Multiple crises are causing industry to experience a slump after global growth of more than 11% in 2021
Supply risks and damage to reputations during COVID crisis have forced companies to rethink production practices
Fashion companies to look at making business models more circular in a bid to reduce supply chain risks
Swedish textile recycling company Renewcell opens new plant with capacity of 60,000 tonnes viscose production
Companies that have invested in energy efficiency better placed to weather current fuel price spikes
March 2 – The fashion industry was looking in good shape in 2021, recovering from COVID-19 quicker than had been forecast, with a global growth of more than 11%. However, this trend was stopped in its tracks in 2022, as soaring inflation, the war in the Ukraine and China’s zero COVID policy took their toll and sales slumped again, according to market analysts Euromonitor.
Inflation has caused huge problems for the fashion industry, says Marguerite Le Rolland, research manager for apparel and footwear at Euromonitor. “Purchasing power is decreasing, and industry players are really reluctant to pass on too much of these costs to consumers because demand has really slowed down since the second half of 2022, and the economic outlook is not good.”
Supply chains have also been hit, and companies are moving production in response. In the main, they are moving to other parts of the same region, for example, away from China and towards Vietnam, Thailand, India and Indonesia, she says.
However, Benetton has relocated more than 10% of production from Asia to Serbia, Turkey, Tunisia and Portugal, with an overall aim to move half its production from Asia to the Mediterranean by the end of 2023. “Manufacturers, retailers and brands are diversifying their sourcing and production hubs. There’s an awareness that you shouldn’t put all your eggs in the same basket, so they’re trying to establish several suppliers in different markets,” she adds.
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Fashion brands are also striving to have stronger relationships with suppliers, according to Andrew Martin, executive vice president of the Sustainable Apparel Coalition (SAC). The pandemic was a wake-up call for the sector, which faced a massive backlash from consumers following revelations that some brands had cancelled massive orders for clothing, leaving workers in poorer countries destitute.
“Companies that had better production practices in place to start with, and a better contract, were the ones (that) came through the pandemic better, so there’s a recognition that that is more and more important,” he says.
Le Rolland echoes this view. “Industry players I’ve spoken to say they want to invest more in their supplier relationships. Before COVID-19, brands would go with the cheapest supplier who could produce huge volumes quickly. This has now shifted, because it’s not just about costs, it’s about risks and reputation,” she says.
Brands want to work more closely with a smaller number of suppliers, with procurement decisions based on location, expertise and good relationships, as well as cost, she says. They hope that this will mean they are given priority as buyers if there is another crisis situation, she explains.
However, this expectation comes with the commitment that they will in turn help suppliers when needed, she says, in contrast to what happened at the onset of COVID-19. This commitment is now being put to the test for the first time, as textile manufacturing in Turkey has been hit by the recent earthquakes, she says. Around 500 apparel factories are in the earthquake region, handling manufacturing for several brands, including Levi Strauss, Mango, Hugo Boss and Zara, according to the UK Institute of Export and International Trade.
Overall, the crises have strengthened the sector’s resolve to become more sustainable, according to commentators. Nicole Rycroft, founder and executive director of non-governmental organisation Canopy, which works with companies to reduce their impact on forests, says that the combination of COVID and the crises of the past year have further entrenched sustainability as a priority for the sector.
“For those companies where perhaps sustainability was a ‘nice to have’, it’s moved on to the ‘have to have’ priority list, and it’s moved up from being just the purview of the sustainability team and sustainability director to something that’s directly linked into the CEO or the board,” she says.
While not being naive about the level of tumult that there is, and the impacts on retail and fashion, this situation is very different to those during previous challenging economic times, when Rycroft reports “leaving a lot of voicemail messages and not getting a lot of calls back,” she says.
Similarly, membership of the SAC rose significantly in the months following the outbreak of COVID-19, contrary to expectations and despite tougher requirements for members, according to Martin.
“Most of our member companies are actually doubling down on the efforts on sustainability because there is a growing recognition for many that sustainability is actually a win-win when it comes to risk reduction,” he says.
The polycrises have forced fashion companies to look at making business models more circular in a bid to reduce supply chain risks. “There’s much more of an urgent sensibility around the need to accelerate the scaling of circular production, that these extractive linear supply chains that have been so dominant for the past 100-200 years need to be left as relics of those centuries, and that we need to build climate-resilient supply chains this decade, and for the decades to come,” says Rycroft.
This is leading fashion businesses to decouple their financial performance from raw material use, she adds, citing the example of H&M, which has set a target to halve its raw material use by 2030. “We have a number of brand partners who have established those kinds of targets. It means developing new business models that require production of a lower volume of product, as well as using more materials from low carbon, circular or next-generation feedstocks,” she says.
It has been historically hard to find innovative textiles, but “new, brilliant minds” are now approaching Canopy weekly with ideas for new fibres, and brands are increasingly encouraging conventional producers to start displacing some of the conventional raw material-driven production models to increasing the amount of recycled content, she says.
For example, Swedish textile recycling company Renewcell in December opened the world’s first commercial-scale, next-generation pulp mill for viscose production in Sweden, with a capacity of 60,000 tonnes to be made from millions of old jeans and T-shirts, ramping up to 360,000 tonnes by 2030.
Though the company has yet to publish its environmental data, Rycroft says that the resulting products should emit five times less carbon per tonne, and use 90% less water, than those made with conventional wood. The plant is being set up in a wood mill that closed in 2020, and Renewcell has re-employed 80 of the mill’s former staff, she adds.
Renewcell’s model is set to disrupt the viscose production market, and other viscose producers are now starting to plan retrofits of their plants to install machines that can take used textiles as feedstock, rather than virgin wood fibre, she reports. Brands were responding, for example, through a commitment announced at COP27 to purchase next-generation materials when they come online to de-risk the scaling of circular alternatives.
“This commitment is now for 650,000 tonnes – enough to buy the full production of six to 10 mills,” she says. “So, we’re seeing catalytic moments, despite the turbulent market context,” she says.
Le Rolland has also noticed a trend for material innovation, and circular models, such as Nike using Pinatex, a natural leather alternative made from pineapple leaf fibres, and Lycra replacing some petroleum-based derivatives with those from corn.
“There’s a shift for sure, but I think what’s lacking is maybe the scale of it – for now, it’s a small percentage of their sales and production. Maybe it’s just the beginning of a big change, but it feels still very niche, if I’m honest,” she says.
Katrin Ley, managing director of Fashion for Good, believes that short-term cost constraints are holding companies back from some of the investments needed to scale innovative solutions, such as switching from wet processing to almost dry processing, which is more energy-efficient and also uses fewer chemicals and water.
“These solutions have advanced quite a bit, but they are not scaled. Often, they are not yet price-attractive compared to incumbent methods, which means that the brands, investors, and manufacturers are a little bit more hesitant,” she says.
A mix of players need to come together to make such processes mainstream, she says. “In a situation where pockets are tighter, you need to join forces, you need to work collaboratively to de-risk and to pool investments,” she says.
Energy price spikes have also hit the fashion sector, both in production and retail. Those companies that had already invested in energy efficiency for climate mitigation reasons are now reaping the benefits, according to Martin. Brands, such as Patagonia, which had a specific programme to monitor and improve energy efficiency for several years to reduce climate impact had actually weathered the storm of recent price hikes, he says.
Sustainability in the fashion sector is no longer only under the purview of the sustainability department, Rycroft says. “These are significant strategic shifts and significant allocations of resourcing, and that is coming with board-level mandate, from the C-suite. Sustainability is a business strategy, and not just for market competitiveness, but really for market survival and access,” she says.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Ethical Corporation Magazine, a part of Reuters Professional, is owned by Thomson Reuters and operates independently of Reuters News.