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Report: Fewer Risks, More Rewards for Socially Responsible Apparel

For fashion companies that have operated with unbridled freedom over the years, the trend of social responsibility can feel like a millstone around the neck. Indeed, for a long time, many major brands were inclined toward “greenwashing” to portray themselves as more environmentally friendly than their actions warranted.

Today, more are finding that profitability and sustainability are not incompatible, according to a new study by A.T. Kearney, a global management consulting firm based in New York City. “Doing good,” in fact, can often translate into heftier profits.

Written in collaboration with Ashoka, a nonprofit that promotes social entrepreneurship, the paper argues that fashion’s economic success exacts significant social and environmental costs. The production and processing of fibers consumes inordinate amounts of limited resources. Chemical effluent has turned waterways into multicolored toxic soups. Greenhouse-gas emissions continue to soar unchecked. And garment workers often barely manage to eke out a living.

Meanwhile consumer behaviors are shifting. An increasing swath of customers are shopping not only for aesthetics, quality, and performance but ethics, as well.

A 2014 Nielsen Global Survey found that 55 percent of consumers from 60 countries are willing to pay more for products and services provided by companies that are committed to positive social and environmental impact.

“Companies around the world across all industries are realizing that sustainable practices can create a competitive advantage,” said Pei Yun Teng, global director of social impact at A.T. Kearney and one of the study’s authors. “Indeed, we see social innovation driving this disruption.”

Teng cautions against lip service or inauthenticity.

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“If a company is fundamentally damaging the environment and society, ‘greenwashing’ through corporate social responsibility or philanthropic donations or a marketing campaign is not enough,” Teng said. “Sustainability and social impact need to move from being social-responsibility initiatives to being a core part of the business strategy, and embedded within the supply chain.

Here are five opportunities for social innovation—and the companies that have implemented them—that A.T. Kearney and Ashoka have identified for the year ahead:

Changemaker leadership

Anokhi, an apparel company based in Jaipur in India, is what A.T. Kearney and Ashoka consider a “changemaker leader.” A specialist in block prints using vegetable-based dyes, Anokhi employs more than 1,000 craftspeople who work from home. Besides focusing on employment options for women, the firm supplies healthcare to all its employees, provides on-site childcare, and offers educational support for its workers’ children.

“Anokhi helps ensure a qualified workforce and a profitable business, bursting the myth that businesses and community empowerment cannot successfully coexist,” Teng said.

New customer value propositions

Today’s shoppers are an increasingly savvy bunch, according to Teng. “We definitely see more consumers demanding new propositions and are increasingly aware of the impact of their consumption choices, thanks to improved transparency and reporting, social and cultural influences, and so on,” she said.

Among the compelling features consumers seek out the most? More sustainable fibers, particularly those produced in a way that “maintains the dignity and the respect of the people who were involved in producing them,” the report noted.

Using these preferred fibers will not only help brands whittle their social and environment impact, the report adds, but it’ll also lead consumers to frame their purchasing decisions in a positive light.

For Teng and her colleagues, the Bombay Hemp Company (BOHECO) is an example of a brand that is using a lower-impact fiber, in this case hemp, as its selling point.

“Hemp is three times as strong as cotton, biodegradable, and very durable. It also requires less water and land, and fewer pesticides and herbicides than cotton for cultivation,” she said. “Through its innovation lab, BOHECO is finding ways to convert hemp into food, clothing, and shelter products, and the company created its own label, The Hemp Couture, under which it brands and sells its product.”

[Read more about attempts to lower the impact of fashion on the planet: These Companies Are Meeting Consumer Demand for Responsible Fashion]

Transparent and responsive supply chain

Tragedies such as the 2013 collapse of the Rana Plaza factory building in Bangladesh have writ large the importance of transparency in the garment supply chain.

“Without transparency, stakeholders—the businesses themselves, governments, consumers, regulators—cannot know if critical environmental and labor standards are being complied with,” Teng said. “As an industry we need to move towards timely access to reliable information that can be verified.”

The good news is, brands are ready to listen. “I think we’ve really witnessed a transition with the way that fashion brands are prioritizing transparency,” said Nicole Rycroft founder and executive director of Canopy, an organization that works with the fashion industry to eliminate ancient and endangered forests from their viscose sourcing.

A.T. Kearney and Ashoka’s paper listed Canopy as one of the groups that is working to usher “unprecedented transparency and investment” into the morass that is the traditional fashion supply chain.

The shift in social awareness aside, transparency can also help brands mitigate risks that could haunt them later on.

“A lot of brands are now starting to publish their factory lists, their supply lists, partly as an outcome of tragedies like Rana Plaza, as well as just ongoing efforts and then just a recognition that transparency can be a valuable tool toward meeting sustainability goals,” Rycroft said. “Like when you have shadows, then it creates places for bad practices to hide and transparency helps shine a light into those places. It’s not a guarantee, obviously, but it does help enable best practices and brands are recognizing that.”

[Read more about tools helping improve transparency in fashion: New Green Supply Chain Map Links Brands to Their Chinese Suppliers]

Closing the loop through recycling

Circularity is the fashion revolution that is simmering under most people’s radar. A growing wedge of apparel firms, including bigwigs like H&M, Zara, and Levi Strauss, are throwing their weight behind the so-called “circular economy,” which refers to a system where products are made to be repurposed and recycled, rather than tossed into a landfill at the end of their useful lives.

The current linear system of making clothes cannot stand, said Teng. “We need to improve the way apparel is designed and used and repurposed and recycled, improve resource efficiency, and phase out the use of harmful substances,” she added.

Companies like Evrnu, a Seattle-based startup that breaks down old cotton waste into premium, good-as-virgin fiber, are the way of the future, per Teng, and for good reason: Current resources cannot support our breakneck pace of clothing consumption.

Evrnu’s overarching goal, according to Stacy Flynn, its CEO, is to “decouple growth from resource extraction.”

“The natural resources needed for the creation of textiles are significant,” Flynn said. “We can’t grow our industry in a way the market is projected to demand over the next 20 to 25 years unless new innovations become available that significantly reduce impact to global air, water and soil.”

This conundrum presents one of the “greatest design challenges of our century,” one which newer, more effective modes of recycling has the potential to crack, Flynn said.

“Converting what is currently perceived as waste in to a viable resource is one way in which we can unlock embedded value, reduce impact to natural resources while simultaneously improving business performance,” she added.

Lower costs

An altruistic approach to doing business may be well and good, but social innovation can lower costs, as well, the report said. Among the firms that embodies this win-win scenario, Teng said, is Levi Strauss, which, after years of research and development, discovered a way to reduce the water used in its textile-finishing processes by 96 percent.

“Levi’s was able to save over 1 billion gallons of water in 5 years,” Teng said. “And it decided to make these techniques open source: not just training vendors to significantly reduce their production costs, but inviting its competitors to do the same, as well.”

Saving water might also have motivated Patagonia to use Tencel, a closed-loop fiber made from regenerated wood pulp from managed forests. Tencel production, as the report noted, uses 95 percent less water than equivalent fibers.

“For businesses, the financial or profit emphasis—and pressure—is always inherent,” Teng said. “But for businesses that are willing to take the risks, there are clear rewards for those who are able to drive this innovation with the right leadership and execution.”