Is Investing in Sustainability the Future of Fashion?

What is sustainable fashion and where does the market stand today?

Sustainable fashion is the design, production, and distribution of clothing with consideration for the environment, society, and the economy. It aims to create a circular fashion system that reduces waste and pollution, uses natural and renewable materials, and provides fair working conditions. Sustainable fashion is important because it can help reduce the negative environmental impacts of the fashion industry while also helping to create better social and economic outcomes.

What are the next steps for sustainability in the fashion world?

This spring, the Vogue Business and Shopify Sustainability Forum was held, which was a half-day virtual event born from Vogue Business’s comprehensive coverage of sustainable fashion and the need to continue these conversations beyond Earth Day. Shopify participated in the event as an emerging voice in the sustainability conversation. Here, speakers provided new insights, alternative business models, and strategies to help the fashion and beauty industries prepare to tackle sustainability challenges in meaningful ways. One of the panels, in particular, addressed the conversation about investment in sustainability and the reasons companies face challenges in raising funding despite the critical importance of doing so.

Four key factors for change

For Olivia Markham, Managing Director and Portfolio Manager at global asset management firm BlackRock, there are four factors that need to be addressed in the fashion industry in order to shift towards sustainability. These factors include: using more sustainable materials, reducing the industry’s carbon emissions impact and improving resource efficiency, reducing waste, and making the industry more transparent and understandable for consumers. “We truly need consumers to drive some of this change, and consumers need to be empowered through information,” said Markham. It’s not enough to build sustainable businesses and brands; consumers need to know how to engage and where to find products that align with their changing values, and how to sustain momentum through their own actions and choices.

Investing in the circular economy and justifying costs

Caroline Brown, former CEO of a New York fashion company and founder of Closed Loop Partners, noted that companies that promote the development of the circular economy are the focus of their investments. These companies design products and materials to minimize waste and pollution, keep products and materials in use longer, and regenerate natural systems. The first variable to look at is whether the company has the ability to solve a meaningful problem for a sizable and addressable market? Second, how well does the solution align with consumer demand? “There are some big problems that consumers are not focused on today, and there are some problems that consumers are demanding and shouting about, and those that are being focused on will be adopted faster and evolve quicker,” said Brown. They also look at how much capital it will really take from the company to launch a marketable product. And finally, but perhaps most importantly, who is the team working on the product, what is their track record and knowledge base, and how do they work together? “We know today that consumers have expressed a clear set of values represented by their desire for sustainable products, and for any business looking for the long term, it’s critical to align with that,” said Brown. “We also see that savvy companies today are really looking at the value of the circular model and waste reduction as a financial benefit.” If we look at the historical model in linear economics, Brown explains, companies made, used, and wasted products. In a circular economy, however, there is a financial benefit in reclaiming raw materials for reuse in the supply chain. “We see companies able to participate in the profits of secondary sales in a way that hasn’t happened before with the explosion of the resale market,” said Brown. “We also see companies developing a continual and long-term relationship with their customers, leading to greater customer loyalty and lower churn rates, with lower acquisition costs.”

Integration

Sustainability in Your Business

When it comes to sustainability, merely reducing waste or considering incremental changes in the supply chain post-factum is no longer sufficient, despite the importance of starting regardless of where your business stands today. Instead, brands can integrate sustainability into their operations from the very beginning as much as possible. And if it isn’t about a new business, what can be done to enhance sustainability efforts should be discussed at the start of planning operations, when strategies are shaped for the month, quarter, or year ahead. To this end, Shopify committed in 2019 to allocate $5 million annually to support the most promising emerging solutions and technologies globally to combat climate change and move towards a more sustainable future for commerce. “It may not seem to perfectly align with Shopify,” according to Shopify’s Sustainability Fund Manager, Stacey Kawak, “but what we’re really trying to do is ensure that our merchants and the brands on our platform thrive in the long term. The negative impacts of climate change will worsen and will make things more challenging for people around the world.”

What’s Next?