ESG Standards in Textiles


The top 20 equity investors in the fashion industry have holdings of over $275 billion, which is not particularly surprising considering it is the third largest manufacturing sector (behind automobiles and technology). What is surprising, however, is its regular inclusion within sustainability funds. The Ellen MacArthur Foundation estimates the industry contributes c.10% to global carbon emissions, more than international flights and maritime shipping combined.


Fast Fashion

The rise of ‘fast fashion’, compounded by a business model that benefits from high consumption rather than high quality, has seen clothing production double since 2000 and average consumption increase by 60%. In the end, this leads to increased waste, with less than 1% of used clothing being recycled into new garments. The remaining is typically incinerated or finds its way to landfill.

With ESG becoming more prominent, are sustainable funds an active representation of where investors believe their money is being distributed? Typically, these funds strip out the obvious candidates within oil & gas and defence, to leave the rest. The textiles industry can certainly talk the talk, throwing terms from organic cotton to recycled fibres out there, while still heavily relying on oil for synthetic fibres, chemicals for dyes, and fertilisers to grow cotton.


The state of the industry

It could be argued that trying to make change from within, as an active shareholder, is better than staying away. However, the industry has been slow to adapt on areas where there isn’t a profit to be made. A report by non-profit Planet Tracker found that of the top 30 textile producers by revenue, over half lack any link between ESG metrics and executive compensation. Only two, Adidas and Puma, had clear links between sustainability objectives, reporting and pay.

Of the 99 fashion companies to register for the industry charter for climate action, just 44 have set public climate targets needed to keep global temperatures under 1.5°C. One obvious point is the lack of information in the sector and the difficulty in extracting that data accurately across a global supply chain to measure the negative impact.

This presents an opportunity for someone to fill, with ESG data gathering and reporting becoming a hot topic, it is only a matter of time before it’s implemented end-to-end in textiles to present consumers the full picture. The other side is to improve the materials used, making them longer lasting and improving recyclability.


Closing thoughts

The fastest method to lessen the environmental impact is also the simplest and, unfortunately, least likely – to push consumers to reduce unnecessary consumption. The first step here is education, the more ESG data that can be found and presented, the better informed consumers are on the impact their purchases have, and in deciding which companies best reflect their values.


By Conor Barrett on 01/06/2023