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Pandemic May Have Varying Degrees of Impact on Sustainable Fashion Startups

Rivet's 2020 Denim Circularity report takes a deep dive into how the global denim industry is plotting its circular future amidst a worldwide pandemic.

Amsterdam-based platform for sustainable fashion innovation, Fashion for Good, is pushing forward with its mission to support innovators sparking sustainable change across the industry.

Though the COVID-19 pandemic may bring a period that stalls innovation as businesses and the supply chain strive to restore themselves, Fashion for Good managing director Katrin Ley says innovation is essential to “reinvigorate business” and “emerge stronger” from this critical period.

Through its Good Fashion Fund, which invests in the adoption of high impact and disruptive technologies and circular innovations in the textile and apparel production industry in Asia, and its accelerator program that connects innovators to investors and a team of dedicated mentors, Fashion for Good is taking a digital approach to maintain momentum.

“Our social media channels highlight important updates from the industry, support ongoing efforts and projects, provide insights into the role of innovation at this time and disseminates advice,” Ley said.

Fashion for Good also recently launched a “Meet the Innovators” online sessions, an opportunity for startups in its accelerator program to pitch their disruptive solutions to a global audience.

Here, Ley shares why this challenging time is an opportunity for the industry to reset and strategically invest in technologies built for a more sustainable future.

Rivet: What effect do you think the coronavirus crisis will have on sustainability?

Katrin Ley: Traditionally, in times when the top and bottom lines are under pressure, investments into longer term projects with no immediate positive top or bottom line impact are the first to be cut. This is particularly true for companies that are publicly listed, for which short-term performance will remain a key priority.

We do see promising signs indicating a more structural shift in thinking. The current situation provides an opportunity to reevaluate practices and may accelerate positive changes that have already been in motion, like in logistics and transportation. Increasingly, more industry leaders recognize the urgent need for responsible practices, as demanded by consumers and investors and as regulatory pressure grows. For many pioneering brands, investments in sustainability and innovation are of high strategic importance and therefore budget cuts could negatively affect financial performance in the future.

Rivet: Will mills and other parts of the denim supply chain have to hold back on investments?

KL: This depends on the supply chain setup. Generally, a lot of early stage investors have a longer roadmap for investment, thus are not so beholden to short-term returns. Most VCs have a three to five year investment time frame and a set amount to invest and therefore will likely to continue to drive investment in this space. Vehicles such as The Good Fashion Fund are designed to help mills who might struggle with investing in sustainable innovation and play an even more important role at this time.

Rivet: The cost of sustainability is a hurdle for some brands. Will brands slowdown on sustainable products as they try to recover?

KL: This is an opportunity to shift the way the industry thinks about business as usual. Opportunities to try and to also invest in circular business models to diversify revenue streams and prevent over reliance on existing supply chains. Recommerce continues to go from strength to strength, an opportunity to capture value of existing products and make it easier for consumers to buy secondhand. This has also accelerated consumer demand for local production and supply chain transparency, therefore present potential opportunities for innovation in on demand manufacturing.

Rivet: How can sustainability startups that rely on investors survive during this time?

KL: Many startups are not in the phase yet where they are selling product to the supply chain. Therefore, they can continue working on R&D and are not disrupted by the developments. Others are trying to pilot and implement into the supply chain. For these startups the situation will probably result in a delay relating to those activities. That means they may need some additional liquidity to bridge this period. More mature startups, finally, are heavily hit as their revenue will likely decline substantially—for those, their investors may need to chip in to provide sufficient liquidity to survive this period.

For new capital, the current fundraising climate is probably suboptimal. Startups may not find this the right time to start talks with external investors, as their progress will be hindered over the next few months. It therefore may make sense to postpone fundraising by a few months. On top of that, some investors may be somewhat distracted by other priorities, like problems in their portfolio.

Rivet: Do you anticipate brands looking for cheaper goods?

KL: Many brands are going through a challenging time at the moment, particularly as retail stores are closed, but this does not necessarily equate to squeezed margins. I think the impacts are so wide-reaching that it will require more than brands just cutting margins. They won’t be able to sell most of their spring/summer products, but this will give them a chance to explore rework or remanufacturing as they need to find a solution to excess stock. For example, one of our innovators, Frankie Collective, reworks new collections from vintage and deadstock. This potentially will also increase the need for modular design so products can be made and remade, meaning fabric can be recaptured and reused.

Rivet: Will this crisis help raise awareness about sustainable manufacturing?

KL: For a number of years now, there’s been an increase in awareness of how products are produced, what they are made of, where they come from, who makes them, etc. Now that the borders are closed, people are realizing where their products come from and assessing their own consumer habits. In the future, perhaps people will buy less, but better quality products, valuing and supporting brands that have sustainability and innovation at their core.

Rivet: What steps is Fashion for Good doing to help keep sustainability a topic of conversation in the apparel sector?

KL: Innovation, particularly in challenging times, has proven its relevance time and again to reinvigorate business as usual to achieve organizational objectives. We remain committed to the important work that we and our partners are doing and continue to show our support across the industry. We continue to engage with and encourage our global movement, sharing knowledge and expertise.

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