Consumers and analysts are applying mounting pressure on multiple industries to work collaboratively and identify solutions and action plans that are capable of reaching the goals laid out in the Paris Accord on climate change.
“There is a huge deficit between what’s being achieved and what we can achieve, said Katja Busch, in her opening remarks in the recent BoF LIVE episode. “We see a special responsibility to work with fashion to reduce emissions.”
DHL — which is a crucial logistics partner to the fashion industry, powering complex global logistics and supply chains — has already made efforts to operate more sustainably. The company has reduced its carbon emissions by 35 percent. It also aims to have reduced emissions by 50 percent by 2025 and is seeking to be carbon neutral by 2050.
Busch was joined by Morten Lehmann, the chief sustainability officer of the Global Fashion Agenda, which has been a forerunner in the sustainable fashion movement for over a decade, conducting original research, building awareness and working with an influential group of Strategic Partners, including: H&M Group, Kering, Li & Fung, Nike, PVH Corp., Sustainable Apparel Coalition and Target.
Below, BoF highlights four key insights from the event; from carbon abatement and the importance of tracking and traceability, to extending the lifecycles of products, and reducing over production.
Carbon Abatement Strategies are Critical
“If we don’t act now, a recent McKinsey report has calculated that we will miss the 1.5-degree pathway — limiting global warming to 1.5 degrees Celsius — by 50 percent,” explains Busch. “This means that we have to reduce annual emissions around 1.1 billion tons, which is half of today’s figures.”
Thus far, efforts to reduce emissions and contribute to a 1.5-degree pathway have largely amounted to carbon offsetting strategies — a focus on doing “less bad,” over “more good.” “To reach [sustainability targets], simply offsetting the emission is not enough. It will require the industry to accelerate abatement actions, including scaling up and intensifying current decarbonisation approaches – from production over processing to transportation,” adds Busch.
We’re not on a good trajectory and need to change the system.
“While we did see a drop in emissions because of the Covid-19 pandemic, we’re still seeing a big growth as we move towards 2030,” says Lehmann. “Although we may see deep economic recession — at the moment, the economic outlook is uncertain — we still predict massive industry growth. Currently, the sustainably performance of the industry is not catching up — the gap is only getting bigger. We’re not on a good trajectory and need to change the system to reward sustainable behaviour and the companies that double down on their climate efforts.”
Tracking and Traceability Could Impact Investment
In order to facilitate a roadmap to a carbon-free industry, brands must invest in and increase tracking and traceability capabilities within their existing supply chains. “Traceability is the absolute must. If you don’t understand your supply chain, it’s hard to know where you’re going,” says Lehmann.
“With Covid-19, we have clearly seen that brands, our industry, and the world at large are all capable of reacting and responding to a big challenge by allocating money and resources,” adds Lehmann. “So, how can we learn from this and invest in the climate? The longer [a brand] waits, the more expensive it will be. If you don’t start having the conversations with your supply chain partners now, […] training your designers and considering which materials will actually be available in the future, then you will hit a wall. Investing in process will ensure your brand is more resilient in a resource-constrained future.”
For Lehmann, the push for traceability should come from investors. “We need regulation, and for them to ask the right questions. Post-Covid, investors are now aware that to futureproof their investments, companies must [demonstrate] clear knowledge and understanding of their supply chains.”
DHL’s Busch sees potential in technology to unlock further transparency. “Today, we’re talking about smart sensors on packages. With the [rollout] of 5G, we can anticipate fully transparent supply chains, with real-time analytics at almost every point.”
Brands Should Focus on Overproduction
The Global Fashion Agenda’s Fashion In Climate report, created in partnership with consulting firm McKinsey & Company, suggests that brands have the potential to directly deliver 20 percent of the necessary reductions.
“From the Covid-19 pandemic, we’ve grown aware of how much overstock [exists],” says Lehmann. “With better technologies to provide foresight, can we become better at forecasting actual demand? This is the best way to reduce overproduction.”
“Consumers are raising questions around waste, with the younger generations massively pushing this topic,” adds Busch. “But we cannot wait for consumers. Brands need to be better at coming with an offering that’s easy for consumers to understand.”
For Busch, curbing overproduction is also possible downstream at the packaging stage.
“While it’s not the biggest contributor to emissions, it’s an emotional topic for customers as it’s very visible. While we are currently piloting reusable packaging with the fashion customer, smart algorithms can be used to minimise waste,” says Busch. “At DHL, we have been working with a major fashion retailer to use these algorithms to [streamline] the packaging used. We reduced the amount of swap bodies a day from five to three, just by doing smarter packaging. A 40 percent saving space can equate to a considerable competitive advantage.”
The Re-Commerce Opportunity Heightens
Many global players in the fashion space and in adjacent industries are beginning to trial resale models as an opportunity to extend product lifecycle.
“The fashion industry is already acknowledging re-commerce. With emissions connected to upstream activities such as production — more than 70 percent come from upstream activities such as production, preparation and processing — the longer an item is in a resale loop, the better,” explains Busch. “With downstream emissions such as transport, packaging and end-of use accounting for 30 percent of emissions, it’s better to have a new transport chain than to be producing more [product].”
It’s time to collaborate now and compete later — nobody can win this alone
“Currently, we are looking at an industry where 40 percent of goods are sold at discount,” says Lehmann. “Brands must look to the incentives of re-commerce. It’s harmful to have so much not being sold at full price, when [brands] have the opportunity to sell the same product four times over. With so much product currently going to landfill hardly used, we need to be smarter. It becomes a question of value — how can we remain profitable while selling less?”
However, designing for resale demands a rethink at the manufacturing stage. “It means product must be durable. Brands must consider longevity and the connection to customers,” Lehmann adds.
Collaboration is Critical to Success
For Lehmann and Busch, fashion’s carbon-free future is reliant upon collaboration across all corners of the industry.
“We need to push the limits on collaboration. There are already examples in industry sourcing. For instance, we don’t all do factory audits”, says Lehmann. “Look to Allbirds, for example. While they won’t share their specific technologies with the industry, they will share the factories they use for production.”
For Busch, there is an opportunity for SMEs and bigger corporate players to learn from each other. “Small companies are so flexible and agile — they can reimagine the supply chain quickly — but they have no leverage to put pressure on supply chain partners. Bigger companies can learn flexibility from SMEs, but can support them in negotiating with partners. It’s time to collaborate now and compete later — nobody can win this alone.”
This is a sponsored feature paid for by DHL as part of a BoF partnership.