Environmental Social Governance (ESG)

No signs of a slowdown on 400% fast fashion growth rate

By Camille Wynter
B Com / B Sci Senior Sustainable Investment Analyst Sydney, Australia

The social and environmental costs of fast fashion

Fashion is an incredibly lucrative industry. The world now consumes approximately 80 billion pieces of clothing every year, an increase of around 400% over the past two decades1, and the rate of growth isn’t slowing down.

Unfortunately, the trend towards ‘fast fashion’ has created significant social and environmental concerns that span the life cycle of a piece of clothing; during raw material extraction, processing, shipping, marketing, consumption and disposal. Investors need to be conscious of a company’s policies and demonstrated actions when engaging with fast fashion companies.

Water use in the fast fashion industry is a key issue that we believe will only increase in severity. UNESCO’s Institute for Water Education estimates the total water footprint of a single t-shirt at 2,720 litres2. Bleaching, dyeing and finishing during production all require substantial amounts of water and use numerous chemicals which can be hazardous to both people and the environment.

The disposal of clothing is another key issue. Around 24% of Australians admit to throwing out a piece of clothing after wearing it only once3. In Australia, we’re disposing around 6,000kg of fashion and textile waste every 10 minutes4. Most ends up in landfill, releasing methane as it breaks down over decades.

Keeping and washing clothing also has an environmental impact, depending on the fibre. Synthetic polymers such as polyester or nylon contain the same ingredient used in single-use plastic bottles. Microfibre waste is released from the fabric in every wash, and typically ends up in our oceans. Recent studies estimate there are already 8.3 million pieces of mini microplastics per cubic metre in the ocean5, and every time a piece of synthetic clothing is washed it adds to this pollution. Marine life consume these microplastics, meaning it ends up in our food chain.

Environmental concerns are only part of the story – we haven’t even touched on human rights abuse, unsafe factory conditions or wage underpayment that occurs throughout fashion supply chains.

Increasingly, companies are being held accountable for the impacts of their operations, and are beginning to acknowledge that if these issues are not managed properly, they can have material, financial, reputational and operational impacts on the business.

Among other things, AMP Capital has been encouraging fashion companies to:

  • publish a full list of factories they source from;
  • consolidate their supply chain and collaborate with other buyers, which will allow them greater influence and oversight of their suppliers;
  • set appropriate targets to reduce their negative environmental and social footprints, and link these back to executive remuneration;
  • enhance reporting of suppliers and ethical sourcing to their board and management;
  • obtain external certification of their environmental product and safety management systems;
  • introduce initiatives to up-cycle and reuse clothes, as well as use more sustainable materials;
  • be transparent in their reporting on the social and environmental impacts of their business.

The recent introduction of mandatory reporting under Modern Slavery Acts in a number of jurisdictions is also an opportunity for fashion companies to mitigate the risks of human rights abuse, as well as investigate all forms of social and environmental violations which may be present in their supply chain.
There are particular social and environmental risks associated with every fabric and every supply chain. Investors should seek detailed advice to understand how businesses are addressing these concerns.

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Camille Wynter, Sustainable Investment Analyst
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Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

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