McKinsey: Fashion Industry Actions That Would Slow Climate Change

Climate and energy experts have been warning the world about the effects of climate change for decades, but now, the fashion industry finally seems ready to address environmental problems. The industry was responsible for 2.1 billion metric tons of greenhouse gasses in 2018, which was roughly 4 percent of the global total that year, according to data from McKinsey. The fashion world knows it needs to change its operating model. A report called “Fashion on climate: How the fashion industry can urgently act to reduce its greenhouse-gas emissions,” which was co-authored by McKinsey & Company and Global Fashion Agenda (GFA), states that the world will miss its 2030 emissions reduction targets if the fashion sector continues on its current path. That would, sadly, lead to faster climate changes. To reach the targets established by the Intergovernmental Panel on Climate Change (IPCC) and ratified through the 2015 Paris agreement, the fashion industry would need to cut its greenhouse gas emissions to 1.1 billion metric tons of CO2 by 2030. However, the current report says that the fashion industry “is set to overshoot its target by almost twofold, with emissions of 2.1 billion metric tons of CO2 equivalent in 2030, unless it adopts additional abatement actions.” This analysis lays out the pivotal contribution of each stakeholder and highlights their responsibility for making the fashion industry more sustainable. According to McKinsey and GFA, the COVID-19 pandemic has influenced both private and public decision-making by moving sustainability to the forefront. The report also mentions that although COVID-19 has ravaged most of the world, fashion executives have changed their focus to making their companies sustainable. In fact, a recent opinion poll shows that around half of fashion executives say that sustainability has moved up their agendas. Mitigation While 70 percent of the fashion industry’s emissions came from upstream activities such as materials production, preparation, and processing, 30 percent came from downstream retail operations. If we don’t reduce that carbon footprint, the fashion sector’s GHG emissions will probably rise to around 2.7 billion tons a year by 2030 — an annual growth rate of 2.7 percent, according to data from the report. Under an “accelerated abatement” phase, the report’s authors estimate that annual emissions would be reduced to around 1.1 billion tons. In this phase, the priority falls on upstream operations and improvements on energy-efficiency. Brands can deliver on roughly 20 percent of this reduction, and 40 percent could come from sustainable consumer behavior changes. The report highlights that these changes won’t come with exacerbated costs. “Around 90 percent of the accelerated abatement can be delivered below a cost of around 50 per metric ton of GHG emissions,” it states. “Around 55 percent of the actions required will lead to net cost savings on an industry-wide basis. The remaining actions will require incentivization in the form of consumer demand or regulations to deliver abatement.” Making purpose-driven commitments Managing stakeholder commitments is important, and we should prioritize reducing emissions from upstream operations as well as fully decarbonizing the fashion industry. “The decarbonization of upstream value chain activities has the potential to drive 61 percent of the ambitious 1.7 billion metric tons of accelerated abatement potential in 2030,” says the report. For instance, decarbonized material production could lower annual greenhouse gas emissions by 205 million metric tons, and decarbonized material processing could decrease GHG emissions by 703 million metric tons. Reducing production and manufacturing waste and decarbonizing garment manufacturing would also assist the industry’s efforts in becoming more sustainable. Reducing emissions from brands’ operations Brands can become more serious about cutting greenhouse gas emissions, and they can do that by improving their material mix. This process alone would avert 41 million metric tons of GHG emissions. Furthermore, they could increase the use of sustainable transport, make packaging more sustainable, decarbonize retail operations, minimize returns, and reduce overproduction. Encouraging sustainable consumer behaviors Consumers also have an important role to play. “Around 21 percent of accelerated abatement potential is directly related to consumer actions in the use phase and end-of-use phase, enabled by conscious consumption and new industry business models,” says the report. Making informed decisions and embracing a circular business model could help the industry reduce around 143 million metric tons of GHG emissions in 2030. Rental, subscription-rental, repair, and re-commerce are convenient business models that could make the apparel industry more environmentally-friendly while also providing value and convenience.

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McKinsey: Fashion Industry Actions That Would Slow Climate Change