Should governments or nonprofits fund decarbonization projects?

On August 26th, McKinsey & Company released a report discussing the fashion industry’s role in climate change. The report not only pointed out how many carbon dioxide equivalents need to be reduced, but also how to achieve a dramatic abatement of greenhouse gases. The management consultancy firm concluded that the fashion industry needs to reduce emissions to 1.1 billion metric tons of CO2 equivalent per year by 2030. The industry is currently on track to reach 2.1 billion metric tons of CO2 equivalent per year by 2030 if its current decarbonization efforts continue. To change the trajectory of greenhouse gas emissions by 1 billion metric tons per year, additional decarbonization actions will have to have to take place. These actions will come in the form of renewable energy replacing fossil fuels and changes in materials, transportation, and packaging.

While roughly 55% of greenhouse gas reducing actions could lead to net cost saving for the industry, there is a significant upfront investment required to get there. McKinsey & Company estimates that “almost 90 percent of the measures identified would cost less than $50 per metric ton of GHG emissions abated.” $50 doesn’t seem like much until it’s added all together. Tens of billions of dollars — possibly more — would be needed over the next nine-plus years. Don’t worry about this cost falling on the consumer, though. The McKinsey & Company report and analyses of the report conclude that retailers and brands would be responsible for shouldering most of the cost. Suppliers who switch to renewable energy will be able to increase prices to brands, but brands will be hesitant to pass along price hikes to consumers, especially since studies show consumers are already wary of the higher cost of sustainable fashion. Yes, in the long run, investments in decarbonization will pay off, but those payoffs may not come for years or even decades. Right now, when retailers and brands are fighting to stay afloat, there is not much extra money sitting around to tie up in long-term projects. And with revenues contracting by double-digit percentages and slow recoveries so far, it could be a year or years before brand revenues return to 2019 levels. With increasing urgency to reduce greenhouse gas emissions in fashion and dwindling time, it is okay to take the pressure off brands and instead invite global governments or nonprofits to fund decarbonization projects?


Governments and nonprofit organizations have gotten involved in fashion industry regulation and funding before, so the concept is not new. In June 2019, the French government announced a ban on the burning of unsold non-food items. This regulation was explicitly in response to companies like Burberry and Amazon burning unsold goods instead of recycling them or sending them to the resale market. Government involvement in the fashion industry was also requested in April this year when organizations like the American Apparel and Footwear Association and Council of Fashion Designers of America requested U.S. Congress provide more stimulus to aid in recovery from the COVID-19 related store closures.


Nonprofits have also been actively involved in regulating and funding change in the fashion industry. London-based nonprofit, Fashion Revolution, is responsible for creating the viral campaign Who Made My Clothes, forcing more ethical production and better treatment of garment workers. More recently, Slow Factory, a nonprofit focusing on circular fashion, launched Super Fund, created to fund social and environmental justice. The fund launch was accelerated to help designers affected by the Beirut explosion. Those who need funding will receive money from Phase 1 of the Super Fund. Like those in Lebanon, designers and brand owners in the fashion industry can benefit immensely from outside help. Unfortunately, the subject of intervention in private company operations remains a touchy subject.


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Without a doubt, it is necessary for funding for decarbonization projects to come from other sources, not just retailers and brands. Reducing fashion’s greenhouse gas emissions is far too important a task to leave it up to one sector of the industry. However, government intervention in private business matters has notoriously been challenged by brands and consumers who are opposed to the threat of government overreach. Governments also suffer from bipartisan disagreements and slow action — the French government’s ban on burning won’t actually be enforced for four years. On the other hand, nonprofits operate much like for-profit brands and have more flexibility to choose which projects to fund and how quickly to move.


Moreover, consumers who are willing to pay more for sustainable fashion can donate to nonprofit organizations, which will then fund decarbonization projects. This is a way for consumers with the means and will to pay for sustainable fashion to do so, while other consumers can reap the benefits without paying the cost, essentially making sustainable fashion more accessible to a broader group of people. Nonprofits also have the ability to provide more than just money to brands. Advice and consulting on sustainable fashion are still in short supply, and many brands need to know how to spend sustainable project funding money more efficiently. Of course, individual investing in sustainable business practices is an excellent way for conscious investors to support brands and get something in return, but decarbonization is an extremely time-sensitive subject and needs more hands-on action and oversight. Most retailers and brands want to do better by the environment, but struggle to do it on their own. They need accountability, advice, and in some cases, funding, and they will need help from outside sources, whether it’s government, nonprofits, or somewhere else.