Where is the fast fashion backlash? #697


In its 2021 annual report, Swedish retailer Hennes & Mauritz AB identified one trend as a “high” risk to its business for the first time, higher-risk even than increased energy costs or the availability of raw materials.

Should consumers increasingly prefer “products and services with low climate impacts from trusted companies that are seen as leaders in sustainability,” H&M wrote, the company might see a negative impact. If H&M were not seen as a climate leader, it could face “reputational risks related to brand perception.”

H&M brought the subject up again a few pages later, this time in sunnier terms: “There is an opportunity,” the report noted, “for H&M Group to attract more customers by providing a more sustainable and transparent offering.”

As recently as 2018, H&M didn’t list sustainably-minded shopping as a risk at all. But the past few years have seen tough feedback for fashion companies that push the limits on how quickly they can churn out clothing and accessories, alongside demands for more transparency. Retailers like Shein, H&M, Zara and Boohoo have been repeatedly dinged by consumers, activists, the press and public officials for their mounting climate, water, and plastic pollution footprints, for labor conditions and for greenwashing. Meanwhile, report after report shows consumers signaling more focus on the environment when it comes to purchasing decisions. In one 2021 survey, for example, two thirds of U.S. consumers said they would pay more for sustainable products.

But people don’t always shop their values. For all the talk about shifting shopping patterns, there is no clear quantitative evidence of any demographic ditching fast fashion en masse — not even environmentally conscious Gen Z. That leaves retailers whose business model relies on fast fashion to size up the threat against it in their annual reports, sustainability reports and climate disclosures, where little consensus exists. It’s clear that shopping habits could change, but no one is sure how, when or if a more climate-conscious consumer will be good or bad for business.
What backlash?

Born in the 1990s, “fast fashion” broadly refers to the business model of rapidly converting designs and trends into cheap and readily available clothing. While it’s been celebrated for making high fashion accessible to the masses, the model is also blamed for promoting overconsumption: One estimate suggests clothing production doubled between 2000 and 2015, a period during which the Ellen MacArthur Foundation estimates a 36% decline in the number of times an item was worn before being thrown out. Every year, mountains of barely worn clothing are exported to countries like Ghana, where much of it ends up in landfills or on beaches.
Every year, mountains of barely worn clothing are exported to countries like Ghana, where much of it ends up in landfills or on beaches. |

The fast fashion industry does feel pressure to resolve some of these issues, says Berkley Rothmeier, a director at the consulting company BSR.”

Is it hitting literally the bottom lines in terms of quarterly profits? I think we can look at financial information and know it isn’t in a significant way,” Rothmeier says. “However, there’s more to it.” It’s now the norm, she points out, for big-name fashion companies, including H&M and Zara, to track their climate footprints, set science-based targets for cutting emissions, ramp up reliance on clean energy, cut use of plastic packaging and water, find ways to more responsibly source raw materials, use more recycled textiles and launch resale programs.

There’s an elephant in the room, though: the business model itself, which anticipates consumers checking for and purchasing new clothing far more often than necessity would dictate. While there is mounting evidence that companies and shoppers are paying attention to how clothing is made and how to dispose of it, the boom in resale is the only indication of anyone interrogating the quantity of clothing currently produced.

Independent analyst Veronica Bates Kassatly says any progress on this front is hard to stand up against fast fashion’s simultaneous growth. “There’s a lot of talk about these younger people wanting to shop more sustainably, but when you look at the shopping patterns, there’s absolutely no evidence of this,” she says, pointing to one culprit in particular: “the rise and rise of Shein.”

A Chinese e-commerce giant that took fast fashion to a new level, Shein’s ascent is one of the biggest arguments against the idea that the model is suffering. The company is part of a new cohort of ultra-fast fashion retailers that largely exist online and grow their customer base by relying on social media influencers and trends like #thehaul — social videos that include itemized breakdowns of big orders. Shein says its approach to manufacturing allows for smaller inventories, which means less excess production. But there is no denying the company is putting massive amounts of cheap synthetic clothing out into the world. Many Shein shoppers are teens and young adults, the same group most likely to express concern about climate change.

Kassatly says Shein’s popularity with Gen Z may have to do with their believing the company is in fact acting sustainably — “like, Shein has a sustainability report,” she says. In that report, released for the first time last year, the company hadn’t yet finished calculating its climate footprint. A few months later, Shein disclosed emissions totaling 6.3 million metric tons of carbon dioxide equivalent (CO2e) for 2021, inclusive of emissions stemming from use of its products; that’s less than H&M’s disclosed emissions of 7.8 million metric tons of CO2e in 2021.
Many Shein shoppers are teens and young adults, the same group most likely to express concern about climate change.

Sheng Lu, professeur agrégé de mode et d’habillement à l’université du Delaware, estime que Shein est un exemple de “la popularité des produits bon marché”. Mais il voit aussi des signes que les achats durables gagnent du terrain, notamment le boom de la revente (sur lequel Shein s’est également lancé). “Nous devons faire preuve de patience”, déclare M. Lu. “Nous devons créer un environnement qui encourage réellement les entreprises, et pas seulement les punir, à faire plus pour rendre leurs produits durables.

Le risque de l’inaction

La meilleure façon de comprendre comment les entreprises de la mode rapide envisagent un éventuel retour de bâton est peut-être d’examiner la façon dont elles en parlent – ou non – aux investisseurs et au public.

Après avoir approuvé la Task Force on Climate-Related Financial Disclosures (TCFD) du Conseil de stabilité financière en août 2018, H&M a mené une analyse détaillée des risques financiers l’année suivante, où elle a d’abord identifié l’évolution des préférences des consommateurs comme étant à la fois un risque commercial et une opportunité. Dans des divulgations détaillées sur le climat partagées l’année dernière avec l’organisation à but non lucratif CDP, H&M est allée plus loin : elle a estimé comment ces préférences pourraient avoir un impact sur ses ventes au cours des trois à dix prochaines années en utilisant une série de scénarios hypothétiques.

“Si nous supposons une baisse hypothétique de 10 % sur nos marchés européens et de 5 % sur nos autres marchés, en raison de la plus grande sensibilisation au changement climatique en Europe, cela signifierait une perte de ventes d’environ 16,6 milliards de couronnes suédoises”, a expliqué l’entreprise dans une estimation haut de gamme. Cela correspond à une perte de chiffre d’affaires d’environ 1,5 milliard de dollars. Dans le bas de l’échelle, H&M prévoit un manque à gagner de 6,6 milliards de couronnes suédoises (630 millions de dollars).

H&M a également estimé que l’adaptation à l’évolution des goûts liés au climat pourrait avoir un impact financier positif : une augmentation des ventes de 2,6 à 8 milliards de couronnes suédoises, soit 248 à 764 millions de dollars. L’année dernière, l’entreprise a enregistré un chiffre d’affaires de 22,4 milliards de dollars.

Inigo Saenz Maester, porte-parole de H&M, souligne que ces chiffres sont hypothétiques “pour expliquer différents scénarios” et “ne constituent pas un pronostic réel sur lequel nous travaillons”. Il ajoute que “les clients sont plus conscients de l’impact de l’industrie de la mode et prêtent plus d’attention aux efforts des entreprises pour s’attaquer à leur impact”.

In its own 2021 annual report, Zara parent company Inditex calls the potential for consumers to strongly prefer more sustainable products an “acute” risk that could reduce earnings in the short and medium term. That’s assuming the world is actively rallying to mitigate climate pollution in line with the Paris Agreement; the company frames the risk as less urgent if the world is slower to respond. Inditex also identifies a “minor” reputational risk stemming from customers engaging in climate activism and souring on companies with carbon-intensive businesses. While Inditex doesn’t detail what such a hit could mean for sales, in its latest filing with CDP the company did find that shifting preferences could help sales — identifying it as a €2.7 billion ($2.9 billion) opportunity. Inditex declined to comment.

H&M appears to be the only major fast fashion retailer to have assigned numbers to the risk of more climate-conscious consumers. “It’s certainly not super common right now, at least externally, to see those,” Rothmeier says. But that could change as more companies endorse the TCFD, and with more regulatory pressure, particularly in Europe. (Michael R. Bloomberg, the founder and majority shareholder of Bloomberg LP, parent company of Bloomberg News, is chair of the TCFD.)

Last year, the U.K. enshrined climate financial disclosures into law for large companies, based in part on the TCFD recommendations. The new requirements prompted Asos and Boohoo to conduct their first detailed climate analyses. Both companies are under investigation by the U.K.’s Competition and Markets Authority for possible greenwashing. In its latest annual report, Asos identified “changing consumer preferences” as a moderate risk and opportunity to the company in both the short term (2025) and medium term (2030). Meanwhile, Boohoo wrote in its latest annual report that “consumers may reduce consumption of fast fashion due to environmental concerns” and noted it could take a reputational hit by not doing enough on environmental issues. Neither company responded to requests for comment.

In its 2022 CDP disclosures, Associated British Foods — parent company of Irish fast fashion retailer Primark — said that its reputation could take a hit from investors and customers if the company doesn’t do enough or is perceived to not be doing enough on climate. ABF said the company believes its “communication on climate change to be a ‘low risk’ because of our approach” of regularly engaging with investors and others about its climate response.

Other private fast fashion retailers, including Fashion Nova and Forever 21, have yet to make any CDP disclosures, mention sustainability in their annual reports or talk publicly about what more climate-conscious consumers could mean for business. Neither responded to questions from Bloomberg Green.

Shein, which is privately held but has been eyeing a public offering, also declined to comment. In its sustainability report, the company noted that it is always looking “for opportunities to support the causes (our customers) care about, from product design and material choice to product end-of-life, circularity, and charitable giving.” On its website, a spring sale features a belted romper for $5.98 and a kids’ denim jacket for $12.

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