What Fashion’s Foundational Shift to Address ESG Issues Really Looks Like

Image: Unsplash

What Fashion’s Foundational Shift to Address ESG Issues Really Looks Like

As governments propose regulations to address the environmental and social impacts of the fashion industry and companies consider voluntary reporting of environmental, social, and governance (“ESG”) factors, the fashion industry continues to wrestle with a complex ...

May 24, 2023 - By Melissa Gamble, TFL

What Fashion’s Foundational Shift to Address ESG Issues Really Looks Like

Image : Unsplash

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What Fashion’s Foundational Shift to Address ESG Issues Really Looks Like

As governments propose regulations to address the environmental and social impacts of the fashion industry and companies consider voluntary reporting of environmental, social, and governance (“ESG”) factors, the fashion industry continues to wrestle with a complex reality. The fashion industry cannot avoid the fact that it is operating on a 20th century business model built on production, consumption, and profit while attempting to solve for 21st century-and-beyond sustainability problems that require a foundational paradigm shift. 

A striking conversation about fashion’s overproduction and overconsumption problem came about at the end of March when the Financial Times published an interview with Marta Ortega Perez, the chairwoman on Zara-owner Inditex, who – in an apparent attempt to distinguish Zara from Shein and other fast fashion competitors – noted that the group does not view itself as falling in the realm of fast fashion. Among the pushback to Ortega Perez’s comments, fashion sustainability strategist Rachel Arthur begged to differ, noting that when a distribution model includes new collections dozens of times a year, you are a fast fashion company. Arthur later asserted that Zara produces approximately 450 million garments a year, and in fact, the term “fast fashion” was coined back in 1989 thanks to Zara.  

The Consistent Quest for Scale

The 450-million-garments-per-year number gets to the heart of fashion’s production/consumption problem: the consistent quest for scale. In furtherance of mass-market fashion’s enduring aim of getting to market quickly – at rock bottom prices, and grow their businesses’ bottom lines, early fast fashion players like Zara and H&M have been dwarfed by newer market entrants like Shein, Boohoo, and very recently, Temu. The BBC noted in 2021 that Singapore-headquartered Shein was adding some 6,000 new styles to its e-commerce site on a daily basis with as many as 600,000 items for sale on its site at any one point in time. 

The low priced products being offered up by ultra-fast-fashion players are aimed directly at Gen Z and for all the talk of this demographic of consumers being especially environmentally conscious, they have helped to drive fast fashion companies like Shein to global behemoth status even overtaking companies like Amazon in terms of their fast rise and dominance. (As of earlier this month, Shein was valued at $66 billion following a $2 billion funding round.)

The sheer number of products being peddled by fast fashion companies is compounded by the cheap materials used to make these products. Polyester, viscose, and other synthetics are the order of the day because they are the lowest cost; they are also some of the most harmful to the environment since they do not biodegrade. Search “Atacama Desert Landfill” on Google, and you will find story after story about the thousands of secondhand clothes, mostly from fast fashion brands, that are dumped daily in what has become a massive toxic site in Chile. The same goes for “Kantamanto Market” in Ghana, which is full of the “dead white man’s clothes” because locals cannot imagine that people would buy and cast-off such quantities of clothes in the way the U.S. and European consumers do. Still yet, discarded apparel is washing up on shores around the globe. 

Foundational Changes Are Needed

In order to grapple with the volume problem, foundational changes to business models and the fashion system are necessary. Companies continue to rely on the 20th century business model of producing more for less at high volumes to drive profit and growth. On its face, this model is not sustainable and no amount of carbon offsets, water reductions, Greenhouse Gas reductions, or corporate social responsibility statements will address the fashion industry’s ESG impacts in a game-changing way.

Brands need to reckon with their pricing and marketing structures: instead of relying on volume, a shift towards quality materials, quality labor practices, and sustainable methods of production – thereby, resulting in lower volumes at higher prices – is key. In addition to producing clothing that will last for years (instead of 2-10 wears), and pricing first-sale items at a premium, brands also need to adopt a tiered product and pricing structure, which has organically been developing with the rise of the secondhand segment. For example, the first sale of a garment is first-tier, secondhand merchandise represents the second-tier, and repair/refurbishment of existing merchandise falls within the third tier. Because the ability to recycle textiles remains severely limited, upcycling could also be incorporated into certain brands’ business models. Upcycled items are often one-of-a-kind and can be priced at premium levels, as well. 

(While the secondhand market has risen and is projected to experience some of the most significant growth in the apparel industry, the carbon and water offsets that buying secondhand bring are being dwarfed by the environmental and human costs of ongoing production of new apparel. Fashion brands are touting their sustainability measures, buying carbon credits, reducing water usage in production, and launching secondhand clothing initiatives to capitalize on this new market, but they are not addressing the core of the sustainability issues.)

Retraining the Consumers

For decades, the U.S. has trained consumers to buy higher volumes at the lowest prices. Sam’s Club and Costco are a couple of examples of this approach. Against this background, marketers will need to shift their focus from greenwashing to educational tactics to drive the consumer towards the tier that best fits their budget and their aspirations. Consumers need to understand why businesses must make this shift and why urgent and sweeping change is needed. The idea that consumers can style new looks with existing apparel at an affordable price can move businesses toward their sustainability goals more than buying cheap first-sale pieces that are discarded within a week. 

Brands will also need to ensure that they are providing varied price points so that consumers continue to have access to apparel, accessories, footwear, etc.; this could come in the form of reasonably priced secondhand apparel.

Finally, these changes also require business models that allow for ESG metrics of success in addition to financial metrics. Reliance on profit-driven and profit-only models is not realistic in today’s environment. The regulations that have recently passed, and others that are currently pending, will be key to holding brands accountable for their actions, as well as to providing them with an avenue for the development of new ways to measure success and growth in terms of environmental and social impacts. Since greenwashing has long been (and continues to be) an issue in the fashion industry, without clear ESG regulations and standards that require transparent and accountable change, brands have repeatedly shown that their tendency is to rely on marketing spin. 

Changing the current fashion paradigm presents significant complexities. For some businesses, including those in the ultra-fast-fashion arena, this means upending their entire model to avoid greenwashing and a litany of problematic statements claiming movement toward sustainability and accountability while continuing to produce millions of garments every year for less than the cost of sandwich. Those two things are, of course, irreconcilable.

For fashion brands to truly move the sustainability needle, they will need to find new paradigms and new metrics centered on growth and success in ESG and financial areas. ESG regulations and enforcement will be critical to provide consistency and uniformity in measuring and reporting in these areas. Creating this new system with reliable, credible, and consistent information for both brands and consumers will be critical to its success. 

Melissa Gamble is an Assistant Professor in the Fashion Studies Department at Columbia College Chicago, where she teaches Trendspotting, Law for Creatives: Fashion, and Professional Practice. 

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