Vol 24: Three Themes from the McKinsey + BoF 2021 Edition

Sustainability, Digital, and the Rise of China

This newsletter is about the fashion world needing to embrace the challenge of transforming into a more sustainable industry.

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This year the 5th edition of The State of Fashion report focused on the post-pandemic recovery overall. 

Spoiler alert: it won't get any easier in 2021, but for the first time in a long time, the fashion industry has an opportunity to rethink its priorities and revamp itself.

The pandemic accelerated three major themes already in place the year prior: digitalization, sustainability, and the rise of China (more on China here). 

Let's look closer at the first two:

LONG LIVE DIGITAL

As the report states, digital and data analytics will play a key role on all fronts in 2021. From a sustainability standpoint, data analytics and artificial intelligence will become an integral part of the product development process. Here are a few examples of the demand-focused approach already implemented by brands:

Moreover, leveraging data and analytics will allow companies to predict footfall, manage assortments and build personalized offerings. Expect more experiments with live stream and social commerce, online-offline integration to come (e.g., Nike's House of Innovation store in Paris, Burberry's "Social Retail" store in Shenzhen, French footwear brand Veja's "services" concept store in Bordeaux).

SUSTAINABILITY IS NO LONGER AN OPTION BUT A NECESSITY

Some sustainability-themed statistics from the report.

  • Just 60% of garments are sold at full price

  • Garment production volumes are predicted to grow by 2.7% annually between now and 2030.

  • 12% of fibers are still discarded on the factory floor

  • 25% of garments remain unsold

  • Less than 1% of products are recycled into new garments

  • 65% of consumers are planning to purchase long-lasting, high-quality items.

  • Overall, consumers considered "newness" one of the least important factors in making purchases.

  • More than 3 in 5 consumers said environmental impact is an important factor in making purchasing decisions.

2020 was the year of awakening for many. As consumers' sentiments are shifting, business leaders are beginning to reconcile with their new reality. Here are a few great quotes from the report:

"The industry has an oversupply problem, which is an environmental problem as well." - José Neves, founder and CEO of Farfetch

"It's the system behind it that is broken, and that's where I see that we have such a big responsibility to change it. The pace we've had the last decade cannon be the pace that we have in the coming decade" - Helena Helmersson, CEO at H&M Group

"We cannot continue to consume at the rate we have, so there is a huge question that we need to answer. We will probably end up selling less, won't we?" - Anne Pitcher, Managing Director at Selfridges Group

The silver lining: the crisis increased the importance of sustainability in purchasing decisions and accelerated the need for circular business models. Indeed, as McKinsey puts it (p.66):

Circularity may become the biggest disruptor to the fashion industry over the next decade.

With demand for fashion much unlikely to return to pre-pandemic levels, this leaves us with a big question: what will happen with unsold inventories?

The answer to the fashion industry's oversupply problem may lie in repeated value creation through "Rs" - recycling, refurbishing, reselling, renting, repairing.

Here are some examples from the report of those leveraging circularity into their business models:

  • Womenswear brand Dai Wear produces recycled and recyclable fabrics and uses biodegradable yarns for seams and air-dried fabrics to reduce washing needs.

  • Scottish textiles firm Johnstons of Elgin created EveryYarn, a material made of used yarns.

  • Levi's and Patagonia partnered with Trove to introduce buy-back programs; luxury leather goods brand Mulberry launched Mulberry Exchange.

  • Resale platform ThredUp partnered with Reformation, Abercrombie & Fitch, Madewell and Gap

The last two examples also illustrate the move from transactional relationships between companies to deeper partnerships to meet sustainability goals. As consumers' values shift towards social justice, there will be an increasing demand for more accountability and transparency from brands.

As the report states, the apparel value chain's labor-intensive nature and wide geographical footprint contribute to its high exposure risk to extreme weather, natural disasters, financial crises, and other black swan events. Companies will need to nurture medium- to long-term strategic relationships with suppliers to rebalance the fashion industry's supply chain.


Engineered by Nature

Each week we highlight one cutting-edge sustainable material innovation. Hit reply if there are any materials you’d like us to include!

Good news for olive lovers: Biolive, a Turkish startup, developed a lightweight polymer made of olive oil production waste. The material is not only less carbon-intensive compared to fossil fuel-based plastics but also decomposes within a year. Using an innovative method, around 5 tonnes of olive seeds can be turned into 3.5 tonnes of bioplastics.

Currently, the material can be used in electronics, food, and cosmetics product packaging. Other Mediterranean countries are catching up with Spain introducing a similar project to create Oliplast.


Around the news

Amazon to Be World’s Largest Corporate Renewable Energy Purchaser - Amazon is set to decarbonize its global operations with an ambitious project, the largest corporate investment in renewable energy in a single year.

How can fashion make marketing more sustainable? - great piece from Vogue Business on how to avoid greenwashing in marketing campaigns. Being transparent, while aligning the brand's values with marketing messages is key.

29 Sustainability efforts of the fashion industry in November 2020 - Fashion United's November roundup: from net-zero carbon targets to a myriad of sustainable collections.

Mount Everest is full of microplastics - the microplastics problem is not confined to the ocean and worse than we thought. This is how far and wide microplastics have spread, reaching the highest peak in the world.


NEW DYES - innovations in textile dyeing technologies that aim to reduce the use of resources, toxic substances, and the pollution and health hazards caused by current industrial dyes and processes.

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