ESG and Fashion: A Complicated Relationship

At a glance

• Main takeaway: The fashion industry is a major player in our global economy, yet despite its best intentions, it continues to struggle when it comes to balancing social and environmental responsibility.
• Impact on your business: Environmental damage can be a byproduct for many industries, including fashion, and as the apparel industry grows, consumers are more motivated to purchase new clothing, and thus continuing the cycle.
• Next steps: Aprio’s ESG team can help you uncover areas that align with your company’s natural business structure and guide you on a path to sustainability.

Are you ready to start your ESG journey? Contact our team for a complimentary consultation.

The full story:

There is an underlying human element to environmental, social and governance (ESG) that receives little attention but can help bridge the gap between each of the three components. When you breakdown each component, at the core lies the relationships you build with your employees, your customers, your local communities, and of course, your partners and vendors.

Nurturing these relationships with honesty and transparency is a crucial step in any successful ESG strategy, yet the apparel industry – from big retailers to designers and manufacturers – have a complicated history when it comes to toeing the line between their social and environmental responsibility.

Is modern fashion sustainable?

As a major player in our global economy, the fashion industry struggles with true sustainability and making a positive impact on people and communities. It may come as a shock to some, but according to the UN Environment Programme, the fashion industry is the second-biggest consumer of water and is responsible for up to 8% of global carbon emissions. Furthermore, for every second, the equivalent to one garbage truck of clothes ends up in a landfill or burned.

Waste is a byproduct of fashion, with industry growth reliant upon consumers purchasing new clothing, while disregarding “last season’s,” and thus continuing the cycle of resource consumption. One of the most successful trends within the industry over the last two decades is also one of the most dangerous trends to the environment – fast fashion. Fast fashion relies upon producing cheaply made clothing at a rapid pace, quickly pushing products to market to stimulate high and ever-growing demand.

One of the largest fast-fashion companies is Shein, which releases approximately 1,000 new clothing products a day. Despite recent outrage over the poor treatment of its workers, the demand for Shein’s products continues to grow. A portion of the company’s success can be attributed to its ability to tap into the Gen Z market through advertising on TikTok, which is interesting and contradicts how vocal this generation has been on the importance of sustainability and standing up for human rights.

In-kind donations are good in theory but can be insignificant if not thoroughly planned

For some companies, establishing a social mission or in-kind donation that ties to their products is a big part of their brand. Take TOMS Shoes and their one-for-one program, which quickly rose in popularity and helped social mission programs become mainstream for retailers. While the intention behind TOMS one-for-one program was innovative, people eventually began to question the true impact of the donations as other brands, like Sketchers, created knockoffs that tied to a social mission program.

Taking matters into their own hands, TOMS had a research team from the University of San Francisco review the effectiveness of their program. The report uncovered that while the shoe donations provided a small positive impact on school attendance for boys, the overall impact is insignificant and actually put local businesses out of work.

Can third-party evaluations get the fashion industry on the right path?

While there is no universal standard for ESG and measurements vary based on industry and country, third-party evaluations can keep companies honest and transparent when it comes to their ESG efforts. A third party can assess your ESG processes and provide you with a real evaluation using criteria specific to your business and industry. This report would be extremely beneficial for any company trying to get on track to making more sustainable business decisions.

The bottom line

Whether it’s standing up for human rights or pledging to make product packaging 100% recyclable, the fashion industry (like everyone) has a lot to learn when it comes to ESG. While there is no easy solution, Aprio’s ESG team can help you uncover areas that align with your company’s natural business structure and guide you on a path to sustainability. To learn more about ESG, connect with our team for a complimentary consultation.

Are you ready to start your ESG journey? Contact our team for a complimentary consultation.