Investing in sustainable fashion may be widely discussed, but it is still a relatively new concept, meaning there are plenty of gaps. One such gap occurs in the funding of sustainable production processes. Brands have noticed that gap and are now trying to fill it by putting up millions of dollars to grow material production technology and new start-ups. Is it enough, though? The fashion industry is worth trillions of dollars, so how much of an impact will a few million make?
Big fashion brands are investing millions in sustainable fashion startups and projects.
Kering’s recent launch of Conservation International and the Kering Fund for Regenerative Agriculture brings new attention, and money, to sustainable production. Specifically, just over $6 million will go to promote better material production used in Kering brands. That’s not the only investment coming from a big fashion group. At the end of 2020, H&M Group and its investment arm H&M Co:Lab, announced they would be putting $9.3 million into Renewcell, a textile recycling start-up that was just publicly listed in Sweden. Both Kering and H&M Group are starting to see the benefit of directly investing in sustainable production projects. Unfortunately, their environmentally-friendly investments are not without criticism. Kering and H&M Group brought in revenues of $19.2 billion and $24.3 billion respectively in 2019, making those couple million commitments minuscule in comparison. Now questions are being raised. Are these investments enough when it has been suggested that a much more considerable amount is needed to make real changes? And can these multi-billion dollar companies be pulling more weight?
A report suggests that hundreds of billions of dollars are needed over the next decade.
Manufacturing and production technology faces a funding shortfall while consumer-facing companies providing a final physical product get suitable investments. Financing the transformation in the fashion industry — a report released in 2020 complied by Fashion for Good and Boston Consulting Group — reveals how much funding is missing. Between $20-$30 billion is needed per year to develop and scale innovations and business models that will make fashion more sustainable by 2030. In general, financing for sustainable companies has increased, but it has not trickled down to sustainable production yet. Innovative brands like Allbirds or ThredUp receive plenty of funding, but both of those brands are focused on reducing the amount of waste from fashion. Start-ups that focus on changing the way fashion is created receive little attention from both media and investors. Companies like Kering and H&M Group can fill the funding gap since they don’t need money from outside sources. Plus, investing in sustainable production improves the image of a brand because it shows a focus on addressing the root of the fashion industry problem rather than investing in end-of-life schemes which can be seen as simply putting a bandaid over the bigger concern.
Consumers should question if too little investment is a form of false advertising.
While investing in sustainable production is more effective in changing the fashion industry than investing in something like resale, consumers should still be wary of brands that use their investments as marketing. Several million may seem like a lot at first, but when it is spread over multiple years and is compared with the revenue the brand makes and the amount needed to fill the funding gap, it is not much. H&M and Kering’s combined investments of over $15 million is far less than 1% of the money needed. And it is not even remotely comparable to the amount of money each brand takes in. Consumers often view false advertising as a brand not living up to what they promise, but not doing enough when it is clear a brand can do more can also be considered misleading. Of course, these small investments may increase in the future. H&M has worked with Renewcell for years, helping it become the publicly listed company it now is. But instead of cashing out, H&M chose to invest even more money into the recycling technology, showing dedication to the cause and not just a short-term, profit-focused scheme. Other brands could follow suit, especially if their initial investments help them achieve their larger sustainability goals.
The Bottom Line:
More brands are investing money in sustainable production, where historically there has been a deficit of funding. But, those investments typically ranging from $1-$10 million are small compared to how much money is needed. Brands would be smart to increase their investments to promote noticeable changes and avoid upsetting consumers.
Why big brands are investing in sustainability start-ups (Business of Fashion)
Financing the transformation in the fashion industry (Fashion for Good and Boston Consulting Group)