The coronavirus pandemic has once again put fast fashion companies in the public eye. Lockdown measures needed to reduce the spread of Covid-19 across the globe have led to a slump in demand for new clothes, causing a ripple effect along international supply chains. According to a May report in the Financial Times, cotton prices are forecast to fall to a 15 year low.
Tense relationships between fast fashion companies and their suppliers as a result of buyers cancelling existing orders have highlighted the possible abuse of unequal relationships and the vulnerability of workers. McKinsey estimates that the revenues of the global fast fashion industry, including apparel and footwear, will contract by 27-30% year-on-year in 2020, then recover marginally in 2021 with 2-4% positive growth. But some companies will not survive the crisis as bricks and mortar stores remain closed and cash-strapped consumers reduce their discretionary spending.
The word crisis has its roots in the ancient Greek “krisis” meaning decision, judgement or a turning point. It is only fitting then that we seize this moment to rethink our choices as consumers and investors.
We have previously highlighted the environmental costs of fast fashion and the need to move towards circular approaches. Work by the Ellen MacArthur Foundation has highlighted the pollution and waste from textile manufacturing. It estimated that 73% of garments ended up in landfill or were incinerated in 2015, while less than 1% were recycled.
In its report, McKinsey argues that: “The pandemic will bring values around sustainability into sharp focus, intensifying discussions and further polarising views around materialism, over-consumption and irresponsible business practices.” The AlphaWise consumer survey conducted by Morgan Stanley in February 2020, before the pandemic reached its height, found that 70% of respondents had a preference for more sustainable clothing, while 58% said that they were already buying fewer items. The coronavirus could exacerbate this trend, making fast fashion “unfashionable” for consumers with an increasing awareness of the environmental damage linked to textile production.
Rethinking fast fashion
It is also probable that investor preferences will change. Morgan Stanley suggests that business models reliant on over-consumption will be avoided by the growing number of ESG investment strategies. It argues that even companies such as Inditex and H&M, which perform well in ESG benchmarks due to their initiatives around recycled materials, working conditions, and water and energy consumption, could fall out of fashion as investors look for circular business models focused on reuse.
Therefore, we encourage companies to move from crisis management to a fundamental rethink of how the global fashion industry works. Companies that show market leadership in transitioning to circular business models stand to benefit.
We expect companies to move beyond paying lip service to environmentally-friendly business models by showing concrete evidence that they are investigating alternatives, such as moving from just selling clothes to rental models, using sustainably sourced and long-life materials, with a plan for the product’s end-of-life.
Ambitions should be matched by comprehensive targets for key impact areas such as carbon emissions and water intensity reduction, discharge of hazardous chemicals, and recycled and sustainable materials. Only if companies report on their progress towards their long-term goals on a comparative year-on-year basis can investors and consumers be expected to return when the high street reopens.