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Sustainability is good for business​​ in the fashion industry

By Vivian Hendriksz

9 May 2018


London - Everyone knows that sustainable and social practices are better for the environment and workers - but as it turns out, sustainability is also good business for the fashion industry, according to a new report.

75 percent of the industry’s global fashion companies improved their environmental and social performance over the past year, a move which has affected their businesses in a positive way, according to the 2018 edition of the Pulse of the Fashion Industry report from the Global Fashion Agenda and The Boston Consulting Group. However, the rate of change concerning sustainability is still not going fast enough or reaching far enough, argues the report.

Sustainability means good business

The annual in-depth assessment of the fashion industry’s environmental and social performance draws on the Sustainable Apparel Coalition’s High Index, a survey of 90 senior managers and more than 50 interviews. Over the past year, the Pulse Score of the fashion industry improved from 32 points to 38 out of 100, confirming that sustainability is becoming a key part of companies corporate agenda.

The report shares the industry’s current Pulse Score, a performance measure of the sector by type of company, size, region, and stage in the value chain each year. From the executives questioned, 52 percent stated that environmental and social targets acted as a guiding principle for close to every strategic decision made, an increase of 18 percentage points from last year.

Sustainability found to be influencing fashion companies decisions at an executive level

“I’m excited that sustainability finally has been taken out of the lab and into the boardroom,” said Morten Lehmann, chief sustainability officer at GFA in a statement. “To find out that the topic influences decision-making at a strategic level leaves me with optimism." However, although the report highlights how the fashion industry is becoming more sustainable, the various different segments of the sector were found to be moving at very different speeds.

The report found that nearly all the progress in terms of sustainability came from companies in the mid-price segment, which accounts for half of the fashion industry. Although this progress is encouraging, small companies within the entry-price segments were found to be lagging behind the most.

In addition, the Pulse Report also found that some of the front-runners in terms of sustainability as well as large fashion companies have hit a technological and infrastructural ceiling on their advances, with little to no Pulse Score improvement this year. This is a critical finding as they are leading the way for the rest of the industry and should be improving year on year.

Even worse, however, is the fact that nearly one-third of the fashion industry has yet to take action and work to become more sustainable. Last year saw the report measure the financial consequences of not taking action in sustainability. This year, the Pulse Report measured the financial gain of becoming more sustainable.

New data and calculations from the Boston Consulting Group and GFA show that investments in resource efficiency, secure work environments and sustainable materials all have the potential to improve companies EBIT margin by up to 1-2 percentage points by 2030. "The impact goes beyond brand building and risk management. Sustainability can actually increase profitability for fashion companies,” added Sebastian Boger, a partner at BCG.

The case for sustainability grows even stronger once the profitability uplift from taking action is compared to continuing business as usual, with the latter resulting in a decline in the EBIT margin by 3-4 percentage points by 2030. In order to ensure fashion companies are all on the path to long-term prosperity financially, socially and environmentally, the report once more stressed the urgency of a collaborative effort to push the boundaries of what is possible today. “To achieve lasting impact at scale, the industry needs systemic change through leadership, innovation, and collaboration,” argued the GFA. Although there are a number of promising, disruptive innovations available on the market to move the industry, the overall success depends on a strong ecosystem that is linked to the efforts of regulators, consumers, nongovernmental organisations, and other stakeholders. ​

​ "The Pulse of the Fashion Industry 2018 report highlights the need for greater innovation to go beyond today's existing solutions and create disruptive change,” added Rick Darling, executive director, Li & Fung Trading. “It provides inspiration on what the industry should look for to futureproof continued progress. At Li & Fung we believe that digitalisation will play an increasingly important role in scaling progress across the industry." ​

Photo credit: Global Fashion Agenda

Global Fashion Agenda