed to “reboot and ‘reboost’ our economy, taking into account climate change and circular economy as key pillars.”
When the coronavirus pandemic hit, “we lost one third of our sales overnight” said Nicolaj Reffstrup, Co-owner of womenswear brand GANNI. The brand recently published their Responsibility Report and 2023 Gameplan for sustainable transformation, but Reffstrup concedes that: “In light of COVID-19 we will change our priorities. We will accelerate the digital strategy, reduce samples, implement a virtual showroom and break with the traditional fashion calendar.” He went on to say that: “3D prototyping and sampling will be a priority and we are reducing the size of our collections.”
“Addressing excess stock and restructuring merchandising, supply chain transparency and social responsibility are areas we feel we’re behind, but (they) will be prioritized higher because this whole corona pandemic made it even more evident how broken the supply chain of this industry is.”
Nicolaj Reffstrup, Co-owner, GANNI
On the subject of the industry’s global sustainability issues, he says “the market economy is broken to the extent that it doesn’t manage to internalize the right cost of things.” For so many companies it’s too easy to push a product onto the market as break-even is low with the low-cost product—because the price is simply wrong. It promotes a non-demand driven model, he says, and fuels overstock.
GANNI is operating a multi-pronged sustainable transformation strategy that combines fashion rental (in their Denmark stores), an outlet to test resale of older styles, samples, and prototypes called Postmodern (which they intend to take online), and a re-structured merchandising strategy, that sees their collections downsized in terms of the number of styles, with smaller order volumes and more drops. Additionally, Reffstrup said that every fourth drop of products will be “made of recycled or deadstock fabric,” and this is being built into their range planning and material ordering processes.
Digitalization of Manufacturing
On the manufacturer side, silk supplier BOMBYX, headquartered in Hong Kong and operating in China, aims to shift traditional perceptions on the silk industry by offering radical transparency and traceability of how their silk is produced, traded, dyed and constructed. Vice President Hilmond Hui said: “We have a 3 to 5-year sustainability strategy in place to complete verticality in the silk supply chain. Sustainability is a core value of our business and will not fade out. Currently, our construction and business practices remain the same.” Regarding the long-term effects of COVID-19, he said it is too early to tell, but he does expect that due to the interrupted supply of materials, the construction costs for silk will likely increase by about 10%. Brands currently sourcing from BOMBYX include Cos and Everlane.
Hui shared the views of other industry experts, commenting on the steady growth in awareness of environmental sustainability before COVID-19 but says the crisis has now “cast a spotlight shown on other aspects like social sustainability.”
“The sudden stop in retail and subsequent supply chain disruptions are forcing brands to rethink their sourcing strategies and the impact that it creates.”
Hilmond Hui, Vice President BOMBYX
Regarding digital sustainability solutions in light of the current crisis, he urges all manufacturers to “look at all available technologies that can be applied to their processes,” paying particular note to technologies that help harness the power of renewable energy, as well as energy reduction. BOMBYX is currently exploring automation to reduce energy consumption per unit and increase output for each worker, in addition to new technologies for recycling and achieving carbon neutrality. It is fair to say that such transformation requires significant investment, and for many manufacturers, this would require the kind of close partnerships Karl-Hendrick Magnus suggested will emerge following COVID-19, as brands look to secure their supply chains with strategic commitments to manufacturers who are pivotal to their production and, therefore, business success.
Concerning so-called “greenwashing” Hui believes that: “both brands and consumers will begin to be more scrutinizing when it comes to where, how, and why things are made. First, it may be for health safety, but very quickly sustainability will be a priority again and a new light will be shown on the social aspect.”
B-Corp certified manufacturer SAITEX has been referred to as the “most sustainable jean factory in the world.” Founded in 2001 in Vietnam, they began closed-loop manufacturing in 2010 and currently produce 18,000 jeans per day. They uses less than 1 liter per jean during the laundering process, compared to the 80 liters used by traditional jean laundries, having spent $2 million on their water recycling system.
CEO and Founder, Sanjeev Bahl, said that they are using the time during lockdown to “reset our infrastructure and business model in ways that would allow us to participate effectively in the ‘new normal’ times ahead of us.” Will their sustainability strategy change? He confirmed that their long term projects including a mill they are building in Vietnam and the factory in LA have not paused. “We continue to invest in long term value creation,” he said.
“Sustainability is a journey, not an event that can be postponed. It’s a way of life. So some things don’t change.”
Sanjeev Bahl, CEO, and Founder, SAITEX
He went on to say: “Our industry has been fractured for quite a while now. All it needed was an event like the current pandemic to snap the fragile business models that have been staying afloat on rising costs, debt and tight cash flows.” He predicts a return to some level of normalcy in 18-24 months from now.
Digitalization came to the fore again, with Bahl stating: “A new model is emerging with opportunities in the digitized space and industry 4.0 manufacturing models.” As SAITEX enters into “the new normal in manufacturing,” Bahl said automation and digitalization are offering new advantages beyond minimizing error and waste, to address social distancing (a component of our foreseeable future, he says) and artificial intelligence to help inventory predictability. Addressing automation’s threat to workers, he said: “To be frank, this has been a catch-22 for factories who want to protect the jobs of their workers, but given the added health precautions we need to enact, moving towards deeper implementation of these technologies is becoming the need of the hour.”
Demonstrating the advanced data collection, insight and dynamism that may be expected of a pioneering factory,” Bahl said: “As supply chains have been majorly disrupted, the need for clear and timely information on individual factory pivots in distribution and production needs to be highlighted. He added that his company “is built on transparency and we are poised to unleash technology that can be used to automate manufacturing models through a digital medium that will track supply chains and get instant information on products with carbon footprinting at the forefront,” he said. It’s this readiness, long-term thinking, and implementation that appear to have placed SAITEX, who produce for brands including Everlane, J.Crew and Calvin Klein, in a position to prepare and plan, rather than simply react—a position that has placed so many manufacturers at the brink of collapse.
On consumer sentiment, Bahl is concerned that in the wake of COVID-19 consumers may quickly move to address their safety and comfort and sustainability may be “tossed by the side.” He hopes that COVID-19 continues to unearth the shortcomings of our supply chain and shines a light on places we need to dramatically improve so that transparency earns its “rightful place as a requirement rather than a premium.”
Demonstrating the precarious position of manufacturers at this time, he explained that the “pricing matrix is going to be a battlefield in the coming months.” Pragmatically, he said there is no way to avoid the shift in behaviors, thinking, and buying of consumers globally and consequently, that will have an impact on the value of certain brands in the minds of consumers. He predicts that an overabundance of inventory will cause issues, such as discounting and consequently slashed margins. His advice? “It’s the right time to get to a manageable size and be in a position to say no to business that will gradually be a cancer that you will not be able to shake off.”
Part 4 in this series will address the effects of COVID-19 on fashion education, incubators, and accelerators nurturing the next generation of talent and solutions for the fashion industry. To read the previous articles, click these links to Design and Manufacturing and Branding and Retail. To take part in the current industry discourse, join the Fashinnovation Worldwide Talks today.