The detrimental environmental impact of the fast fashion take-make-dispose model means it is inherently unsustainable and companies must adopt more circular approaches. In this paper, we look at how the industry will need to employ technical innovation in resource efficiency and recycling, as part of a shift towards circularity-driven value creation for customers.
It is also in the interest of investors to encourage apparel companies to improve the management of their environmental impacts and move to more circular consumption models. Changing consumer perceptions and the high probability that emerging regulations will impact profitability suggest that apparel companies should invest in more sustainable fibres and production processes, for example.
We have found that the maturity of approaches varies widely in the apparel sector. Some companies display very limited awareness of the need to reduce their environmental impact, while others have incorporated the ambition of circularity into their strategic decision-making. For example, Adidas has set a target that nine out of 10 of its articles will be sustainable by 2025 as part of its new growth strategy, presented in March 2021.
Ultimately, it is the actual performance of companies and their products in terms of their environmental impact that matters. Some of the key performance metrics that we have identified include carbon emissions and water use per unit of production. With improved disclosure, investors will be able to compare companies’ performance on a per unit or per sales basis.
It is also critical to see reporting on circular innovations such as the proportion of recycled materials inputted, the roll out of take-back schemes and consumer education on recycling, and the proportion of investment committed to circular innovation.