Textiles are going the same way as oil companies. If Exxon Mobil is a target, clothing doesn’t have to be spared
Fast fashion has attracted the magnifying glass of activists. The environmental, social, and governance credentials of this $ 2.5 trillion-a-year industry have been battered out of the pandemic. Retailers like Adidas and Asos could be easy targets for activists aspiring to a greener future.
The clothing merchants had until now been fairly sheltered from environmental activism. They shouldn’t be. At more than 2 billion tons a year, cheap clothing production accounted for 4% of greenhouse gas emissions in 2018, according to McKinsey, and causes 20% of water pollution. The pandemic has aggravated the situation. The shift to online shopping means fewer items are being returned to stores for recycling. If this trend is more the result of inertia than selective purchases, there will be more garments that are simply thrown away. Most end up in landfills or burn within a year, according to UBS analysts.
Recycling provides reason to be optimistic. Inditex, the owner of Zara, is one of many companies that promise to use more single-thread materials like organic cotton, which make old garments easier to recycle. Retailers also collect old clothes from stores and use fewer chemicals in their production processes. But this is of little use in tackling the real problem: waste. The retailers’ business model is to create cheap clothes that are only in fashion for a season. Timeless and durable clothes would cause sales to drop.
Even so, fashion is going the same way as the big oil companies. Senior executives know that the industry is vulnerable to changes in consumer habits, especially among young demographics concerned about global warming and pollution. If Exxon Mobil can be a target for activists, clothing manufacturers need not be spared.
Big companies have some protection. 65% of Inditex belongs to the powerful Ortega family in Spain, while the Persson and Tham clans control more than half of H&M in Sweden and have almost 80% of the voting rights. 55% of Primark’s parent, Associated British Foods, is owned by Wittington Investments.
But brands like Boohoo, Asos and Adidas do not enjoy that endorsement. They seem like candy for activists to enter capital and insist on the so-called circular economy strategy, where producers have to prove that their products are durable and are not made of materials from exploitative regimes. The downside is lower profitability and drastic changes in management. The advantage is that they can stay active.