We are a technology obsessed society and fashion brands know it. Back in 2007, the average consumer was spending about $1,200 per year on technology, a number that has grown significantly since, with the consumer tech market in the U.S., alone, slated to reach $461 billion this year. While consumers readily shell out on various premium tech gadgets and services (in 2019, the average U.S. household had 11 connected devices), most are far less willing to pay extra when it comes to sustainable garments and accessories. A survey from IBM and Morning Consult revealed that consumers would pay roughly $3 extra – or a total of $14 on average – for a sustainably-produced t-shirt. That is one dollar less than the hourly minimum wage in Los Angeles.
This tech vs. t-shirt comparison may help explain why many companies’ efforts to create a “sustainable” fashion model center more heavily on novel – and marketable – technological advancements, such as using more recycled fabrics or adopting non-traditional materials like mushrooms, than on more foundational efforts that get to the heart of mass-market manufacturing operations. A steady stream of headlines not only suggest that these new technologies are the key to putting fashion on the path toward a more sustainable future; they also create the appearance of burgeoning progress.
However, a closer look at these regularly-reported efforts tells a different story.
Buzzy Tech & Marketable Initiatives
For one thing, despite widespread marketing, complete with often-glossy imagery, most of these “sustainability”-centric initiatives represent a miniscule amount of a company’s total product offering. Retail giant ASOS’s recycled capsule collection, for instance, which launched in September 2020, amounts to just 29 items out of the retailer’s 80,000 SKUs – or 0.03 percent of the company’s product offering. (The company is currently at the center of a greenwashing investigation in furtherance of which the United Kingdom’s Competition and Markets Authority is “scrutinizing” the environmental claims it has made about its fashion products.)
In a similar vein, as part of its “comprehensive circularity strategy to advance sustainability goals,” Ralph Lauren revealed that it will offer Cradle to Cradle Certified products by 2025. The multi-national lifestyle brand – which generates $6.2 billion in annual revenues from roughly 15 different product lines producing everything from cashmere sweaters to its famous polo shirts and chinos – has not yet specified what items would fall under this certification scheme. It did, however, reveal that it has “set a goal to make [just] five iconic products” in connection with the Cradle to Cradle certification.
Still yet, H&M is one of the busiest companies when it comes to technology-related PR announcements – from its LOOOP machine to its long-running Conscious Collection. All the while, the Swedish fast fashion giant, which maintains the title of one of the largest global clothing retailers, churns out millions of garments every year, most of which are ready to be recycled after a few wears in exchange for a 15 percent credit towards a customer’s next purchase. (H&M is currently facing two proposed class action lawsuits over its marketing of fast-fashion apparel and accessories as sustainable.”
Beyond the relatively small impact of companies’ sustainability initiatives compared to the might of the marketing that surrounds them, a more fundamental issue exists. A cursory read of any fashion sustainability report quickly reveals that most companies are relying almost exclusively on buzzy technology initiatives and/or carbon offsets to meet their sustainability goals, as opposed to reexamining their growth models.
Basic business logic establishes that a company can grow its earnings by increasing volume, margins or some combination of the two. While brands that occupy the upper end of the fashion industry spectrum benefit significantly in many cases from beefed-up margins for things like branded eyewear and trademark-bearing coated canvas handbags, the industry as a whole has increasingly looked to volume to boost their earnings, particularly as mass-market margins have dropped. This has fueled a race to the bottom in both wages and quality, which is, of course, a critical part of fashion’s sustainability problem.
It is not all doom and gloom. From a production point of view, there appear to be some outliers. Prada, for example – which was the first big-name luxury names to prioritize sustainability by linking its efforts to five-year 50 million-euro ($55 million) loan from Crédit Agricole Group – appears to be promising contender. In addition to the sustainability linked bond, the Milan-based group announced that it would stop doing markdowns in 2019 in order to better preserve margins, a process that likely sees it being more careful about how much is being produced each season. (And in fact, in an earnings call in March 2021, Prada Group executives revealed that it was able to “avoid excess inventory,” and thus, markdowns, which in turn, “significantly improved” its price positioning.)
What about the data?
Consistent overproduction, the endless quest for scale, and the downward spiral of wages are key issues that stand out in fashion’s quest to clean up its act, but more than that, transparency continues to be a problem. Despite endless marketing around their sustainability efforts, in most cases, brands currently do not have to release data on their progress, nor do they have to prove how these technologies allow them to continue to increase their production while creating a net reduction in their total greenhouse gas emissions.
Yet, that could be changing, something that would pose a real problem for fashion’s smoke and mirrors sustainability strategy. Investors and regulators – who are paying increasingly close attention to whether brands’ marketing matches their actions – care about the bottom line and materiality, not what creates the best PR story.
Acting SEC Commissioner Allison Lee called for public comment on a series of climate and ESG related disclosures in March 2021 given the “soaring” interest from investors because “companies are reporting in different ways ranging from traditional SEC filings to something that looks almost like an ad brochure.” With that in mind, “How can investors be confident that the information is reliable?,” she asked. Among the fifteen topics that the SEC is calling for input on what “quantified and measured information or metrics should be disclosed because it may be material to an investment or voting decision,” what “registrants [are] doing internally to evaluate or project climate scenarios, and what information from or about such internal evaluations should be disclosed to investors to inform investment and voting decisions.”
Days after Acting Commission Lee’s call for public comment, SEC Commissioner Caroline A. Crenshaw asserted in a statement to the Asset Management Committee that “investors have different thoughts about what ‘sustainability’ means and how ESG factors inform their investment decisions.” As such, “The Commission’s role is to facilitate material disclosure to investors, [b]ut to be useful to investors, disclosures need to be meaningful. That’s particularly true for ESG-related disclosures, as they are too often inconsistent and incomparable.”
“What we should be working toward,” she stated, “is a clear disclosure regime that yields consistent, comparable, reliable, and understandable ESG disclosures to investors.”
The fashion industry (and others) should be working towards a similar disclosure regime, one that is consistent, comparable, reliable and understandable. In other words: one that is transparent, which is precisely what fashion’s current sustainability plan is not. And still yet, the industry needs to acknowledge the fact that sustainability will never be achieved through technology, alone, no matter how enticing these endeavors may be. A small – but heavily advertised – recycled capsule collection from a fast fashion titan, here or certified circular series of items from a multi-billion dollar company, there, is mathematically immaterial.
The general fashion press and consumers might not do the math, but investors and regulators will.
Kristen Fanarakis is the founder of Los Angeles-made brand Senza Tempo. She spent over a decade working on Wall Street in foreign exchange investment, sales & trading, and currently works with the Center for Financial Policy in Washington, D.C.
This article was initially published in April 2, 2021, and has been updated to reflect new developments.
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