Nonprofit think tank Planet Tracker has received a major grant from Laudes Foundation to bring its proven methodology to the fashion industry. The recently launched foundation is an independent foundation aiming to tackle the dual challenges of inequality and the climate crisis by transforming the global economic system. Building on the work of C&A Foundation, tackling the systemic issues of the fashion industry is a central pillar of its strategy.
Currently, the listed equities portion of the fashion industry generates more than $1.2 trillion in revenues. Yet investors in this industry are not incorporating the true cost of their investments. Specifically, while multiple studies have highlighted the deep, environmental impact of the fashion and textiles industry, Planet Tracker has found little analysis assessing those natural capital-related financial risks across the value chain, which can impact shareholder value. Textiles Tracker will identify and analyze these potential financial risks, enabling investors to factor them in.
"Without a broader view of system dynamics influencing the industry—with a particular focus for this project on understanding the industry’s financial and related investment systems—change will happen piecemeal and slowly. If the cost of natural capital is factored into financial flows, change will occur far more rapidly as businesses cannot risk loss of capital or indeed reputation," said Planet Tracker’s CEO Robin Millington in a statement. "This grant will give us the resources to undertake a detailed analysis of the textiles industry and identify value at risk for investors."
"We launched Laudes Foundation to help harness the productive power of the market to value all people and respect nature. This can only be done if investors have access to the right information to make informed decisions," said Leslie Johnston, CEO of Laudes Foundation, in a statement. "Planet Tracker is a powerful demonstration of how this can be done in an industry—in this case fashion, an industry that generates 10 percent of global greenhouse gas emissions. We’re proud to work with Robin and her team to better capture these risks and influence the flow of capital in this important industry."
The fashion industry has increasingly come to the attention of politicians, environmental activists and media. The focus of scrutiny has been mainly on the impacts of the industry’s practices that are driven by a variety of trends. Fast-fashion, for example, has accelerated the rates of production and consumption.
Since 2000, global clothing production has doubled while utilization has decreased by 36 percent, resulting in up to 73 percent of all produced clothing (equivalent to $460 billion) ending in landfill annually.
The financial value generated by the sector’s largest companies do not price in or value the ecological cost of their current practices. Valuing natural capital in the textile industry and relating it to financial risk creates tremendous potential to catalyze a change in investment behavior.
If the textile industry does not fundamentally transform, business-as-usual dynamics are projected as follows by 2050:
- Textile industry-related carbon dioxide equivalent emissions will represent 26 percent of the global carbon budget (versus 2 percent in 2015)
- Nonrenewable energy inputs into the supply chain (oil, coal) will increase to 300 million tonnes per year (versus 98 million in 2015)
- Microplastic fibers entering the ocean will accumulate to 22 million tonnes (the equivalent of 4 billion polyester t-shirts entering the ocean each year until 2050)
- EBIT (earnings before interest and taxes) margin declines of 3 to 4 percentage points risks annual profit reductions of approximately $52 billion per year for the industry by 2030
“By identifying financial risks to investors linked to ecological boundaries within the textiles value chain, Textile Tracker aims to stimulate investors to reallocate funds in ways which influence change in the industry toward more sustainable practices,” said Millington.