This article was originally published in Forbes July 20, 2020. We are sharing because of its relevance to the sewn products industry post-Covid-19. It also delves into the relationship between this month’s theme of technology and another hot topic of discussion for the industry: sustainability.
Although no industry has been immune to the impact of COVID-19, the current pandemic has had an especially devastating effect on the fashion space. According to the Sustainable Apparel Coalition’s recent report, with foot traffic in retail and recreation shrinking by 44% in the US and more than 50 percent in many countries around the world, fashion and luxury segments have been hit harder than many other consumer goods and services. The majority of apparel manufacturing facilities have been impacted by order cancellations or suspensions, resulting in mass layoffs and factory closures. With losses mounting, some companies will not survive the crisis. From J. Crew, famous for its preppy basics, to Neiman Marcus, a high-end department store chain, a growing number of already-struggling companies have been filing for bankruptcy.
Although fashion’s role in the global economy cannot be underestimated - clothing retailers, department stores, and cosmetics outlets employ millions of people and generate hundreds of billions in annual revenue – the industry has been criticized as “broken” long before the pandemic. In an effort to continuously grow sales, designers have been churning out collection after collection, ramping up production, while significantly discounting merchandise and sacrificing quality of products and sustainability of operations.
The challenges caused by the pandemic have illustrated how economic, environmental, and human elements are all closely interconnected.
“The crisis has pushed us all to reassess our values, question our personal relationships, work-life balance and generally lifestyle,” said Masha Birger who runs sustainability consulting firm ESG alpha. “Take me for example: I cleaned out my closet. What remains now is a carefully curated capsule wardrobe, containing well-made classic multifunctional pieces. I am now more than ever focused on buying sustainably-made items and generally buying less, and I am not alone. With people all over the world demanding social, environmental and economic change, it is clear that companies in the fashion industry have to reassess their priorities and adapt to the new reality,” said Birger.
Some brands big and small are already pivoting, ramping up their sustainability efforts, or at least re-focusing their marketing campaigns. Many are aiming for sustainable materials. Fashion powerhouse Gucci is launching Off Grid – its first sustainability collection, using recycled, organic, bio-based or sustainably sourced materials like econyl. Belarus Fashion Council has recently staged Ethical Fashion Week raising plastic pollution awareness. Similarly, small maternity clothing brand Emilia George chose eco-friendly fabrics, such as bamboo, cupro, and Tencel-Luxe for its latest Fabrics Matter collection. “However, using organic and recycled materials is not enough for fashion to become sustainable,” underscores Birger, “All stages of production should be sustainable and that includes managing waste and water, limiting GHG emissions and chemicals, protecting workers and paying them fair wages.”
To examine how companies in the fast fashion space see sustainability in the post-COVID world, we sat down with Anna Gedda, the Head of Sustainability at H&M Group.
The fashion industry has been hit hard by the COVID-19 pandemic. How has the pandemic impacted H&M? How has this been different from other crises in the past?
Anna Gedda: The current crisis happened so quickly. I think COVID-19 has been one of the biggest challenges we have experienced in the recent past, and being as big as we are, it has been tough to navigate. One of the main issues has been store closures. At some point, 80% of all our stores were closed, and we have more than 5,000 stores globally. That was challenging in terms of sales and safety measures, as well as our supply chain. First of all, we were worried about keeping our staff and our customers safe. In addition, we had a big drop in sales: our Q2 report shows that our net sales declined by 50 percent, despite an uptick in online purchases. Then everyone in the industry has felt the impact on the supply chain. Because of the demand slump, we had to quickly figure out how to mitigate those effects working with our suppliers, to ensure that they are able to fill orders and get paid, while we cut our losses where possible. The impact of the crisis has really been felt throughout the company. Luckily we are seeing things slowly improving, as stores reopen, and more people go back to some kind of new normal.
Here is a question that everyone is asking these days: How is this pandemic transforming the fast fashion industry?
Anna Gedda: I guess that's the million-dollar question. Not only have businesses been greatly impacted in terms of operations, but also in terms of people's expectations, ideals, and values. Even myself, I think about things differently now. You may have realized what is really important to you in life, but how that will translate to our industry will take time to see.
Here is what we can foresee. First of all, the industry landscape will look different. As I mentioned, we had a big drop in sales as many stores were closed, but at the same time there was a rapid acceleration of a digital phase. The digital shift that many were predicting for a while fast-tracked during the crisis, and that will only continue. This will impact the different players in the fashion industry. We can already see that those that had not entered the digital space were the first ones to suffer as the crisis began. Also, I believe that customer expectations and behaviors will change. Not only people will be buying differently, but their purchasing decisions will also be impacted by concerns about personal financial security. According to Deloitte’s recent survey, 77% of millennials and 66% of Gen Zs globally are worried about their finances today. Obviously that economic reality is hitting behaviors as well. At the same time, there's a lot of talk about environmental sustainability, as well as economic recovery efforts, including job creation. We can see that we really need to transition to a more resilient, diverse business model - a much more circular business model than what we have today.
How will H&M Group do, considering this transformation?
Anna Gedda: For H&M Group these all are areas where we can provide an answer to many of our customers' expectations and their future needs. We believe that we can offer sustainable products, sustainable fashion, and most importantly we can make it available for many. We believe that sustainability should be affordable. Also, with our reach, together with our partners we will be able to help provide jobs and incomes, both in our retail and production markets.
You have created a number of sustainably-made collections and have been using sustainable materials in some H&M products. Are you ramping up your sustainability initiatives?
Anna Gedda: Yes, I think that we have achieved a lot and today we have a big assortment of products made with sustainable materials. That means either that they are sustainably sourced or recycled in different ways. We also have the garment collection program and have piloted different circular business models, such as re-commerce and rental, to extend the lifespan of the products further. But also, to be fair, we have a long way to go. When we talk about having a circular system, that covers how we design the products, manufacture them, and handle their end of life. In a circular model, of course, all the materials should be sustainable in one way or another. Also, when possible we should have multiple uses for the product. And although there's still much we have to do, this is the only way we see to move forward.
We are making, even in these challenging times, continuous investments both in more sustainable materials, but also in piloting and testing new types of circular business models. We have funded innovations that can help us become more circular on the product side, but also more importantly, in the whole supply chain.
What are you expecting on the sustainability front?
Anna Gedda: I foresee a future where our offerings will be more sustainable, but also will continue to be available and affordable to customers. We believe the key is to mainstream sustainability, to scale things up by finding clever solutions to make things sustainable yet affordable for many.
What are the specific sustainability initiatives you have focused on?
Anna Gedda: Several initiatives we started before the crisis will become even more important after COVID-19. We've begun to offer access to our global supply chain as a service to external companies via an initiative called Treadler. We have spent the past 20 years working together with our suppliers and their partners to create a sustainable supply chain. We're not there all the way yet, but we have made a lot of improvements and investments along the way. We would now like to expand and enable others to contribute further to this change, and that is why we have the B2B service. It is also a way for us to diversify our revenue stream.
Another important work that we do is around transparency. With transparent information about how, where and by whom a product was made, customers are empowered to make informed decisions, ensuring that everything they buy is designed, manufactured and handled with responsibility for people and the environment. Earlier this year COS partnered with a blockchain platform VeChain to enable customers to see the full history of a sweater made from recycled wool. Blockchain technology helped trace the origin of the leftover wool, the spinning mill and the knitting factory. By scanning a QR code on the hangtag the customer saw a map, pictures and could read the story of the sweater. The sweater was available in COS stores in Asia in February 2020. Another brand of ours, Arket, has tried this technology as well.
Please tell us more about your investments in innovations that improve circularity?
Anna Gedda: We have been investing in several sustainability starts-ups. One of them, TreeToTextile, uses renewable forest raw material and regenerates the cellulose into a textile fiber. Another is Worn Again, which has developed pioneering recycling technology that can reprocess pure and blended cotton and polyester textiles by separating them and then recycling them in two different streams. Re:newcell - a third example - is developing a recycling technology for cellulose-based textiles, such as cotton and viscose, creating a more sustainable textile pulp that can be used to produce new fibers for use in textile production. Earlier this year we announced that H&M’s Conscious Exclusive collection featured the newly patented material Circulose, marking the first time chemically recycled fibers are used in garments sold at scale.
Can you share some specific examples of new circular models that you have already tested?
Anna Gedda: We have done a lot of piloting tests around new circular business models like Rental, Remade, and On-demand. H&M Members will for the first time be able to rent popular pieces from previous Conscious Exclusive collections at one of H&M’s newly refurbished flagship stores in Stockholm. The rental model is in line with our ambition to extend the lifespan of our fashion. It is also meeting the demand of our customers, to whom