Fashion needs $30 billion per year for sustainability step-change
A new report released at Davos 2020 has found that the fashion industry must plug a $30 billion funding gap, if it is to make good on promises to ramp up its sustainability efforts. Commercialising the infrastructure necessary for such a step-change will require the support of multiple private-sector partnerships, as well as support from the public sector.
The fashion industry must undergo a much needed revamp if it is to see its sustainability efforts meet the demands of a world in crisis. After oil, fashion is the world’s second most polluting industry, thanks to the use of pesticides, formaldehyde, and carcinogens in the fabrics that make many of the clothes people wear around the world. At the same time, demand for new cheap and quick clothing means many companies engage in a race to the bottom regarding the pay and conditions of their workforce. Garment workers – including children – in developing countries can earn as little as $10 a month for intensive labour like embroidering.
The UK is one of the driving forces of this problematic market trend; each person in Britain buys an estimated 26.7kg of clothing every year, compared to an average 15.6kg for people across Germany, Denmark, France, Italy, the Netherlands and Sweden. On average, this sees each UK household emit about 1.5 tonnes of CO2 from new and current clothing – a similar carbon footprint to an average modern car that covers about 6,000 miles – while an individual in the UK produces up to 70 kg of fabric waste each year.
Significant change is needed then. If companies are to cut down on the emissions their products create, reduce the amount of plastic waste they are responsible for, and ensure safe and fair employment for their workers, it will take a sustained effort on the industry’s part, as well as from governments and regulators. All this will not come cheap, however.
According to a report from Boston Consulting Group, released at the World Economic Forum’s latest Davos summit, there is a colossal financing gap in fashion’s sustainable idea. The study found that there is between $20 billion and $30 billion a year in unmet funding which needs to be found to see this change realised by 2030. While that might seem like a daunting figure, BCG is confident that companies can be persuaded to stump up the cash, however.
Hard-tech solutions are essential to the industry’s transformation and have special needs for support in order to advance to commercialisation. Due to its asset intensive nature, hard technology typically requires three to five times more funding than digital solutions do to commercialise. For example, to gain market share and cater to the large volumes and global operations of multinational fashion companies, chemical recycling innovators need to build several thousand recycling facilities to process the world’s annual fibre waste.
BCG contends that financing can flow into the fashion space to meet such needs if all stakeholders build toward conditions that promote manageable risk, attractive returns, and measurable impact. No single stakeholder operating on its own can provide all of the capabilities and factors needed to scale innovation, so the fashion industry, investors, and financial institutions must join forces. This can be supported by strengthened regulations, and the public sector increasing its direct investments and support to catalyse investment from the private and philanthropic sectors.
Commenting on the report, Sebastian Boger, Partner at BCG, said, “The growing innovation pipeline proves that such solutions can be found, but the pace of development is too slow, and the most significant innovations needed are not yet available at scale. Too many innovators still fall victim to the financing gap, in which they fail to receive the support they need from brands, investors, supply chain partners, philanthropy, and regulators. A perfect storm of innovation and opportunity is forming – companies and investors that can capitalise on sustainability and impact-driven innovation will transform the industry.”
