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Global Fashion Agenda Lays Out Six-Step Sustainability Roadmap

Shaken by a global pandemic, fashion leaders are nonetheless calling for their industry to band together and chart a new, sustainable path forward.

In a special edition of its CEO Agenda report, the Global Fashion Agenda and McKinsey and Company identified six opportunities for executives to ensure the industry’s resilience and promote sustainable outcomes throughout the coronavirus crisis, and beyond.

“Over the following 12-18 months we need to adapt to the immediate challenges that surface and in parallel keep our long lens tuned in with the scope of the future,” wrote Eva Kruse, CEO of the Global Fashion Agenda.

The coronavirus pandemic has caused “a deep economic shock that pushes companies and societies to the point of financial distress,” Kruse said, warning that as the industry grapples with these destabilizing effects, “sustainability risks becoming secondary.”

Unprecedented disruptions to value chains and retail locations, along with the added pressure of increased consumer scrutiny, have created an intensely challenging environment for retail. She warned that short-term survival measures should not become the sole focus, though, even during a period of uncertainty.

“This crisis presents a unique opportunity to reevaluate the lexicon of fashion and to evolve individual business models and industry systems alike,” she added.

Mapping social and environmental impacts

The crisis has heightened the need for the tracking of social and environmental impacts across the supply chain. Traceability is a must, the groups said, for creating a baseline for target-setting in areas like quality control, cost saving, and reducing inefficiencies.

Providing transparency—both internally and externally—can give companies the leverage they need to communicate credibly about their supply chains and the efforts they’re making to promote sustainability. Thorough mapping can also help companies collaborate more efficiently and dependably with their supply chain partners, especially during future challenges.

“The disclosure of information about company values, supply chain policies, supplier base and purchasing practices enables greater accountability and allows frontrunners to exemplify responsible business practices,” the groups wrote.

Consumer trust and loyalty

Two-thirds of consumers say that sustainability has become a more important priority to combat climate change in the wake of the coronavirus crisis, according to the Global Fashion Agenda and McKinsey’s survey. More than 80 percent of shoppers believe that workers in poor countries need support through the pandemic, and 45 percent value brands that they feel have made meaningful contributions to support them.

Fashion brands are attracting more attention than ever when it comes to social practices and safety measures meant to protect workers and consumers. Before the outbreak, shoppers were already making switches to brands that espouse sustainable practices—evidence that consumer appetites have shifted.

Seventy percent of survey respondents said they expected to stick with brands that managed to build consumer trust during the crisis, showing that today’s actions could have lasting consequences.

The Global Fashion Agenda and McKinsey analysts recommended that brands strive for transparency in their communications with consumers about the challenges they’re facing, and about the efforts they’re making to keep up with their sustainability commitments.

Deepening supplier relationships

According to the joint survey, 73 percent of sourcing executives expect to see closer partnerships between companies and their suppliers, moving away from the transactional relationships that have dominated in the past.

That’s because the crisis has highlighted the “strong connectivity” of the fashion industry, analysts said, and partners across the supply chain must come together to support sustainability agendas and create proactive solutions to ward off future disruptions.

“By co-investing in innovation and sharing financial incentives with suppliers, companies can continuously improve their environmental and social impact while positioning themselves for strategic partnerships,” they wrote, adding that 60 percent of sourcing executives expect to see further consolidation as a result of the crisis.

Sixty percent of executives also expect automation to accelerate after the pandemic, and the Global Fashion Agenda encouraged them to support transitioning workforces to mitigate the impacts of technology on jobs.

Create and scale new business models

Inventory levels have exploded in warehouses and across the global supply pipeline, while lockdowns have decreased consumer demand. The industry must create innovative solutions to deal with this season’s unsold products, analysts said, and address the issue of overproduction more broadly.

The vast majority (71 percent) of consumers indicated that their interest in more high-quality garments, along with circular business models like resale, rental and refurbishment, would grow after the crisis. More than three-fifths (65 percent) of surveyed shoppers said they would be support fashion brands delaying the launch of new products by up to a year as a result of the coronavirus outbreak.

The current buildup of unsold—and largely unwanted—product should precipitate big moves toward circular materials and product flows, analysts said. The strategy behind seasonal product lines should be rethought, they added, and factories’ capacities should be augmented to include upcycling and recycling services.

Accelerate new digital processes

With the shutdown of most of the industry’s physical operations, virtual processes are becoming more important than ever.

Video conferences and 3D design software are among the more promising trends, analysts said, with 45 percent of executives saying they expect them to become part of their organizations’ digital transformations. More than one-third of executives said they expect virtual prototyping to become table stakes across the industry.

End-to-end digitalization, from design to sales, virtual showrooms, sampling and AI and VR experiences can help with inventory management, cash flow, waste reduction and sales, analysts said. Agile, demand-driven business models can also lead to fewer markdowns and less waste.

About three quarters of sourcing executives believe that in-season retail and smaller production volumes will accelerate following the crisis. “The current pause in retail presents an opportunity to reinvent the cadence of the fashion system, to realign seasons and to reduce overproduction,” analysts wrote.

Strengthen e-commerce

In the wake of the crisis, 40 percent of shoppers who didn’t shop online previously began using online channels. What’s more, 26 percent expect to shop less at physical stores even after the crisis ends.

According to the Global Fashion Agenda and McKinsey’s survey, 35-40 percent of sales from April through September are projected to come from e-commerce.

The shift could lead to permanent changes in store networks, like a reduction in overall brick-and-mortar space, they said. “This generates a clear opportunity to lead the sector’s recovery by building resilient, efficient and robust e-commerce models of the future that are low carbon, allow safe and secure workplaces and hold involved parties accountable,” analysts wrote.

Additionally, improving sizing algorithms and digitalizing logistics and operations could provide sustainable value, as it would increase efficiency and minimize returns.

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