ECONOMIC IMPACT

Fashion companies must safeguard workers, employees, capital, value chain partnerships, channels, and the trust and support of their customers. 

This moment is an opportunity to remove unnecessary complexity and costs, in order to prepare for reinvestment.

Leaders will recognize the importance of open dialogue and constructive partnership across the value chain in order to find shared solutions for protecting worker livelihood and sustaining trust.

Cancellation of completed orders will be a measure of last resort, while cancellation without consultation or collaboration will be an unacceptable practice

 

• Integrate sustainability throughout business recovery strategies: Sustainability will be an imperative for strong companies after the crisis. Leaders will make sustainability central to post-pandemic decision making, while laggards will view sustainability as an effort to resume once convenient. 

• Accelerate transparency while increasing sustainability ambitions: Companies must take advantage of digitalization, innovative business models, and end-to-end solutions – with transparency playing a central role – in order to assess and demonstrate positive environmental and social impact to stakeholders.


 

Behind the invisible hand of an exchange economy beats an invisible heart.

 

Circular economy models (where products are designed from the outset to be recovered and materials repurposed).

As a result, investors have more regularly required ESG/sustainability credentials from companies, realizing the value and return opportunities from investing in more sustainable businesses.

The industry needs to embrace a system that is circular, (where there is not an “end of life”, just “end of use”), rather than linear, (where a product reaches the end of its use and is simply thrown away, clogging up our landfills for years and years).

There are many ways we can incorporate circularity into the system.

Clothing rental is one of the most obvious ways to reduce waste and slow down our consumption levels, whilst still enabling people to indulge their need for novelty and self-expression.

In order to delink the provision of decent work from economic growth, we need a fundamentally reorganized world economy, one that values care and craftsmanship, and replaces quantity with quality.

The degradation of the environment and the degradation of work—share a common root in the logic of capital accumulation. 

Successful businesses need to generate profits (not just products) and then reinvest the surplus. 

To accomplish this, businesses must cut costs and expand operations, producing an ever-expanding array of goods and services, as well as the consumer markets to absorb them. 

The need to control the details of the labor process in order to decrease labor costs leads to the degradation of work; the constant need to produce, sell, and consume more strains the environment.


 

“Suppliers say, ‘We can’t decide to make this investment if brands pick up and go after a year — which they do — or if they aren’t willing to pay us more,’” says Michael Sadowski

Currently, brands have as a main motive to make as much money as possible, in order to make as much money as possible you need to have the biggest difference possible between what price are you buying your clothes and at what price are you selling your clothes.

In this sense better labor rights conditions, higher wages for workers, safer for factories are driving up costs and therefore reducing the margin of brands. So next to the profit motive there needs to be a very strong incentive for these brands to actually perform and to take up the political role that they should take up.

Research conducted by Deloitte Access Economics for Oxfam has revealed that just 4% of the price of a piece of clothing is estimated to make it back to the workers.

Even if big brands passed the entire cost increase of paying living wages to the workers on to consumers by increasing the price they pay for an item, Deloitte estimates this would increase the price of a piece of clothing sold by just 1%. 

Investors want to understand how companies are addressing water-related risks

Since then, the cotton price hasn’t reached such extremes but the impact on raw material costs remains a significant risk to apparel companies. 

That is why investors look to understand how well companies are preparing themselves for future price shocks triggered by water-related risks, amongst other factors. Effective water management in a company’s direct operations and across its supply chain is critical, particularly as global water resources become increasingly stressed.