Doing good by doing well is the ESG mantra of companies heeding the demands of investors, employees and other stakeholders. The fashion industry isn’t doing so well on the E part of that acronym, a report finds.
Why it matters: Fashion companies criticized for being environmentally unfriendly run the risk of losing customers and shareholders.
- They also open themselves up for an activist attack, whether a small group of individuals or a larger hedge fund waving the ESG banner (Environmental, Social and Governance).
Reality check: The fashion industry is regarded as the second-largest commercial polluter in the world, right behind the energy industry, according to a United Nations stat.
- With more attention paid to climate change and the circular economy, companies need to get their ESG acts together or fall out of fashion.
What’s happening: According to a report by the global consultancy Kearney, only 7% of fashion industry companies it surveyed used recycled materials to any meaningful extent.
Between the lines: “Executives don’t really understand how circularity actually works and that really cascades its way down through the organization,” Brian Ehrig, a Kearney partner, tells Axios.
By the numbers: Just about 5% of companies — mostly luxury brands — offer extensive repair services, 5% offer secondhand sales, and about 2% provide rental or lease services, the report finds.
What’s next: Very few brands spend on R&D so their next best bet is partnerships with companies like ThredUp, Poshmark and The RealReal, Ehrig says.
- But that needs to come with relationship-building, and maybe some investment, with recyclers, secondhand marketplaces and others in the ecosystem for that to work, he says.