As an analyst at Polestar, one of my roles is to write proposals for prospect clients. The area of focus in a proposal is the key value drivers of a company-the reasons why an investor or buyer would see future growth. A big trend right now that I have seen in many sectors is a push in ESG policies. Many investors, especially PE firms, are looking for companies who integrate ESG policies into their business model.
With consumer products – specifically fashion brands – this may be one trend that the industry will need to be “à la mode”.
The fashion industry is notorious for a lack of ESG policies. From fast fashion, to sourcing labour, the industry never has focused on being environmentally nor labour friendly. However, one of the UK’s biggest online fashion retailers, Boohoo, is setting the trend in the right way.
In the latest annual report, Bohoo has now tied executive remuneration packages around ESG policies to show its commitment to environmental and social change. This change follows an investigation into Boohoo’s unethical supply chain, which led to the company losing almost £2bn of its value. With Bohoo leading the way, many other retailers will follow in a similar manner.
While fashion companies focus on turning green, a new subsector emerging from ESG policies in fashion is a “resale revolution”. To combat fast fashion and excess waste, consumers are turning to secondhand retail.
A new demand for secondhand retail created resale platforms, such as Depop, Thredup, and Poshmark. These platforms grew 25 times faster than the broader retail sector in 2019.
However, the resale marketplace is new and there are some kinks. One of the biggest issues with resale platforms is the lack of authenticity. Consumers are worried that the products they buy on these resale platforms won’t be authentic, as its not purchased from brands directly.
To grow this new subsector within consumer products, there will need to be a push for innovative technology, combined collaboration models with brands, to boost this market. Digital authentication technology already exists, but will need to be embraced on a larger scale by resale platforms.
Final Thoughts
ESG is a trend that we have noticed with our clients in the consulting, technology, and business services industries. With bigger brands aligning their ESG policies and the emergence of resale platforms, we are going to see this environmental and social push in consumer brands as well.
What are you doing to meet the ESG needs of the future?
Marketplaces and brands should collaborate on new systems to authenticate goods, which would fight counterfeiting, encourage sustainability habits among consumers and unlock increased resale growth.
