The Covid-19 pandemic has presented the apparel industry with an opportunity to pause, reflect and rethink its future. Winners in this new post-Covid world will be those that reset with sustainability in mind – shifting to more circular business models that move away from the traditional ‘take-make-waste’ system and allow for more transparency along the supply chain with greater cohesion between brands and suppliers.
The crisis sent the sector into a tailspin in 2020, but as it looks to regain its footing one year on, sustainability must be top of mind, industry executives tell just-style.
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By GlobalData“In the past few years, the call for the transformation of the apparel industry has been heard loud and clear. Even before the Covid-19 standstill, the fashion industry had begun to make changes,” says Katrin Ley, managing director of Fashion for Good.
“A continued commitment to sustainability and innovation is not only important to ensure the industry meets sustainability targets, but brands, manufacturers, and retailers with a focus on innovation and sustainability are more prepared to meet the challenges ahead and will emerge from this crisis all the stronger.”
“I firmly expect that this pandemic is about to sharpen our sense of urgency as a society when it comes to sustainability” – Andreas Streubig
Natasha Franck, founder and CEO of Internet of Things platform Eon, concurs: “If there is anything this pandemic has taught the fashion industry, it is that the transformation of our current business models to better align economic growth with circular and sustainable values is mission-critical.”
She adds the sector’s current system of continuous production and consumption is inherently limited, with the crisis bringing its limits into new focus.
“Greater attention to global human and environmental health is driving a surge of consumer interest in more responsible, sustainable products and brands – and rapidly growing engagement in resale and recommerce. As a result, the brands that have already been building towards a more connected value chain are the ones continuing to succeed – and grow.
“Moving forward, business model transformation – specifically the adoption of responsive, connected, circular value chains – will be the price-of-entry into the market for brands that want to survive, thrive and lead in the new post-pandemic economy.”
Why sustainability?
But with many industry players fighting for survival, why is a focus on sustainability so crucial?
Industry consultant Robert Antoshak says sustainability got pushed to the side during Covid as a luxury some simply couldn’t afford, but notes it now offers a way for the sector to find its way back into broader consumer relevance.
“It’s a very smart strategy from a business standpoint. Sustainability properly managed is really a cost efficiency programme because you have less inputs and so forth.
“Where the industry needs to reinvent itself is to rethink how it uses sustainability. I see some companies use it as a cover to paint bad behaviour, or lots of the industry uses it to maintain very, very long and complicated supply chains. So it’s time for a rethink in that regard.”
Meanwhile, Morten Lehmann, chief sustainability officer at Global Fashion Agenda, says the pre-Covid fashion system was “way beyond planetary boundaries.”
He adds that while the sector may have lifted millions out of poverty, a lot of the jobs were not “decent.”
“Maybe we don’t build back better…this needs to be a totally new structure because there was so much wrong with the old system” – Morten Lehmann
“There is a need to see how we can create a prosperous industry but one that works within planetary boundaries, that looks at the climate, and creates decent jobs. That’s what we need to work towards and that’s why sometimes when we say building back better, maybe we don’t even build back better; we don’t even build a new house, this needs to be a space rocket or a totally new structure because there was so much wrong with the old system. It just cannot continue because we don’t have enough resources in the world to allow it to continue in this same way.”
He adds the old system was not profitable, with about 40% of apparel currently being sold at a discount. “It’s not good in a business sense and it’s not good for the environment.”
Disruptive innovations
For a more sustainable future, the apparel industry must harness disruptive innovations, whether it be in the field of new materials, processes or technologies, Ley asserts.
In the tech space, Eon is one such example. The firm recently launched its Partner Network to build connected systems for the circular economy across fashion retail by allowing brands and retailers to track their products and tap into circular business models.
Franck notes as more partners emerge to facilitate the reuse, recycling or recommerce of products on behalf of the brands, industry transformation not only becomes possible – it becomes inevitable.
Andreas Streubig, director of global sustainability at Hugo Boss, also underscores the importance of technology and explains the pandemic has accelerated the virtualisation of the workplace. “Overnight we saw that working remotely on a large scale is not a future reality, but something we were suddenly faced with. I believe this finding will remain, shaping our future way of working – and this will also have an impact on the area of sustainability and how we approach this topic in the future.”
“If you’re a room of ten people, and you’re asking what sustainability is, you get back 12 answers. There has to be a concerted effort on defining what is sustainable” – Robert Antoshak
Digitalisation, he adds, can be an important driver in terms of production and procurement, the traceability of material streams, and target tracking. “One buzzword here, for example, is digital product development. We developed the entire pre-fall 2021 collection digitally last year – which saves resources by significantly reducing material consumption.”
Francois Souchet, lead of the Make Fashion Circular (MFC) programme at the UK-based Ellen MacArthur Foundation, also points to product design. He says products must be made so they can be returned or recycled and with materials that are not hazardous to people or the environment.
What’s more, climate change is set to have a “huge” impact on the materials the sector can use, particularly cotton and polyester, Lehmann says.
Meanwhile, for Antoshak, there needs to be a comprehensive assessment of how the industry defines sustainability.
“If you’re a room of ten people, and you’re asking what sustainability is, you get back 12 answers. There has to be a concerted effort on defining what is sustainable. Through that exercise, that’s when the relevance of sustainability will become apparent.
“Often I see the cotton industry getting picked on because they’re an easy target to blame for some sustainability problems. When in fact the problems of sustainability go a lot deeper in the supply chain than simply just blaming the raw material people.
“Some companies feel it’s just not relevant – but then the rest of the trade will realise that they’re not really into sustainability, and as a result, they’ll get that reputation. On the other hand, those who are trying to figure out what the solution is, they’ll have a real advantage.”
Future of supply chains
So where does this leave the supply chain?
Antoshak says the massive globalisation of the past may turn into a massive rationalisation, with Asian markets supplying Asian consumers and so forth.
“How can you build a more resilient industry if you don’t know where your goods are being made?” – Morten Lehmann
“You’ll have a different approach,” he asserts, but adds: “The old-time churn of fast fashion, of overproduction, just to make sure there’s always product in the stores, I don’t think that’ll ever be entirely eliminated. That would be unrealistic.”
Lehmann, meanwhile, points to growing requirements for transparency from stakeholders, consumers, investors and regulators alike, noting: “If you have to be more transparent, you need to focus more on traceability.”
Indeed, he says investors will be looking to those companies who can speak to how prepared they are for a future crisis and prove their resilience.
And it’s here that traceability is key: “How can you build a more resilient industry if you don’t know where your goods are being made?” he asks.
Greater cohesion across the supply chain is equally important.
“The industry is so fragmented; we need to have much more collaboration. We have so many of these agendas and one of these that has really grown this year is the social agenda.”
Generally speaking, he says the industry has been mostly focusing on environmental issues as “that’s where the easiest solutions are.” But this past year has highlighted a lot of issues on the social side, including human rights.
“It’s a big challenge and there is no quick fix,” Lehmann says, adding while there is legislation in the works on mandatory due diligence, one answer is to put incentives in place that would reward companies for “doing the right thing.”
A more collaborative brand-supplier relationship will also help develop “feedback loops,” which will boost brand agility and “enable you to be real a winner in the future.”
He adds: “How can you solve some of the challenges in the supply chain, in terms of human rights issues, without having a close relationship with your buyers and a more equal partnership where you listen to all of your suppliers and the knowledge they have on sustainability? A mutual partnership, a more equal partnership, is what needs to happen.”
He points to the ‘Manufacturers Payment and Delivery Terms‘ initiative from the STAR Network – the first inter-Asia Network of Producer Associations – which launched in January to try to raise the bar on the purchasing practices of fashion brands and retailers.
“Hopefully in the future, there will be a battle for the good manufacturers and that power relationship can maybe be turned around a little bit so brands will have to amp up. Of course, often it is the other way around, but with the consolidation maybe that is something that will start happening.”
Souchet concurs, noting future supply chains need to be more collaborative and equal so they “don’t face the same challenges as today where if a brand is facing an issue they basically shut down their order, pushing the risk down toward the supply chain.”
He adds: “Evolving the relationship that exists between the brand and their supply chain is really important.”
It’s a point with which Hugo Boss’s Streubig also agrees. “The Covid-19 pandemic has been an unprecedented challenge not only for each individual but also for businesses and their value chains around the globe. Since the fashion value creation is very complex and multifaceted, progress here is only possible in close cooperation with suppliers and various industry partners.”
“It has become clear how important resilient supply chains and flexibility of the players involved on all sides are in order to successfully manoeuvre unforeseen obstacles” – Andreas Streubig
He explains that even before the Covid-19 pandemic, Hugo Boss attached great importance to long-term partnerships with its suppliers. “As we can now see, this strategy has proven its worth, especially in times of crisis. It has become clear how important resilient supply chains and flexibility of the players involved on all sides are in order to successfully manoeuvre unforeseen obstacles. That’s why our cooperation with our partners is now even closer than before.”
Barriers to change
But as in any industry, there are challenges to overcome.
These include changing mindsets, developing innovation capabilities, and retraining the workforce – and ensuring consumers are on board with the transformation and will still be able to have their needs met, Souchet says.
Another challenge concerns truly changing the industry at scale. “No company is big enough to achieve that so there’s a need for unprecedented collaboration across the industry to make it happen.”
Patience, however, will be key.
“The business case is not there to look at sustainability in the short term,” Lehmann cautions. “If you want to be in business and have loyal customers for the long run, of course, you need to focus on sustainability and build a more resilient supply chain. But in the short run, lots of people make a nice profit without thinking about sustainability and being rewarded with consumers that don’t want to think about it, just want to buy whatever they want, use it once, and put it in the garbage bin.”
“Circularity is an investment that demands patience” – Katrin Ley
Ley adds: “Circularity is an investment that demands patience. Larger organisations, with their long term goals, multiple stakeholders, large force of employees, and supply chain dependencies, will take longer to change course and steer towards sustainability, but ultimately will have a bigger impact as compared with smaller organisations that are more agile and so can make and implement changes and strategies rapidly and where needed.”
She tells just-style to bring the necessary innovations to scale, fashion brands, supply chain partners, investors and others all need to step up to create the conditions that accelerate innovation.
“Although a broad innovation pipeline has emerged, only a fraction of all available capital reaches fashion and textile tech, leaving many innovators stuck in the financing gap, unable to bring their solutions to market. Financing will flow into the fashion space when investors are presented with manageable risk, attractive returns, and measurable impact.”
With its US$2 trillion market size, Ley says the industry offers major untapped opportunities for investors and companies. Fashion for Good’s co-authored report, ‘Financing the Transformation in the Fashion Industry: Unlocking Investment to Scale Innovation‘ calculates a financing opportunity of $20-$30bn per year to be directed toward developing and scaling the disruptive innovations and business models needed to achieve a step-change in sustainability by 2030.
The report identified two points in the development process that are most challenging to finance: securing financing to develop a minimum viable product, and scaling to reach commercial volumes.
To overcome the barriers, Ley reiterates the point that all parties must work collaboratively to drive change.
“No single stakeholder operating on its own can provide all of the capabilities and factors needed to scale innovation. So, the fashion industry, investors and financial institutions must act not only individually but also collectively, as orchestrators – through targeted consortiums and a structured innovation process. Multi-stakeholder organisations must drive collaboration and create a streamlined ecosystem for innovation.
“In addition, the industry needs bespoke consortiums of brands, supply chain partners, innovators and investors with a shared technology focus to concentrate resources and de-risk investments.”
Turning point?
As to whether the pandemic will truly prove to be a turning point and act as a trigger for the industry to build back better, the executives are cautiously optimistic – at least for one-half of the industry.
“I think there are good signs that it will. The first sign is how much people have been converted to second-hand over the pandemic,” Souchet says, pointing to the success of platforms such as TheRealReal as an example.
“The transformation of our current business models to better align economic growth with circular and sustainable values is mission-critical” – Natasha Franck
“It really shows an accelerated shift toward these models…and in that direction of making sure products are used more. Then we see a lot of companies coming back with much stronger strategies on sustainability and the circular economy compared to before the pandemic, which is also a very positive sign.
Streubig also sees a silver lining. “I firmly expect that this pandemic is about to sharpen our sense of urgency as a society when it comes to sustainability. Nature again has shown its power and independence, so mankind should strive to be in respect and harmony with nature, taking over responsibility for the impact our businesses have on the environment and society.
“This urgency is also confirmed by the fact that, for example, customers, NGOs or investors are increasingly calling on companies to become more sustainable, with regards to their purchasing behaviour or the use of resources. At Hugo Boss we see ourselves in a good position, given that we made sustainability a strategic pillar of our business many years ago.”
Lehmann, meanwhile, says while the crisis will galvanise some to change – who will, hopefully, be the winners in the long run – others will simply find it too difficult.
Not only was sustainability never a focus or part of the core business for many companies, but now they are simply fighting for survival.
“Do I see them doing more sustainability? No. For me, it’s not where they’re going, they’re just trying to survive quarter by quarter.”
Antoshak also foresees a tale of two halves but says, ultimately, it will come down to consumer demand.
“I think the reality is for part of the industry, it will be a permanent change of operators. For another part, it’ll just be a snapback. At the end of the day, I think the ultimate decision-maker in this will be the consumer.”
He adds: “There’s always going to be a need for mass-market production because not everyone can afford those kinds of prices. So that’s why I see it as a double path.
“Some companies will stay with the fast fashion route because it will work with a portion of the population very well and they’ll say, ‘Well, there’s really no reason to change.'”
