Search this website. You can use fund codes to locate specific funds

Closing the loop - fixes for fast fashion

Fast fashion has an ugly side. How can investors convince companies to consider the full lifecycle of their low-price garments, rather than simply focusing on getting fashion to consumers as cheaply as possible? In part two of our series we look at circular approaches aiming to capture the value of resource inputs at the end of a product’s life and channel these to productive uses.

  • In my first article I looked at the scale of the problem and the impact that fast fashion business models are having on the environment due to waste generation, hazardous chemicals, resource depletion and water scarcity.

Fast fashion companies focus on getting clothes to consumers as cheaply as possible, without necessarily thinking about what happens to the material after that – a linear business model. How can this model evolve to become less wasteful, while retaining some of the positive attributes of availability and affordability? This would constitute a major shift for the industry on a par with moving from privately-owned petrol-powered cars to electric vehicles and ride sharing. A recent McKinsey report looking at trends in the fashion industry found that consumers were increasingly demonstrating an appetite to move beyond the traditional ownership model to access products via the pre-owned, repair and rental business models.

There is also a growing acknowledgement from companies that urgent action is needed, with 20 fashion retailers forming a global pact to address their impact on oceans, biodiversity and climate change at the G7 summit in August 2019. Investors can play a part by urging companies to tackle this in a proactive and innovative manner, before they are forced to do so by regulators and changing consumer attitudes.

As a first step, we would like to see fast fashion companies undertaking a comprehensive assessment of their environmental impact. By measuring and understanding this better, companies will be able to pinpoint where the most impactful actions can be taken. Disclosing this to investors will enable them to better understand a company’s exposure. 

Secondly, companies need to engage with their customers in a proactive manner. Consumer behaviour is critical in all types of recycling as it is individuals who are relied upon to return the material. Take back and recycling schemes can be a first step in this direction. H&M, for example, has introduced a garment collection programme, while M&S has a “shwopping” scheme in collaboration with Oxfam. A change in consumption patterns, towards using higher quality items over a longer period, is also essential to reduce the stress that fast fashion puts on the environment. But just as some car companies are now investing in ride-sharing, fashion companies also need to rethink the fundamentals of their revenue generation models. 

Sustainable fabrics

An acceleration in the work being done on recycling technology and the recyclability of garments would also help. Closing the loop will require investment into innovative fibres and more sustainable materials such as wood-based fibres like lyocell, viscose, organic and recycled cotton, as well as recycled polyester and polyamide. Companies need to assess the trade-offs between different options.

Fashion brands are slowly becoming more aware of the environmental impact of fast fashion. Inditex, for instance, has announced that the clothes under its Zara brand will be made from 100% sustainable fabrics by 2025. For this purpose, it is working on sourcing more sustainable materials. However, there is no silver bullet – organic cotton is still water-intensive and recycled polyester fibres contribute to micro-fibre plastic pollution in our oceans. A further step would be for companies to look into alternative business models that provide fashionable garments as a service, such as renting models.

At Hermes EOS, the environmental impact of fast fashion is an emerging engagement theme as part of our focus on pollution, waste and the circular economy. In conjunction with discussions on supply chain human rights and due diligence, we have had an animated dialogue with a number of apparel companies on key issues such as alternatives to the incineration of unsold stock, scalability of sustainable cotton across product ranges, and innovative materials. We will continue to push companies to assess their exposure, engage with their consumers and rethink their production and business models to reduce their impact on the environment.

Related Insights

Votes for change
This year we saw a number of companies offering shareholders a vote on their climate transition plans, including some in the oil and gas, construction, aviation, and consumer goods sectors.
Salary or sick leave – the impossible choice
In the United States, the lack of national paid family and medical leave policies underpins many difficult, often impossible, choices faced by disproportionately impacted worker populations.
Siemens Energy case study
Siemens Energy is addressing the challenges of the climate transition by setting science-based emissions reduction targets.
A watershed for climate change stewardship?
Mainstream sentiment has shifted, and the momentum is with investors calling for faster action on climate change.
Abate and switch: steel seeks low carbon solutions
Steel is considered a hard-to-abate sector, but national net-zero commitments and pressure from customers mean that solutions must be found to help drive down emissions.
Nature’s larder – why food producers must safeguard biodiversity
As many of the risks associated with the decline of nature are concentrated in the agricultural supply chain, it is imperative that companies develop a comprehensive understanding of how biodiversity underpins their business model.

EOS Client Service and Business Development

Amy D’Eugenio,
Head of Client Service and Business Development, EOS