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Pivot or Die: The Megatrends That Will Capsize Your Supply Chain if You’re Not Paying Attention

If last year meant change for the apparel industry, this year it’s time for a pivot. And in particular, a pivot toward more sustainable business practices.

Without it, extinction will be a sure bet.

“At the core, this is about a change in vision,” Andrew Winston, author of “The Big Pivot,” said during a talk at the Textile Exchange Sustainability Conference near Washington, D.C. Tuesday.

Companies not only need to understand the short-term pressures their businesses face today, but they need to innovate in new ways and ask new questions about the way things are done. They need to recognize a change in the value of things. They will have to face the fact that the world simply can’t sustain a status quo of increasingly depleting resources.

According to Winston, five megatrends are shaping the sector right now: a changing (and expensive) climate; clean economy economics; resource pressure; a deep shift in generations; and technology, connectivity and transparency.

“These megatrends create systemic risk to business but they also mean opportunities,” Winston said. That is, for the companies that can see where the puck is going.

Climate change isn’t fake news

Despite the conspiracy theorists and the U.S. excusing itself from the Paris climate accord, a global pact to mitigate the effects of climate change, the concept is not a farce.

“Scientists agree that it’s happening, it’s serious and dangerous,” Winston said.

Citi Bank has said in recent years that if no action is taken on climate change, it could cost the world $72 trillion by the middle of the century. The World Bank said last month that last year, the total amount of financing mobilized for climate change reached $65.3 billion, and the amount amassed in the last six years has reached over $158 billion.

“The scale of everything we’re seeing just keeps growing,” Winston said, adding that as companies realize the government’s depleting functionality in areas like this, many are rallying around the cause of their own accord, and doing nothing really won’t do—either for the environment or for the consumers existing in it.

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It’s all about a clean economy

Recognizing the apparel industry’s weighty impact on the world’s resources, more companies, both in this industry and beyond it, are working in the clean economy, using renewable energy, converting to LED bulbs in plants and warehouses and stores. They are building fully solar-powered factories, finding ways to be more efficient with water and tapping into alternative fuels.

“This is about building a resilient business and sector,” Winston said.

Rampant resource pressure

Put in its simplest form: too many people are using way too many resources and there’s just not enough to go around anymore.

Citing stats from oil company Shell, Winston said by 2030, global demand for water will increase by 30 percent, energy by 40 percent and the world’s swelling population will need 50 percent more food than what’s needed now.

What’s more, the apparel sector has helped to add insult where injury is already doing enough damage.

“Your industry has a footprint problem,” Winston said to the audience of sustainability focused executives from the industry’s biggest brands and players. “The movement in this industry to much faster fashion and a lot quicker turn has led to a lot more clothing in the world.”

If every country were to gravitate toward the United States’ level of consumption, Winston went on, carbon emissions alone would go up 80 percent.

“It’s just clear there’s not enough planet for 9 or 10 billion people to live in the state we’re living in,” Winston said, adding that we have to dematerialize, close loops. “This is why the circularity is getting more and more currency these days.”

[Read more about circularity: Report: The Industry Has the Circularity Concept All Wrong—And What Companies Can Do to Get It Right]

The generational shift

Millennials may be maligned for many of their ways, but the generation of movers now coming into their 30s and holding more spending power than they’ve ever had, are moving the needle when it comes to more sustainable living whether brands are with it or not.

“The vast majority of Millennials [87 percent] think the success of a business should be measured in terms of more than just its financial performance,” Winston explained.

That means Millennials are sizing brands up based on their overall ethos, what goes into the products they make, what’s happening along the supply chain to bring that product to them and what that brand’s story is—just to name a few. And these ever savvy shoppers want the brands they buy from to give them access to all of this information regularly, easily and in a way they want to digest the information, whether it be through mobile or ads or individual outreach.

Technology, connectivity and transparency, oh my

It’s not news that technology has all but taken over our lives, but putting some numbers behind that fact throws even more weight behind it.

According to Winston, humans are liking 3 million things on Facebook in a minute, tweeting 500 million times in a day, and every month the average teenager sends 4,000 text messages.

These numbers, Winston said, are evidence of the fact that social media provides more than a platform for sharing cat videos, but a forum for consumers to ask questions like: where did this thing I’m wearing come from?

“It’s an open world and we’re now seeing this movement towards clean labeling,” Winston said, adding that consumers not only want to know what went into making their garb, they want to see inputs that are natural and clean and recognizable.

Technology is also driving the trend toward transparent pricing and companies like Honest By are leading the way. Calling itself the world’s first 100 percent transparent company, shoppers perusing Honest By’s site for a printed jacquard skirt can learn about the garment’s material information, manufacturing details, how much the sewing thread cost, what the pattern cost was, the manufacturing cost, the markup and finally, the retail price.

Companies are also taking stands on issues unrelated to apparel as part of building the brand’s story. Taking an example outside of apparel, Tecate beer ran an ad in Mexico speaking out on domestic violence and telling men who engage in such not to buy their beer because they are not real men. In promoting health and wellness, CVS stopped selling cigarettes altogether despite the billions it bit out of business.

“Companies are coming out and saying things in a very new way,” Winston explained. “We have to shift business value to saying the purpose of business is solving the world’s challenges and work back from there. I think that companies that do this well are going to make the most money. This big pivot has begun.”

What’s next

When the investment community starts paying attention to sustainability, it’s no longer just a nice-to-have.

Last year, Morgan Stanley looked at all the major apparel companies and ranked them on their sustainability performance, noting that the ones doing more were managing their risks better and therefore their stock prices should be higher, Winston explained.

Eighty-five percent of the world’s largest companies now have sustainability targets, according to Winston, and the targets are extending beyond their own operations and further down the supply chain.

Some are committing to more sustainable fuel, some are testing dry dyeing technologies to curb water use, some are issuing green bonds to allocate funds to improving certain sections of the supply chain for sustainability, some are marketing gear that lasts longer and urging consumers to buy less, and less often.

“Companies are coming together and changing and driving market demand,” Winston said. “There’s a basic idea here: business cannot thrive unless the people and the planet are thriving.”

What’s one good first step for companies to take in undertaking what may still come as a daunting pivot ahead?

Start with data and understanding your impacts, Winston said. Start with your own data and move toward understanding your value chain footprint.

Companies should be asking themselves, “Where do we have operations in our value chain that are in water stressed areas, for example? Where are we at risk of extreme weather?…I think it can then drive a better conversation internally that says here’s where our risks are.”

Either way, the pivot toward more sustainable practices is a vital one as the status quo simply won’t be tenable, according to Winston.

“I don’t think we can keep the status quo because the status quo also means there’s not enough water. The climate is not status quo…these were three of the biggest hurricanes we’ve ever seen. We survived, but that’s not the limit on how bad it can be,” he said.

Surmising what he might say giving the same talk five years from now, Winston said it will hopefully be a different industry than the one he’s speaking to now.

“I believe that even less than I have to now, will I have to say anything about climate change as a debate. I think in five years the world will focus on climate change as the number one issue for humanity because they’ll have to,” Winston said. “I also belive there’ll be vast technological change in the world, in particular AI and autonomous vehicles and robotics that are going to challenge workforces and labor in a way that we’re really not ready for.”