Fashion

Sustainability is the new fashion must-have


Sustainable sourcing at
scale is the fashion industry’s new must-have. Since 2016, searches for the
Instagram hashtag #sustainablefashion have increased fivefold. More than
half of the world’s purchasing executives in the fashion industry consider
sustainability to be one of their most important business strategies and it
has become an increasingly important issue for consumers and governments.
Accordingly, the range of sustainable fashion products is growing fivefold
every year. However, its share of the overall market is still low: less
than 1 percent of the products released in the first half of 2019 were
labelled as “sustainable”. This is what McKinsey’s chief purchasing
officer (CPO) survey 2019 “Fashion’s new must-have: sustainable sourcing
at scale” recently found out.

Sixty-four sourcing executives who together are responsible for a total
sourcing value of more than 100 billion US dollars participated in the
survey. In addition, street interviews were conducted with consumers in
four major European cities as well as interviews with industry experts,
while research service provider Edited evaluated data from online fashion
retailers.

Lack of international standards and clear definitions is a problem

One problem is that international standards for sustainability and
clear definitions are lacking. Sometimes this refers to ecological
standards, while other times it refers to social aspects in manufacturing.
“There is still a long way to go towards objective standards that are
internationally binding. Only then will the development be speedier, “
says Hendrik
Magnus, McKinsey & Company partner and fashion industry expert.

While most executives reported that responsible and sustainable sourcing
is already a top priority on their company’s CEO agenda, it is also the
area in greatest need of improvement in their companies. They were also
asked to identify the three topics in sustainable apparel sourcing at the
top of their agendas for the next five years and they mentioned sustainable
materials as top-ranked area, followed by transparency and traceability,
supplier relationships and purchasing practices.

Sustainability is the new fashion must-have

Materials, transparency, supplier relationships and practices are top
priorities

“For example, the share of apparel products containing sustainable
materials remains low today, but the majority of executives surveyed aspire
to source at least half of their product with such by 2025. Likewise,
apparel companies are under increasing pressure to create transparency on
their supply chains and to share that information with consumers—and eight
in ten CPOs surveyed have ambitious plans to step up transparency. Social
and environmental sustainability is also taking on much greater importance
in supplier relationships: two-thirds of CPOs surveyed said it would likely
become a top factor in their supplier ratings by 2025,” finds the report.

The study makes it clear that most apparel companies will need to shift
current practices “dramatically” if they are to deliver on their
expectations. However, there is the problem of the industry lacking a
common language on sustainable sourcing, let alone a shared set of
standards.

Sustainability is the new fashion must-have

Sustainable sourcing at scale will be a must though for apparel
companies over the next five years – for the environment and workers as
much as in response to consumer demand for sustainable fashion, which is
growing rapidly. “At the same time, margin pressure is making it even more
important that companies improve the efficiency of end-to-end product
development and sourcing processes,” cautions the report, yet finding that
“as our survey shows, executives see no conflict between this imperative
and the drive for sustainability”.

Trade tensions is another problem

Another area that the sourcing executives commented on was increasing
trade tensions, exemplified by the trade war between the US and China.
While those outside the US expect the more challenging trade environment to
have “a high impact on sourcing-cost development over the coming year,
adding to margin pressure from consumers,” US-based fashion companies
expect to accelerate the shift away from China as a sourcing country in
favour of locations like Bangladesh and Vietnam.

“In the years ahead, apparel companies must shape a robust
sustainability agenda that addresses both social and environmental
imperatives. And they must deliver it at speed and scale, harnessing
innovations in technology, standards, processes, materials, and
communication,” concludes the study.

Photo & illustrations: McKinsey Apparel CPO Survey
2019



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