To be successful in the future, the fashion industry must invest in sustainability, argues Georgina Laird, Senior Responsible Investment Associate at Aegon Asset Management.
Today, more and more brands are launching sustainability initiatives but there remains a stark gap between the leaders and laggards. Companies that don’t think about sustainability today are likely to lose out tomorrow if they cannot keep up with this sustainable trend. Stronger disclosures around “what” they are making and “how” it was made are not just welcomed, we believe they will be necessary to succeed.
Clothing costs have risen less than other consumer goods, enabling fast fashion and feeding our insatiable appetite for the latest trends. It has never been cheaper to be fashionable. The problem is items don’t stay fashionable for long and social media influencers encourage a “wear it once” culture. Currently, many items are worn just seven to ten times before being thrown away and the average person keeps clothing for half as long as they did 15 years ago.
Fast fashion is cheap for a reason – it often relies on cheap synthetic materials that have profound negative impacts on the environment and low paid, mistreated workers. However, research tells us consumers are increasingly willing to pay more for sustainable goods. We believe consumers are increasingly becoming more aware of what sustainable indicators to look for when they are shopping.
There are three key questions that should be asked by customers and investors who are concerned about sustainability and fashion:
How well does the company understand its supply chain?
Does the company understand where the raw materials are sourced? The Better Cotton Initiative (BCI) for example, estimates only 20% of the cotton grown in the world is done so in a way that protects the farmers and the environment (it is very water intensive). Does the company actively engage with the farmers who supply the raw material?
Recycled and organic fibres can be found in an increasing number of garments. Adidas, held in our Sustainable fund range, is well known for creating trainers from recycled ocean plastic. From 2024 onwards, Adidas is committed to using only recycled polyester in its products.
Where and how are the clothes produced?
The race for low-cost labour is shifting production out of China and into Vietnam, Cambodia, Myanmar and other countries with poorer working conditions and environmental standards. It is important to understand how the company deals with issues surrounding child labour and working conditions. Do they audit suppliers and what standards are they held to? Do they personally visit where the production takes place?
Is the end product recyclable?
The majority of textiles used in supply chains are synthetics like polyester. Whilst these are cheaper, they are harder to recycle and generate the plastic microfibers that end up in oceans. Some firms are introducing take-back schemes that help reduce the vast quantity of waste we currently see. Also, is the company signatory to any initiatives trying to improve the fashion life cycle? For example, Better Cotton Initiative, Microfibre Consortium, Ellen MacArthur Foundation, or the Fashion Industry Charter for Climate Action.
In recent years, Inditex (held in our European funds) has launched circular initiatives such as encouraging customers to return clothes at the end-of-life stage and offering to repair items.