Fast Fashion: The Industry's Dirty Secret

Fast fashion has fundamentally changed the way consumers shop and dress. It’s a highly profitable system (developed over the past fifty years) with investors pouring millions into brands that constantly churn out the latest trends from the runway at low prices. However, the fashion industry creates many challenges; both environmental and social. So, what does the future hold for such a controversial industry?

What are the impacts of fast fashion?

To consistently produce clothes at a fast rate and low-cost, companies source their production in developing countries like Bangladesh, where they can take advantage of cheap labour and lack of workers’ rights. Zara has taken advantage of this extractive system by becoming the second most valuable apparel brand (after Nike) in 2019 (value is measured through the royalty relief valuation method) (Brand Finance, 2019). [i] But this comes at a great cost. Fast fashion relies on low wages to keep costs down and textile workers in sweatshops are often exploited and earn below a living wage (Labour Behind the Label reported that Sri Lankan workers in 2018 on average earned only $197/month)[ii].

There are also many environmental effects, the fashion industry is the world’s second largest polluter producing 10% of total carbon emissions and contributing to 20% of water pollution. Despite these poor practices retailers provide huge profits for investors and shareholders. In 2019, Boohoo’s share price nearly doubled in price, further fuelling investors’ appetite for fast fashion.

How has sustainability impacted the industry? 

There has been a shift in attitudes towards fast fashion, consumers have become increasingly aware of problems in the industry, leading to a demand for a more sustainable approach. This shift is global, Sweden (home of fashion giant H&M) has seen a change in consumer behaviours, ‘köpskam’ refers to a shame in overbuying and Swedish consumers are actively embracing a more sustainable approach to consuming and producing clothes. Meanwhile globally buying second-hand has become extremely popular, with companies like Depop fuelling a demand for more sustainable forms of purchasing clothes. This has proven to be profitable too, it’s predicted that in the next five years the second-hand market will reach $64Bn in size[iii].

The financial industry is also experiencing change. The 2015 Paris Agreement highlighted sustainable financial flows as fundamental towards climate change mitigation and investors are now incorporating the ESG criteria into their investment decisions. In fact, BloombergNEF reported that in 2019 there was a record high of $465 bn sustainable debt issued and it’s predicted that ESG assets will continue to grow from 11% (2015) to 50% by 2025[iv]. These trends are crucial to facilitating a sustainable fashion industry.  

While fast fashion giants dominate the industry there are brands that embrace sustainability. The outdoor apparel company Patagonia is a testament to the profitability of sustainability[v]. Patagonia produces high-quality products while staying committed to its environmental ethos, this approach has been highly successful – Patagonia has experienced an upward trend in growth and an estimated $1 bn in annual revenue in 2019.

What does the future hold? 

The future is somewhat promising. Changing attitudes and public pressure have forced well-known brands to reconsider their attitudes and practices – H&M have pledged to become completely ‘climate positive’ by 2040 although critics have branded schemes like the Conscious Collection as greenwashing[vi] (which describes when brands mislead buyers into believing that they are environmentally friendly when in reality they are not). 

The financial industry has started to embrace its role in aiding the transition towards a sustainable, low- carbon world. The continued growth of the green finance market signals a commitment to tackling climate change - Goldman Sachs in 2019 announced plans to invest $750 bn on financing and advising companies dedicated to sustainable finance issues over the next decade. But it remains unclear whether this change will infiltrate the fast fashion industry, especially without enforcement from governments forcing companies to behave ethically and change their practices. 

Unfortunately, unsustainable practices still plague the industry. Poor working conditions, irreversible environmental impacts and overproduction remain key characteristics of the industry. While public pressure has forced companies to address these issues, substantial change is yet to come.

Poor working conditions, irreversible environmental impacts and overproduction remain key characteristics of the industry. While public pressure has forced companies to address these issues, substantial change is yet to come.

For the industry to fully embrace sustainability it requires a united change in its approach and business model. It requires investors to act in line with ESG criteria – currently only a small amount of capital reaches fashion technologies, this prevents innovative, eco-friendly approaches to fast fashion to reach the market. For meaningful progress to be made the industry must invest approximately $30bn yearly to achieve sustainability (which has yet to happen). [vii] 

Only time will tell which direction the fashion industry will go. It can continue on its current course or take advantage of the opportunities available and embrace a green sustainable future. If one thing is clear however it is that change is due.

By Zahra Rahman

Sources

[i] Brand Finance (2019). Apparel 50 2019. pp. 4-14.

[ii] Malik Chua, J. (2018). Why Is It So Hard for Clothing Manufacturers to Pay a Living Wage?. [online] Vox. Available at: https://www.vox.com/2018/2/27/17016704/living-wage-clothing-factories [Accessed 19 Jul. 2020]

[iii] ThredUp (2020). 2020 Resale Report. [online] pp.4. Available at: https://www.thredup.com/resale/#resale-growth [Accessed 19 Jul. 2020]

[iv] Henze V. (2020). Sustainable Debt Sees Record Issuance at $465bn in 2019, Up 78% From 2018. [online] BloombergNEF. Available at: https://about.bnef.com/blog/sustainable-debt-sees-record-issuance-at-465bn-in-2019-up-78-from-2018/ [Accessed 19 Jul. 2020]

[v] Rigby, R. (2018) The profitable company that cares about the planet. [online] Financial Times. Available at: https://www.ft.com/content/1564e99a-5766-11e8-806a-808d194ffb75 [Accessed 19 Jul. 2020]

[vi] Ramaniah, Z. (2019). H&M’s Greenwashing: Short-Sighted and Unethical. [online] Brandingmag. Available at: https://www.brandingmag.com/2019/12/12/hms-greenwashing-short-sighted-and-unethical/. [Accessed 19 Jul. 2020]

[vii] Boger, S., Watten, D., Seara, J., Martinez-Pardo, C., Zuo, C., Ley, K. and van Mazijk, R. (2020). Financing the Transformation in Fashion. [online] BCG Global. Available at: https://www.bcg.com/publications/2020/financing-transformation-fashion-investment-scale-innovation [Accessed 19 Jul. 2020]