The fashion industry has set ambitious targets to become more sustainable, driven by changing consumer expectations and an evolving regulatory landscape.
According to the most recent Global Fashion Agenda Monitor, 67% of companies have set water stewardship goals and 42% now have greenhouse gas emissions targets. Action must follow if these targets are to be met.
In this Citi GPS report, we examine how leading companies have been reshaping their supply chains to embrace sustainability and explore what more might be needed. We find that there is already action behind the industry’s sustainability targets. Fashion brands have taken steps to move production closer to consumers with reshoring to the United States a dominant theme in the evolving shape of fashion supply chains.
Brands have increasingly chosen to source from more ecological material manufacturers. Retailers’ suppliers now have more than 50% of their revenues linked to sustainability. However, our analysis shows that there has been less action on water stewardship and biodiversity. The fashion value chain continues to operate in areas of high water-stress, posing both a risk of contributing to water scarcity and a financially material risk to business.
We argue that incremental changes to the current linear model can only take the fashion industry so far towards its sustainability goals. A more fundamental shift may be required – towards a circular fashion industry.
This would be a complex transition requiring collaboration across the value chain. We highlight two elements of circular fashion that companies have already addressed and could scale up, namely – keeping clothing in circulation and using more sustainable fabrics.
A circular fashion economy would see clothing designed to last for longer, potentially resold or rented out during its use phase, and recycled at the end of its useful life. Choosing sustainable materials for garments is an enabler of each stage in this cycle.
Some brands have launched circular revenue streams, like Patagonia’s Worn Wear hub or Levi’s Tailor Shop. Companies across the value chain have also innovated to create sustainable, circular fabrics.
But circular business models only account for 3.5% of the global fashion value market. And production of virgin fibres continues to grow. The next frontier of the sustainable fashion economy might be a circular value chain, but for now it is just that – a frontier.
So, what can companies across the fashion value chain and their investors do to bring the industry’s sustainability goals into focus? Our Citi experts highlight through practical steps and case studies how sustainable finance solutions can help.
Source: citigroup.com
