Alterations are being made to the fast fashion industry

By 16/12/2020

Alterations are being made to the fast fashion industry

December 16, 2020

Most consumers are now aware that the fashion industry is one of the largest contributors to environmental damage; intensive energy and water use make it an industry that is quickly becoming wholly unsustainable. Every second, the equivalent of one garbage truck of textiles is landfilled or burnt and it is estimated that around $500 billion in value is lost each year due to clothing that is hardly worn or not recycled.

The problem has only become worse over the years with the rise of fast fashion stores, which have become a huge part of the way we consume fashion – being offered more clothes, more often and at a much lower price point. The negative impact on the environment is overcasting the fast fashion industry – no surprise when the sector accounts for 10 per cent of global greenhouse gas (GHG) emissions, which is higher than international flights and maritime shipping combined.

However, there are opportunities to invest in brands and technologies that are adapting and putting sustainability at the core of their business models. The outbreak of Covid-19 and how companies emerge from the crisis is now a focal point for investors and the industry will need to to tackle some of its practices to minimise the impact on the environment. data:image/gif;base64,R0lGODlhAQABAPABAP///wAAACH5BAEKAAAALAAAAAABAAEAAAICRAEAOw==

The fast fashion industry has created a ‘take-make-dispose’ model that is now entrenched in global societies. It is estimated that production has approximately doubled in the past 15 years, which has seen a direct correlation with the decline in usage per item of clothing. In turn, this has set the industry on a negative environmental trajectory and could use more than 26 per cent of the world’s carbon budget by 2050 according to the Ellen MacArthur Foundation.

A striking trend that has been on the rise over the past decade, which looks to combat some of the disposal issues in the retail fashion industry, is the resale market. The second hand apparel market in the US was reported to be a $24bn industry in 2018 and online thrift store thredUP has estimated this will reach $51 billion by 2023.

The trainer resale market, in particular, has been on the rise. In North America, it is estimated to be valued at $2bn in 2019 and $6bn by 2025, according to investment bank Cowen. Within this, there is a large market for worn items. A good example of this is, a website where sellers can send in trainers that are authenticated, cleaned and then hosted on the site.

The resale market plays an important role in the sustainability of the apparel market as it helps to extend the life of a product. Importantly, it relies on high quality products that can withstand multiple periods of wear over a long horizon. This points to the design and production of higher quality clothes and shoes by apparel companies such as Nike and Adidas, which can provide customers and businesses with an attractive opportunity to resell products rather than see them as disposable items, which adds to the wastage issues we see today in the industry.

Many companies have risen to the challenge and pioneered change in their business models to try and make their products more sustainable.

As part of the Global Sustainable Equity Strategy’s environmental, social and governance analysis, we look at the life cycle of a company’s product and how they look to employ a circular economy model. Within our ‘Quality of Life’ theme we currently invest in sporting goods and apparel companies Adidas and Nike, two of the most popular resale brands.  We believe the high-quality product design and patented technologies produced by Adidas and Nike are key drivers of their high brand equity and customer loyalty. These companies have invested in research and technology to create more circular business models.

Adidas has been working to increase the use of more sustainable materials in its products. The company announced that from 2024 onwards it would use only recycled polyester in every product and on every application where a solution exists. Futurecraft Loop, the first fully recyclable running shoe, is due to be launched in 2021.

Nike has similarly been working on creating a more circular business model with many of its core products featuring reused materials. All the core polyester yarn for its Flyknit shoes are 100 per cent recycled polyester and Nike has diverted more than 4 billion plastic bottles from landfill by using recycled polyester.

There are many obstacles for investors in the retail sector as the industry faces increased regulation, scrutiny on textile waste and higher raw material costs, which impact profitability. However, if the industry is able to address both the environmental and social issues, it could release over $170bn of untapped value annually.

As consumers, we can be responsible by showing retailers that we want sustainably made clothes and shoes, and as investors, we can be responsible by picking the best-in-class stocks, which put circular methods at the heart of their business models and innovate to create a more sustainable retail environment.

Charlotte Nisbet is a governance and responsible investment analyst at Janus Henderson Investors, a member of The Gulf Capital Market Association

The article above was published in The National and the full article is available HERE