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5 Davos Themes to Watch for Fashion and Retail

Influential leaders, CEOs, presidents, and public figures descended on Davos earlier this month for the World Economic Forum’s Annual Meeting after a three-year hiatus.  The post-pandemic winter forum confronted calls from activists, civil society, business, and academia for urgent action on a number of interconnected challenges, including the global economic crisis, war, climate, human rights, income and gender inequality.

During roundtables and breakout sessions held on and around the famous Promenade, I watched as the apparel industry was reprimanded with hard-hitting data about its declining environmental and human rights record, and the fueling of unhealthy over-consumption driven by cheap products from the Global South. Climate activists’ cries of greenwashing by multi-billion-dollar apparel companies compared them to banks and finance institutions that have signed up to net zero pledges but who also continue to invest heavily in fossil fuels.

Academics, NGO leaders and industry insiders pressed upon the impact of fashion on the environment—responsible for 4 percent of carbon emissions, creating 20 percent of global wastewater, with 35 percent of microplastics pollution in the ocean coming from micro-fibers shed by synthetic fibers, and 80 percent of clothing as either landfilled or incinerated.  With a reported 2 percent of production workers earning a living wage, 98 percent of the 75 million people in the global supply chain remain in systemic poverty and exploitation.

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Dialogue was productive and focused on building the industry’s capacity to generate net positive social and environmental impacts through collaboration, new business models, materials innovation, policy levers, and greater accountability.

Here are my main takeaways for apparel and retail industry executives to consider in the year ahead:

‘De-growth’ is not an option: more guardrails are needed

Industry insiders and nonprofits lamented that entirely redesigning the fashion industry business model, reversing its explosive growth and changing customer behavior towards disposable fashion is simply unrealistic.  Consumers were described as prey to aggressive marketing, cheap goods and are “addicted” to on-trend fashion, with a growing middle class in emerging markets driving purchases and corporate shareholders continuing to demand high top-line growth year-on-year, meaning that overproduction and overconsumption are the enemies in the war on waste. 

Industry stakeholders called for tighter consumer protection and enforcement of existing directives around deep discounting and seasonal sales—10 out of 27 European countries have laws prohibiting predatory pricing. There were even calls for new regulation in advertising—like tobacco industry warnings—stating a garment’s negative environmental and social impact and providing consumer advice on garment labels on how to wash clothes to limit microfiber release, for example. 

Circularity can offset growth, Gen Z returns are unsustainable 

Speakers called for a decoupling of industry growth from new production of raw materials, with a systems-thinking approach to constructing and deconstructing fashion so that materials can be recycled and reused. As fast fashion does not have a lifecycle that is going to withstand going through returns more than twice, garments end up on landfills.  The seismic environmental impact of returns amongst Gen-Z—some 50 percent of purchases and costing the industry $75 billion a year—needs a re-imagining of the pre-purchase e-commerce experience.  Whilst retailers are placing a lot of focus on returns management which drives margins up, the root issue is beyond improved product fit and sizing but also digitization tools that can mimic brick-and-mortar and help shoppers see clothes styled on them before purchase.

Sustainability is ‘passe’, ‘regeneration’ is in 

Sustainability strategies must transcend damage reduction and have regenerative and “nature-based” approaches, aligned with the UN SDG’s broader ecological focus. Scientists and environmentalists discussed regenerative farming techniques focusing on water and land for cotton production beyond organic certifications and supporting the restoration of biodiversity. Corporate leaders are being asked to address the interconnectedness of crises: climate breakdown, nature loss as well as social inequality. 

De-concentration of supply chains and ‘friend-shoring’ 

China’s Vice-Premier Liu He declared his country open to the world at the WEF after three years of pandemic isolation, and emphasized international cooperation, economic stability and re-globalization.  India and ASEAN countries were out in full force in Davos championing “friend-shoring” to market-orientated democracies with very positive momentum in growth, manufacturing, and digitalization, and with a much younger and growing population relative to China’s population, which is declining for the first time in decades as well as concerns over human rights.  The World Trade Organization Chief Ngozi Okonjo-Iweala further encouraged U.S. importers to explore trade outside of Asia and bring in Africa and South America to de-concentrate supply chains away from risk.

Retailers must support innovative startups despite early-stage risk

Seasoned venture capital investors in the room insisted that the “clock is ticking” for innovation. Retailers and brands need to provide faster corporate support of early-stage technology companies, from materials science for new eco-textiles to artificial intelligence for supply chain transparency and worker voice, in order to unlock larger amounts of later-stage venture capital for growth.  Corporate adoption at the early stages, despite the risks, can help startups with customer traction, feedback, and product development without which they cannot be successful. The real risk today is that industry innovation in the long-term is thwarted as capital and runway dries up. 

As concluded by one youth activist at the forum, in a brave new world for the apparel industry there would be no bad choices for consumers, with every purchase a net positive for the planet and workers in the supply chain. Without a silver bullet to solve the environmental and social crises that the industry is confronting, we must engage in collaboration and dialogue to move the industry forward and build a new industry playbook.

Jag Gill is a technology entrepreneur in supply chains and sustainability, and the CEO and co-founder of Vertru Technologies, an emerging technology company using blockchain and artificial intelligence to identify supply chain risks.