Fast fashion is moving into activist crosshairs. The $2.5 trillion industry’s environmental, social and governance credentials have been further battered by the pandemic. Retailers like Adidas and ASOS could be sitting ducks for activists’ intent on a greener future.
Rag traders have so far been largely sheltered from environmental activism. They shouldn’t be. At over 2 billion tonnes a year, cheap clothing production emitted 4% of global greenhouse gas emissions in 2018, according to McKinsey, and causes 20% of water pollution. The pandemic has made the situation worse. A shift to online shopping has meant fewer items returning to stores to be recycled. If this trend is more about inertia than selective buying, more garments may get thrown out. Most are landfilled or incinerated within one year, according to analysts at UBS.
Recycling offers cause for optimism. Zara owner Inditex (ITX.MC) is one of many companies promising to use more single fibre materials like organic cotton which make it easier to recycle old clothes. Retailers are also collecting used clothes in stores and using fewer chemicals in their production processes. Yet this does little to address the real problem: waste. The retailers’ business model is to create cheap clothes that are only fashionable for a season. Timelessness and durability could lead to a slump in sales.
Still, fashion is heading down the same path as Big Oil. Senior executives know it is vulnerable to shifting consumer habits, particularly in a young demographic that is concerned about global warming and pollution. If Exxon Mobil (XOM.N) can be successfully targeted by the tiny Engine No. 1, so can they.
The biggest players have some protection. Inditex is 65% owned by the powerful Ortega family in Spain, the Persson and Tham clans control over half of Sweden’s H&M (HMb.ST) and nearly 80% of its voting rights. Primark’s parent Associated British Foods (ABF.L) is 55% owned by Wittington Investments.
But brands like Boohoo (BOOH.L), ASOS (ASOS.L) and Adidas (ADSGn.DE) have no such backing. They look ripe for climate activists to buy in and insist on a so-called circular economy approach, where producers have to show that their wares are durable and not made from materials sourced from exploitative regimes. The downside is potentially lower returns and sweeping management changes. The upside is they stay in business.
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– Around half of the clothes sold by online retailers Boohoo and ASOS are made entirely from virgin plastic materials such as polyester, according to a study published on June 11 from Royal Society for Arts Manufactures and Commerce.
– The RSA analysed a sample of 10,000 items added to websites from PrettyLittleThing, Missguided, ASOS and Boohoo found some stores only contained 1% recycled fabric.
– Spanish fast-fashion giant Inditex said on June 9 sales in May and so far in June were twice as high as in the same period last year as customers splashed out on post-lockdown shopping sprees.
– The post-lockdown spike mirrored results from rivals including Next and Abercrombie & Fitch.
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