The majority of consumers are now conscious that one of the main contributors of environmental damage is the fashion industry. The heavy use of energy and water makes it a business that is increasingly becoming absolutely unsustainable.
The equivalent of one garbage truck of textiles is landfilled or burned every second, and nearly $500 billion in value is estimated to be lost each year due to clothing that is rarely worn or not recycled.
With the advent of fast fashion stores which sells more clothing, more frequently and at a much lower price point, it has become an enormous part of the way we buy fashion, making the issue worse over the years.
The negative impact on the environment is overcasting the fast fashion industry which is no surprise when the sector accounts for 10 percent of global greenhouse gas (GHG) emissions, which is higher than international flights and maritime shipping combined.
There are opportunities, however, to invest in brands and innovations that adapt and place sustainability at the center of their business models. The outbreak of COVID-19 and how businesses recover from the crisis is now a focal point for investors and the industry will need to tackle some of its practices to minimize the impact on the environment.
A “take-make-dispose” model has been created by the fast fashion industry that is now embedded in global societies. Over the past 15 years, demand is estimated to have approximately doubles, which has shown a direct correlation with the decrease in use per piece of clothing.
In turn, this has set the industry on a negative environmental trajectory and, according to data, it will consume more than 26 percent of the global carbon budget by 2050.
The resale market is a striking trend that has been on the rise over the past decade, aiming to combat some of the disposal problems in the retail fashion industry. In 2018, the second-hand clothing market was estimated to be a $24bn industry and by 2023 it is expected to hit $51 billion.
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.
Also, to try to make their products more sustainable, many businesses have risen to the challenge and pioneered improvements in their business models.
Nike and Adidas
The design and manufacture of higher-quality clothes and shoes by global apparel companies such as Nike and Adidas can provide consumers and companies with an attractive opportunity to resell products rather than see them as disposable items, contributing to the industry’s notable amounts of waste.
The high-quality product design and patented technologies produced by Adidas and Nike, two of the most popular resale brands, 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.
Germany-based Adidas has been working to increase the use of more sustainable materials in its products. From 2024 onwards, the company said 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.
Meanwhile, America’s 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 percent recycled polyester and Nike has diverted more than 4 billion plastic bottles from landfills 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 $170 billion 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.