Environmental, Social And Governance in the Fashion Industry

As the climate problem intensifies, the fashion sector is being pushed to take more action and accept responsibility for its environmental impact. We investigate the expanding environmental, social, and governance problems that are becoming a major issue for businesses seeking to remain competitive in a highly scrutinized sector. It is no secret that the fashion and textile industries are among the most harmful and polluting sectors on our planet. Following the fast fashion business model, the sector has shown to have extremely significant environmental implications.

It is notable for accounting for 10% of worldwide carbon emissions, causing to contamination of streams and soil. In addition, we are producing heaps of rubbish, which will surely have a significant influence on our biodiversity and ecosystems. Furthermore, as a society, we are becoming more conscious of social, political, and environmental issues such as the climate catastrophe, sustainable living, and, of course, ethical fashion, which exacerbates and makes it more difficult to ignore. People are speaking out and increasingly sharing their thoughts on such issues via social media, resulting in a movement that affects and pushes for change in the fashion and retail industries.

As a result, the industry has been at a crossroads for than a decade, driven by customers who want to do business with companies that care about their environmental effect and incorporate ethical practices into their beliefs and business models. In recent years, the environmental, social, and governance — or ESG — components of business have progressed from a minor worry to a critical factor that brands and organizations cannot ignore if they want to survive and grow in their particular markets. With rising ESG expectations, companies that fail to reach the required and satisfactory standards must be ready to forego profits, as their financial success is becoming increasingly dependent on their capacity to deal with environmental, social, governance, and overall ethical issues.

As a result of the increasing demand to change and change as soon as possible, several businesses have publicly disclosed their freshly established sustainability targets and plans. Kering is a remarkable example of an industry leader in sustainability. Kering declared in 2019 its commitment to being carbon neutral across all owned activities and throughout the entire supply chain as part of its strategy and efforts to mitigate the consequences of global warming. By 2030, the objective is to attain net-zero emissions.

Other luxury conglomerates, like as LVMH and Prada Group, are following suit and announcing goals to achieve carbon neutrality by 2050, a goal that is compatible with the Paris Agreement. This shift in responsibilities among such industry executives is more important than ever. The ethical aspect of developing a fashion business has risen to the top of the priority list. Consumers no longer have to settle for anything less than what they so eagerly demand: companies that exhibit responsibility, thanks to the rising number of Instagram-friendly brands that have totally developed and designed their business strategies, brand image, and values around sustainability.

However, while this change is positive and beneficial to our environment, the overwhelming pressure placed on companies and the industry as a whole has created a new dilemma. Greenwashing is increasingly a significant source of worry for both investors and consumers. The act of disseminating incorrect or misleading information regarding a company’s ESG action plans and actual outcomes. According to an ESGClarity article, the UK’s Competition and Markets Authority discovered that up to 40% of environmental marketing claims might be considered deceptive to consumers.

Similarly, according to a Business of Fashion report, while the majority of the industry’s most prominent companies have committed to a “net zero” target, only half have laid out a plan with specifics that will create proper accountability and have incorporated time-bound targets to reduce emissions. As a result, additional rules and inspection are to be expected in 2022. They will be held to a higher standard of responsibility, particularly by investors, who are more likely to withdraw funding if companies are seen to be failing to live up to their sustainable credentials.

It is apparent that the environmental part of ESG has gotten a lot of attention. It is critical to explain and comprehend what topics are covered by the acronym’s “S,” or social aspect. To properly grasp the notion, it is critical to consider it as an interconnected concept, with each topic operating in tandem and social challenges at the center of it all. The easiest way to think about the “S” is as a point that openly addresses the individuals who are involved in and contribute to the business model. Directors are expected to examine the circumstances of their workers, stakeholders, suppliers, and consumers. This pertains to how individuals are treated and the extent to which their views are heard.

Brands, their partners, and their workers are all expected to be completely transparent. Furthermore, emphasizing and ensuring that workers have the freedom to voice their concerns may be critical to the success of any brand or organization. Employees are best positioned to assess if the supply chain activities are flowing into and reproducing the company’s proclaimed ideals when it comes to the scrutiny over sustainability in fashion. Furthermore, while considering social concerns, the question of diversity inside an organization must be addressed. Fortunately, the fashion sector excels in this area of ESG, with numerous Fashion Houses, such as Hermès, leading the way in terms of diversity and inclusion.

As time goes on, more and more businesses will look to ESG as a source of competitive advantage, as well as distinctive selling features and brand identities. This type of activism, which encourages brands to improve their production and operations in a more environmentally friendly manner, provides an opportunity for fashion houses to improve their practices and overall profitability in a market where consumers demand responsibility and accountability for products. Brands should prioritize sustainable textiles in order to reduce their water, chemical, and carbon footprints. As small firms continue to gain attention via their sustainable practices and models, we anticipate the adjustments that industry leaders will implement to encourage an atmosphere of sustainable advancement and innovation.