What Fashion Can Learn from a Decade of Disasters #Startups - The Entrepreneurial Way with A.I.

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Wednesday, December 4, 2019

What Fashion Can Learn from a Decade of Disasters #Startups

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LONDON, United Kingdom — For years, luxury titans Kering and LVMH have duked it out over deals, designers and retail space. But during Paris Fashion Week this past September, the biggest contest between the French fashion giants came down to climate.

At a rare public gathering of its senior executives that week, LVMH laid out the steps it’s taking to operate brands like Louis Vuitton and Celine more sustainably, while throwing thinly veiled barbs at its rival. “We prefer acts to pacts,” said Antoine Arnault, a board member and son of LVMH Chief Executive Bernard Arnault. Just a month earlier, Kering, which owns brands including Gucci and Saint Laurent, helped launch a sustainability pact backed by French President Emmanuel Macron. Roughly 60 fashion and textile brands have signed on to the initiative.

It’s hard to imagine these global luxury conglomerates slugging it out over sustainability 10 years ago, though both companies did already have initiatives in place. Back then, few customers, and even fewer fashion executives, cared enough about these issues to influence major commercial decisions. But over the last decade, the conversation over human rights and climate abuses within the fashion industry has radically shifted.

Now, the imperative is on brands to show their businesses are not just financially sustainable, but also morally supportable. Since 2010, a host of technological, social and political upheavals, public scandals and fatal disasters have drawn attention to the industry’s social and environmental misdeeds. On the flipside, a new generation of value-driven consumers are creating positive incentives for brands to show they are operating more responsibly.

The issues have moved from a niche focus for corporate social responsibility teams and sustainable development experts to “one of the biggest topics of our industry,” said Eva Kruse, chief executive and president of the Copenhagen-based Global Fashion Agenda, a sustainable fashion forum and advocacy group. “The conversation has shifted into, ‘This is the only way that our industry is going to survive.’”

As fashion enters a new decade, frank talk about fashion’s environmental impact and mistreatment of workers is table stakes. Brands large and small face pressures that may finally force fundamental changes to how the industry operates.

The conversation has shifted into, ‘This is the only way that our industry is going to survive.'

Consumers are becoming more knowledgeable, more demanding and more active. Governments are also paying more attention to the industry. Retailers are casting around for new business models that are less wasteful. Technological innovations are creating new threats and fresh opportunities.

Heading into the 2020s, a growing number of analysts, executives, investors and consumers are looking at fixing fashion’s numerous abuses as an existential challenge for the industry.

“For sure it is getting more complex,” said Anna Gedda, head of sustainability at H&M group. “This is about securing, not just that we exist in the next three years, but in the next 30 years.”

And below the surface, emerging designers, activists and some consumers have begun to argue that the only solution to fashion’s many ills is to end the cycle of consumption altogether.

“We have brands who seem to think the answer to fast fashion is to put clothes bins in shops or develop closed-loop manufacturing," said Dominique Muller, policy director at workers’ rights nonprofit, Labour Behind the Label. “But at the same time they are not in any way discussing consuming less, or encouraging consumers to purchase less, so the model remains fast fashion.”

The Dirty Truth

Ten years ago, many companies saw sustainability as a basic compliance issue with a limited focus. Clothes marketed as ethical were often dismissed as undesirable. There was little incentive or appetite to tackle the slow, messy and expensive process of fixing the industry’s social and environmental issues.

Then in 2013, the Rana Plaza factory complex in Dhaka, Bangladesh, collapsed, killing more than 1,000 people. It was the deadliest garment industry disaster in modern history and landed on the front pages of the world’s biggest media outlets. Overnight, the sector’s misdeeds were back in the spotlight.

For sure it is getting more complex.

“For the first time, fast fashion had to look in the mirror,” said Mike Barry, a consultant and former director of sustainable business at Marks & Spencer. “The impact was not on the marketplace, but in the boardroom.”

The tragedy at Rana Plaza didn’t radically transform the industry, but it did leave an indelible mark. It forced brands to start taking responsibility for their whole supply chain, and propelled a movement to disclose more information about where clothes are made. It remains a touchpoint for consumers concerned about the social impact of their purchases and it did lead to real, if fragile, safety improvements within Bangladesh.

Protests on the sixth anniversary of the Rana Plaza collapse | Source: Getty Images

As the decade progressed, concerns about workers were eclipsed by mounting political and cultural engagement with the climate crisis. In 2015, members of the United Nations reached a landmark agreement to limit global warming, committing governments to climate action. Though progress on reducing emissions has lagged, voices like Swedish activist Greta Thunberg and Extinction Rebellion have kept up the external pressure, and investors have grown bolder about questioning companies’ commitment to climate action.

Kering and LVMH’s face off during fashion week is one example of the impact of this societal shift. So was Burberry’s decision last year to stop the long-standing practise of destroying unsold product after the company became a symbol of the industry’s wasteful practices for burning nearly $40 million in merchandise.

“Everyone knows the fashion industry’s really, really bad,” Extinction Rebellion’s Claire Farrell told BoF's VOICES conference in November. “What is glamorous about living in a dying world, and what is fashion doing to the planet, and is it really worth it?”

The impact of these cultural and political shifts on the industry have been amplified by the rise of social media and a generation of activist consumers. Where ten, or even five, years ago taking any kind of political stance was anathema to most major fashion houses, it’s now de rigueur.

While cynics may dismiss big brands’ new-found commitments to social values as pure marketing, statements from high-profile players have helped drive change. In 2017, Gucci CEO Marco Bizzarri’s withering critique that fur is “a little bit outdated” helped precipitate a wave of brands going fur-free. Even the Queen of England has followed suit.

Everyone knows the fashion industry’s really, really bad.

On the flipside, controversies like Dolce & Gabbana’s ill-conceived ad campaign in China at the end of 2018 (and Gucci’s infamous “blackface” balaclava) have demonstrated the cost to brands if they get it wrong. The upshot is that brands are on notice that they are being closely watched, and that missteps can immediately impact the bottom line.

An Industry on the Brink

But fixing fashion in the coming decade is a monumental task. Even as consumers began to get wise to the industry’s environmental and social challenges, the business model has become even more destructive.

Between 2000 and 2014, global clothing production doubled and the number of garments purchased each year by the average consumer increased by around 60 percent, according to McKinsey. The Global Fashion Agenda and The Boston Consulting Group project apparel consumption will rise another roughly 60 percent between 2017 and 2030 to reach 102 million tons — the equivalent of 500 billion T-shirts.

Luxury and high street alike have moved to a swifter cadence of drops, chasing consumers’ desire for newness. The rise of e-commerce has intensified competition, ratcheting up the pressure for brands to turn out the latest trends at a faster pace and lower cost.

As slim margins narrow even further, brands have continued to squeeze manufacturers on price, even as they advocate publicly for better wages. The news is little better on the environmental front. While brands are increasingly burnishing their sustainability credentials with glossy initiatives and marketing copy dedicated to eco-materials and ethical processes, the Global Fashion Agenda has warned that the industry’s efforts to clean up its act are stalling.

Fixing fashion in the coming decade is a monumental task.

Heading into the new decade, fashion’s desire to drive growth through more consumption and the need to shift to more sustainable models are on a collision course.

“If I were to take the temperature of the room, it feels like sustainability is still more of a marketing conversation,” said Maxine Bédat, executive director at sustainable fashion database New Standard Institute. “I foresee a real shakedown.”

It’s a conundrum the industry may not have another decade to solve. Pressures that have been slowly building look set to come to a head in the years ahead.

“Now is the time for action. We have to wake the fuck up and get a grip and get on with it; otherwise it’s over,” said activist designer Katharine Hamnett, who spent years battling for more sustainable practises within the industry. “The shake-down is happening all over the place … consumers increasingly want sustainability, sustainability, sustainability, because they have a choice.”

After years of economic growth, the industry is facing a much more gloomy outlook in the coming years, putting even more pressure on the bloated model that has led to overproduction and damaging discounts for many traditional retailers. According to BoF and McKinsey and Company’s annual State of Fashion report, executives across the industry are bracing for an economic slowdown in the coming year.

Meanwhile, climate concerns are coming into even sharper relief. In November, the United Nations Environment Program published a bleak report that warned drastic action is now the only way to avoid catastrophic climate change. In London this September, protests staged by Extinction Rebellion seemed to upstage Fashion Week. According to BoF and McKinsey’s State of Fashion report, almost two-thirds of consumers are self-proclaimed “belief-driven buyers” who will choose, switch, avoid or boycott a brand based on its stand on societal issues.

“The kind of questions are coming from all over the world,” said Kering’s Chief Sustainability Officer Marie-Claire Daveu, highlighting how the issue is spilling into the corporate realm as employees also demand more action on everything from climate policy to company culture. “To attract the best new talent, it’s really important for a company to be really involved in sustainability.”

Regulators are beginning to pay attention too, a significant change for an industry that has largely escaped tough oversight. France has moved to ban brands from destroying unsold items, and consumer watchdogs in the UK and Norway have warned companies for over-stating their sustainability claims.

“You’ll go out of business. It’s literally that simple,” said Lucy Shea, chief executive at sustainability consultancy Futerra. “The world has shifted and if you want to remain relevant to your consumer base you have to start offering closed loop and D&I as an absolute minimum.”

The New Business Model

Brands are slowly beginning to grapple with this new reality, with one eye on the major disruptions already rippling through the industry and the other on consumers’ evolving demands for more responsible practises.

Companies are increasingly experimenting with new business models like resale and rental, intended to keep clothes in circulation for longer. Luxury resale site The RealReal raised $300 million in its IPO earlier this year, pricing its shares above the target range in a floatation that valued the company at about $1.6 billion.

The take, make, dispose approach that has served this industry well for the last 100 years or more doesn’t work for the future.

Material innovations and technological advances around recycling also offer the potential for game-changing new solutions to fashion’s sizeable waste problems, if they can scale and become cost-competitive.

“There are now solutions that were not there ten years ago,” said Sylvie Bénard, head of LVMH’s environmental department.

A slow embrace of transparency also has the potential to help resolve some of the persistent labour issues that continue to plague fashion’s supply chain. Greater traceability is key to resolving issues created by fashion’s murky and convoluted supply chain, which facilitates abuses and makes it more challenging to hold companies to account. Radical transparency, advocated by new direct-to-consumer brands like Everlane are helping to set a new benchmark for the industry.

But for all it’s good intentions, fashion still faces a fundamental challenge in its efforts to do better: it has yet to find an alternative to the extractive and exploitative model on which it currently runs.

“There are fundamental discussions we haven’t really addressed,” said Global Fashion Agenda’s Kruse. “It’s questioning the whole business model going forward; the take, make, dispose approach that has served this industry well for the last 100 years or more doesn’t work for the future, so how does the future of our industry look?”

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How Sustainability Became Fashion's New Battle Ground





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