Investors Must Press Fashion on Lasting ESG Impact, According to New Report #648


Investors aren’t doing nearly enough to get fashion to act on key ESG issues like synthetic fibers, biodiversity and more, according to Planet Tracker.

Though ESG seems to be a focal point for investors and corporate leaders alike, a recent report from Planet Tracker suggests that there is more work to be done.

Core sustainability issues like fiber mix, biodiversity, deforestation and more are not widely raised in shareholder meetings, according to recent data from nonprofit Planet Tracker. Since 2015, the financial think tank has tracked more than 1,198 ESG proposals submitted to retailers’ annual shareholder meetings. Planet Tracker’s latest report,“ Under Dressed,” published Jan. 13, found that textile sustainability issues have all been voted down by shareholders, despite modest strides in the past few years.

As far as ESG goes, governance issues dominated 87 percent of the proposals, social issues accounted for 11 percent and environmental issues just 2 percent of proposals, according to Planet Tracker. Though a broader move away from synthetic fibers and toward deeper supply chain investments are crucial for fashion’s net-zero aims, not enough is happening, the organization contends.

WWD interviewed Richard Wielechowski, senior investment analyst and head of the Textiles Tracker at Planet Tracker, to find out how investors could hold brands and retailers accountable in the coming months.

WWD: How fast does fashion need to move away from synthetics?

Richard Wielechowski: The industry needs to make a commitment to move away from synthetics as soon as possible. The trend is very much in the wrong direction. The issues with synthetic use are increasingly clear. The technology and infrastructure for recycling synthetic textiles remain early-stage or unproven. Without a truly circular system for synthetics, they will continue to be incinerated (releasing toxins and greenhouse gases) or placed in landfills (potentially polluting land and water for years to come). Meanwhile, there is increasing academic work examining the problems associated with microplastics release from textiles during their use.

WWD: With incoming EU legislation, under the Strategy for Sustainable Textiles, do you see fashion struggling to adjust on fiber and other needs?

R.W.: The industry faces a challenge from the proposed EU legislation in a number of areas. Fast-fashion brands will likely struggle to adapt to requirements around product longevity. More broadly, we remain a long way and significant investment away from the recycling infrastructure needed, so it is unclear what fibers or fiber mixes can meet volume demands whilst helping the move to a more circular textile industry.

Microplastics remain a difficult problem to address without a ready non-synthetic replacement available in large volumes. Finally, we have written in the past that the industry needs to invest in traceability systems so it can make credible green claims about its products. Too many garments, which are claimed to be sustainable, don’t have a fully traceable supply chain. This is an area where we expect greater regulatory scrutiny in future and also see the risk of legal action from consumers.

WWD: Why is biodiversity, deforestation and synthetic use an urgent topic for investors?

R.W.: Biodiversity is increasingly important for investors as the results of [the United Nations biodiversity conference, or COP15], mean corporations and investors will be required to report on the risks and impacts on biodiversity of their operations, portfolios and supply chains. With these impacts often poorly understood or reported up to now, there is a need for urgent action to better understand the risks and opportunities. Deforestation is important as part of the focus on biodiversity, along with its importance as a driver of climate change. Again, this is something investors and corporations are being required to focus on and report on.

On a more textile-focused note, we think it is fair to say that synthetic use is not yet a major concern for investors, but we believe it should be something they are thinking about and acting upon. As noted in the answers above, the negatives associated with synthetic use are increasingly clear. Investors should ask if they are happy to fund the pollution associated with their creation, use and disposal along with the negative human health impacts which are likely to become clearer in the medium-term as more research is conducted.

WWD: Anything else to add?

R.W.: Some feedback we received on our note is that the industry does talk a lot about sustainability, so aren’t they already acting on these issues? Our argument is that investors should be making sure the talk is followed up with concrete actions. By pushing for targets and potentially links to management remuneration, they can be sure that the companies they are investing in are making changes and that their capital is being used in a [natural] and climate positive direction.