Fashion Retailers’ Green Credentials ‘Meaningless’ Without Better Supply Chain Engagement

New report from Planet Tracker analyses 3,900 companies across the textile supply chain, arguing retailers need to be more actively engaging with suppliers and manufacturers to help them as they work to reduce emissions

• Planet Tracker has created a new interactive dashboard to help investors better understand the textile value chain 

• A significant mismatch between financial value and emissions in the textiles industry exists – with fabric manufacturers and producers responsible for 76% of textile’s impact on climate , but only 7% of its market capitalisation
• Regulators are adopting an increasingly aggressive approach to ‘green’ claims in the textile industry – making it more important than ever for investors to demand greater transparency on the textile value chain
• Planet Tracker calls on retailers to work with their supply chain partners to improve traceability and environmental impacts 

New research from Planet Tracker finds that textile retailers need to actively engage with supplier and manufacturer efforts to reduce negative environmental impacts if brands want to claim ‘green’ credentials. 

Analysing 3,897 companies from across the textile supply chain, Planet Tracker’s new report Following The Thread, finds a significant discrepancy between the location of negative environmental impacts and the location of capital within the supply chain. Fabric Manufacturing and Fibre Production are associated with much of the textile supply chain’s environmental impact – 76% of climate change impact, 74% of resource consumption and 61% of its water use, while only making up a collective 18% of its revenues and 7% of its market capitalisation. 

Clothing retail on the other hand, represents 54% of revenues and 63% of market capitalisation, while only marginally directly contributing to environmental impacts. 

Following The Thread finds that frequent outsourcing of manufacture leads to poor supply chain visibility and limited direct control of most of the negative environmental impacts of the industry by retail companies and investors. 

Analysis of the current environment finds that regulators are adopting an increasingly aggressive approach towards responsibility for supply chain impacts, such as the European Commission Directive on corporate sustainability due diligence, and we are also seeing international efforts to clamp down on disingenuous ‘green credentials’. Without significant efforts by the textile retail sector to work with their supply chain and help the push for real change, these measures could result in significant regulatory exposure for many major companies. 

Richard Wielechowski, Senior Investment Analyst (Textiles) at Planet Tracker, comments: “While retailers themselves produce relatively few emissions, green claims among brands are meaningless when the clothing they sell contributes to accelerating global warming and polluting water supplies with toxic chemicals.

“That’s why Planet Tracker is calling on investors to pressure retailers to work with their supply chains as they look to reduce their negative environmental impacts. Brands can for example help via direct funding or order guarantees and together with their suppliers drive meaningful action across the whole value chain. 

“Previous Planet Tracker work showed  that investment in the supply chain to improve environmental impact, such as through heat recovery or water reuse, will not only help retailers substantiate green claims and meet pressing Net Zero commitments, but will generate positive returns quickly. Our ‘Easy Unpickings’ report showed that such investments can generate significant environmental benefits and pay back very quickly. We estimated that an average one-off investment of USD 455,000 produced annual savings of USD 369,500, meaning an average payback period of 13.8 months.”

The report can be downloaded in full here.