Environmental risks, largely unaccounted for in pricing, have not yet significantly impacted credit ratings within the sector. However, the report suggests that as these risks become financially more significant, fast-fashion brands could face the most exposure. With regulatory scrutiny expected to rise, particularly regarding waste management and physical climate risks affecting supply chains, the industry may need to adapt swiftly.
The European apparel industry faces escalating environmental challenges, including waste management, carbon emissions, and climate risks.
Despite minimal progress in mitigation, regulatory scrutiny and fast-fashion growth intensify the industry’s sustainability dilemma.
Efforts to reduce emissions and improve recycling are critical amidst rising concerns.
Over recent decades, the apparel sector has undergone substantial changes, including the rise of fast fashion and the shift to online sales, leading to increased environmental externalities across its value chain. Despite the growing consumer and governmental focus on environmental issues, the industry has made minimal progress in mitigating its negative impacts, as per the report.
The report underscores the significant environmental footprint of the apparel industry, which is responsible for about 4 per cent to 8 per cent of global greenhouse gas emissions and about 20 per cent of global clean water pollution due to its high use of energy, water, and chemicals in textile production. The sector also contributes notably to microplastics pollution, with polyester-based textiles accounting for 8 per cent of global microplastics.
Moreover, more than 90 per cent of used clothes end up in landfills or are incinerated, as the industry’s recycling ecosystem remains underdeveloped. This situation is exacerbated by the fast-fashion model, which continues to grow, especially in developing economies, further deepening the industry’s environmental footprint and challenging its sustainability.
Clothing supply chains face significant physical climate risks, with most apparel production occurring in countries highly exposed to climate-related events such as cyclones, typhoons, and flooding. This could potentially lead to production yield drops due to rising temperatures in key locations.
While environmental risk management has yet to significantly impact European apparel companies’ earnings, the report highlights the complexity of reducing emissions, especially scope 3 emissions linked to production and waste management. Fast-fashion businesses have made strides in reducing direct emissions, but controlling emissions associated with cotton and polyester production and garment manufacturing remains a significant challenge.
Fibre2Fashion News Desk (DP)