Fashion giants are failing to address environmental concerns

A new report by Remake World has found that major fashion brands are failing to address environmental and social issues, with assessment scores from the study remaining largely similar to last year's findings. Remake World analysed 52 leading fashion companies, including Ralph Lauren, Levi Strauss, Primark, Boohoo, and Shein, to grade them on 88 individual metrics. These measured the following areas:

·         traceability of supply chains

·         wages and wellbeing of workers

·         commercial practices (how fashion companies treat suppliers)

·         raw materials

·         environmental justice

·         governance[i]

Worryingly, the average overall accountability score for an individual fashion company was just 14 points out of a potential 150, the same as in last year’s research. Looking at the results by category, the average scores for traceability (one out of eight points), wages and wellbeing (two out of 23), commercial practices (one out of 15), and governance (three out of 42 points) all stayed the same versus the 2022 research. However, there was slight improvement with raw materials (three out of 20 possible points) and environmental justice (five out of 42) both improving by 1 point compared with last year.

Few brands are meeting the criteria for change…

Whilst no fashion brand outright excelled in terms of scoring, Everlane performed the best compared with its peers; achieving 40 points out of a possible 150, followed by H&M with 37, and PUMA with 36. At the bottom of the pile was Fashion Nova, Missguided, SKIMS, and Temu who shockingly all scored 0. Notably, less than half of the companies studied (24 out of 52) engaged with Remake World to provide data on the metrics covered, meaning that information not held in the public domain may have been unaccounted for.

In terms of sustainability, only 6% of companies, including H&M Group and Burberry, met all four of Remake World’s climate demands, which include publishing full emissions data, setting short-term 1.5C aligned science-based targets, setting long-term net-zero targets and demonstrating a reduction in total greenhouse gas (GHG) emissions compared to base years.

On wages, the research found that whilst fashion companies ‘talk a big game’ on employee remuneration, they found little evidence to support this. Only one company- PUMA stated that it paid a living wage to all direct employees globally (including retail and logistics).and just two companies- Cotopaxi and Hanesbrands Inc. publicly disclosed the percentage of garment workers who receive living wages. Further, on executive pay, only five companies said they have begun addressing governance issues by including and clearly defining specific social and environmental metrics in calculating their executive bonuses.

… As new due diligence regulation looms in the EU

Fashion brands operating within the EU should be concerned over their ESG credentials, given proposals currently moving to a vote in the European Parliament. The Corporate Sustainability Due Diligence Directive (CSDDD) was given provisional agreement by the EU Council and Parliament in December last year. It would require both EU and non-EU companies to perform environmental and human rights due diligence throughout their operations, subsidiaries and value chains. Therefore they would need to proactively mitigate risks associated with their global operations, such as forced labour, pollution, deforestation, and excessive water consumption.

The legislation is currently being finalised by EU lawmakers, as they attempt to push the bill through by this coming Friday (15^th March) at the latest, having faced blocking signals from Italy, Austria, and Germany- that’s according to Euractiv[ii]

As we noted previously, implementation of this law may have wider implications due to the ‘Brussels Effect’ - the idea that EU regulation is exported through market mechanisms and can be used to model regulation in countries outside of the EU. As a result, we could see this type of ESG regulation being modeled in other parts of the world in the years to come[iii].

References

[i] Remake-Fashion-Accountability-Report-2024.pdf

[ii] EU negotiators arm CSDDD text against last-minute political push – Euractiv

[iii] A gap in corporate spending on net zero and how regulation can save the day: examining Fidelity’s 2023 ESG Analyst Survey (zerocarbonacademy.com)