Fashion can achieve decarbonization goals for an affordable 1-2% of revenue

There’s a growing movement towards sustainable fashion, and a recent analysis by McKinsey & Company dives deep into how the industry can achieve significant progress in reducing its environmental impact. In their article, “Sustainable Style: How Fashion Can Afford and Accelerate Decarbonization”, McKinsey explores the challenges and opportunities facing the fashion industry on the road to decarbonization.

This post provides a concise look at the key takeaways from the McKinsey analysis, focusing on the affordability and effectiveness of various strategies for achieving significant emissions reductions.

Fashion Can Accelerate Decarbonization Without Breaking the Bank

The fashion industry faces a growing challenge: reducing its environmental impact. While many brands have pledged to become more sustainable, translating those commitments into action has proven difficult. A new McKinsey analysis sheds light on how the fashion industry can achieve significant progress in reducing greenhouse gas emissions (GHGs) in a cost-effective way.

 

The Need for Speed: Fashion’s Decarbonization Challenge

Consumer demand, investor pressure, and environmental concerns have driven fashion brands to make public commitments to reduce their GHG emissions. However, progress has been slow. Our research found that:

• Two-thirds of brands are behind schedule on their decarbonization goals.
• 40% of brands have actually seen their emissions INCREASE since making sustainability pledges.
• The fashion industry is responsible for an estimated 3-8% of global GHG emissions, with projections indicating a 30% increase by 2030 if no action is taken.

The urgency for change is clear, particularly considering that many countries central to the fashion supply chain are highly vulnerable to climate change impacts.

 

Good News: Sustainable Fashion is Affordable but Beware of these 6 Roadblocks

Despite these challenges, achieving significant emissions reductions in fashion is not only possible, but also surprisingly affordable. Our research suggests that most brands can achieve a greater than 60% reduction in GHG emissions for less than 1-2% of their revenue. This excludes actions like reselling and garment repair, which rely heavily on consumer behavior shifts.

The analysis identified six key roadblocks preventing the fashion industry from achieving its decarbonization goals:

1. Sustainability on the Back Burner: When economic pressures rise, sustainability initiatives can be sidelined.
2. Lack of Integration: Sustainability needs to be embedded across the entire business model, not just a siloed effort.
3. Decarbonization Complexity: Charting the most effective path to reduce emissions requires deep understanding of a brand’s supply chain and technical knowledge.
4. Limited Supply Chain Transparency: Measuring emissions accurately requires access to primary data from suppliers, which is often lacking.
5. Underestimating Implementation: Successfully executing decarbonization strategies requires a robust roadmap, clear ownership, and dedicated resources.
6. Fragmented Supplier Landscape: Collaboration with a vast network of suppliers with varying resources presents a significant challenge.

6 Solutions to Accelerate Fashion’s Decarbonization Journey

Building on successes in other industries, McKinsey & Company identified six steps fashion brands can take to expedite their decarbonization efforts:

1. Turn Sustainability into a Selling Point: Identify what resonates with your customers regarding sustainability and leverage this to create compelling brand messaging and product offerings.
2. Focus on Material Transition: Prioritize using innovative, low-carbon materials like recycled fibers and bio-based alternatives.
3. Develop a Strategic Roadmap: Create a clear plan outlining emissions reduction strategies, prioritized based on effectiveness, cost, and speed.
4. Invest in Data Accuracy: Move beyond industry averages and gather reliable, brand-specific emissions data through partnerships and supplier collaboration.
5. Boost Execution Capabilities: Apply the same rigor and focus to sustainability transformations as you would to cost reduction or margin improvement initiatives.
6. Foster Action-Oriented Collaboration: Work with other brands and industry players to drive collective change, such as joint investments in supplier decarbonization initiatives.

Early Movers Reap the Rewards

By taking these steps, fashion brands can not only achieve significant emissions reductions but also unlock substantial business value. Early adopters will benefit from:

• Enhanced Brand Equity: Consumers increasingly seek out sustainable brands.
• Cost Advantages: Securing access to sustainable solutions at lower prices before supply constraints escalate.
• Competitive Edge: Becoming a leader in the transition to a more sustainable fashion industry.

The time for action is now. By embracing these solutions and prioritizing sustainability, the fashion industry can chart a course towards a greener future.