The fashion industry (from manufacturing in developing markets to retail stores in Europe and North America) is responsible for around 10% of global greenhouse gas emissions and expected to rise to 26% by 2050 if no action is taken. This article will discuss the challenges the fashion industry come across when tackling decarbonisation, as well as the best practices and sustainability organisations available.
Emissions in the Fashion Industry
In 2018 the fashion industry was responsible for around 8% of global greenhouse gas (GHG) emissions, approximately 2.1 billion tons of CO₂e. Many brands have made pledges to decrease their emissions, yet in 2023 the fashion industry’s emissions rose by 7.5%. Despite promises from many companies, 40% of brands have reported increasing GHG emissions since making a sustainability pledge and 2/3 are behind on their own decarbonisation schedules. Without decarbonisation the fashion industry is predicted to account for 26% of global carbon emissions by 2050.
Some of the higher emission figures are the result of a growing industry yet 40-60% of consumers would pay more for products with better environmental performance. The rise in emissions can also relate to increased transparency and reporting across the fashion industry. Having clear and accurate baseline emissions is crucial to reduction and decarbonisation.
What are the Main Challenges to Decarbonisation?
Reliance on Supply Chains
The largest challenge to decarbonising the fashion industry comes from tackling indirect emissions in the supply chain (scope 3 emissions). Many brands have reported this as the blocker to net-zero targets; including Patagonia, who reported that nearly 99% of their emissions comes from the supply chain. The United Nations Framework Convention for Climate Chance (UNFCCC) has identified three of the biggest challenges when it comes to decarbonising the fashion industry:
Use of Coal in Processes
Coal is still the preferred method for generating thermal energy in material processes including bleaching, dying, printing, and developing water repelling fabric. Coal boilers can account for up to 70% of a manufacturer’s annual GHG emissions. Cost of implementing alternatives is the biggest issue for manufacturers. This is not only the cost of installing electric or solar thermal boilers but the financial loss of pausing manufacturing whilst the updated boilers are installed.
Access to Renewable Electricity in Key Markets
Access to renewable electricity is another significant barrier to decarbonisation for manufacturers in principle manufacturing countries such as Thailand, Vietnam, Bangladesh, India. Many of these manufacturers do not have access to affordable or sufficient quantities of renewable electricity available to them through the national grid. Unbundled Energy Attribute Certificates (EACs) can be an effective solution in the interim. Furthermore, manufacturers face issues installing their own renewable energy supply. The financial burden and physical available space to install technology such as solar PV often discourage manufacturers from choosing to take action in reducing emissions in their energy use.
Financial Investments for Technological Processes
Financial investments are needed to improve technological processes, energy efficiency, and upgrades to renewable energy. As the manufacturing and retail aspects of the fashion industry are compartmentalized, there is little investment back down the supply chain to manufacturers to make the significant changes necessary to significantly decarbonise the fashion industry. However, investments in energy efficiency and Building Management Systems (BMS) can have quick return on investments, even on standard upgrades such as LED lighting and HVAC systems.
What are the Leading Sustainability Commitments?
There are a number of sustainability pledges and commitments globally, particularly for the fashion industry. Some internal pledges such as Levi Strauss’ LEAP and Marks and Spencer’s RE:Spark are targeting a reduction of Scope 3 emissions in a bid to decarbonised their supply chain. However, there are internationally recognised pledges that offer further credibility to internal decisions. Below are a few sustainability commitments that aim to reduce the carbon emissions of the fashion industry as well as more general actions for companies:
UNFCCC Fashion for Climate
In 2018, fashion stakeholders signed the “United Nations Framework Convention on Climate Change Fashion Industry Charter for Climate Action” (UNFCCC Fashion for Climate) which called for its signatories to undertake 13 commitments that include net zero by 2050. Any company, as long as they are professionally engaged in the fashion sector, can sign the Fashion Industry Action.
Science Based Targets initiative (SBTi)
SBTi is a charity organisation that develops tools, guidance, and produce standards for companies and financial institutions to make science-led climate decisions. SBTi has standards for different industry sectors including “apparel and footwear”. SBTi works with large fashion brands (e.g. Nike and H&M) and apparel retailers (Marks and Spencer’s, Tesco, Walmart, and Target) to ensure targets set under the scheme are impactful and realistic for decarbonisation.
Renewable Energy 100 (RE100)
RE100 is a global initiative that calls on companies to publicly commit to sourcing 100% of their electricity from renewable sources by 2050. By aligning with RE100, companies must report their progress annually, helping to improve transparency and accountability. Both RE100 and SBTi are compatible with and encouraged by UNFCCC Fashion for Climate. Fashion brands including Burberry, Under Armour, and H&M are members of RE100.
Addressing Scope 3 Emissions
Scope 3 emissions report all other indirect emissions both up and downstream, it is also known as the Corporate Value Chain. This is where, as a retailer, a garment’s emissions from its manufacturing and shipping from factory to warehouse are considered. It also includes how an item is shipped to a customer and how the product and packaging is disposed of (end of life treatment).
From NUS’ experience of quantifying emissions for fashion clients, Scope 3 emissions typically account for over 85% of a company’s overall emissions, with key categories including Purchased Goods and Services (covering required raw materials for clothing) and Downstream Transport and Distribution (relating to the global delivery of fashion products to retail outlets and end customers).
Not all categories in Scope 3 apply to every fashion company but the full quantification of Scope 3 emissions is required for a range of both voluntary and mandatory reporting frameworks, such as the SBTi, BCorp and the EU Corporate Sustainability Reporting Directive (CSRD).
Fashion Supply Chain Pressures
The majority of household fashion brands are aligned to leading international standards such as the Science Based Target initiative (SBTi), CDP and RE100. In turn, this has resulted in industry leaders requiring key suppliers to also commit to decarbonisation and long-term sustainability. In practice, any fashion manufacturer committed to net zero will require all suppliers of key products such as leather, cotton, wool, silk and synthetic materials etc to be from providers with low carbon manufacturing processes.
For suppliers to remain competitive and secure contracts with leading companies in the fashion industry, there is now a requirement to showcase proactive decarbonisation, often through alignment with the SBTi. This is of key importance, as the Scope 1 and 2 emissions of suppliers, directly feeds into the Scope 3 emissions of the man reporting company.
What can Companies do to Decarbonise?
There are numerous approaches to reducing carbon emissions, many of which can be applied generally regardless of the role a business has in the fashion industry:
1. Energy Efficiency
An energy audit is an on-site inspection of a building (including manufacturing sites, warehousing and retail sites) and a survey of its energy use. This is often the first step towards carbon emission reduction for many companies as it is considered a low-risk action. An audit provides recommendations to reduce energy consumption and energy waste making businesses more efficient. It is recommended to carry out an energy audit before implementing any renewable energy systems as this would reduce the amount of energy needed to be produced.
With many manufacturing facilities located in developing market with carbon-intensive energy grids such as Bangladesh, India and Vietnam, significant carbon savings can be made from improving production facilities with quick-win measures.
2. On-site Generation
Once an energy audit has been completed, generating renewable energy onsite can be a cost-efficient method to reducing carbon emissions long-term. In an all-encompassing site energy audit, there may be recommendations for the most suitable options for on-site energy generation. There are a number of options for generation and a popular option for manufacturing and warehouses is solar PV.
3. Purchasing Energy Attribute Certificates
Purchased electricity makes up a large portion of energy consumption under Scope 2 emissions for many fashion companies due to energy required for manufacturing and processesing products. The sector is typically advanced in ensuring that the majority of consumption is classified as renewable through the purchasing of underlying Energy Attribute Certificate (EACs). This is demonstrated by leading brands (listed above) securing the highest standards of renewable electricity consumption as part of RE100.
Renewable Supply Contracts (Bundled EACs): EACs are contractual instruments that showcase the origin, ownership, vintage (year) and technology of renewable electricity generation. Each individual certificate represents 1 MWh of renewable electricity generated. ‘Bundled’ EACs reference renewable electricity supply contracts with an EAC. This is a simple option but doesn’t allow for much flexibility in pricing or choosing a specific type of energy generation (such as solar).
Many key markets providing manufacturing services in the fashion sector are in regulated markets, meaning that opportunities for renewable supply are not available or restricted (China, Vietnam) meaning that unbundled EACs are the only viable option.
Unbundled Energy Attribute Certificates (EACs): ‘Unbundled’ EACs offset electricity use in the same way as renewable supply contracts. However, they are purchased separately from the electricity supply. This allows businesses without direct access to a renewable energy supply to reduce their electricity emissions in part or completely. However, an update coming to the Greenhouse Gas Protocol might require EACs to be purchased based on location and matching the consumption and generation by the hour.
More information on these updates and their impact can be found in a previous article: GHG Protocol Scope 2 Proposed Revisions.
Many leading companies in the fashion sector are now developing opportunities to purchase EACs which align generation with consumption, or long-term commitments through funding asset-specific EACs.
4. Supplier Engagement Strategy
Fashion companies will only be able to reach long-term decarbonisation by ensuring that all players across the sector directly contribute to carbon reduction. As fashion brands require all suppliers of materials, warehousing, transport and distribution, retail outlets etc to commit to sustainability, a structured and robust supplier engagement strategy is of pressing importance.
Many companies have now incorporated supplier requirements into RFP processes to select providers with a commitment to decarbonisation. This is directly filtering down the supply chain whereby even niche providers of components are required to decarbonise in alignment with the leading fashion house. Often, fashion brands will identify their main suppliers under (Scope 3) Purchase Goods and Services from a carbon emissions perspective and establish decarbonisation requirements in order to remain a long-term partner.
How NUS Can Help
NUS have a dedicated team who specialise in developing and implementing bespoke Decarbonisation Strategies for fashion and retail companies. We partner with our clients to develop a detailed knowledge of their operations, markets, corporate agenda, climate targets and financial objectives.
Once the strategy is approved, our integrated Sustainability division has the expertise to work alongside companies to implement chosen solutions, including on-site energy audits, unbundled EACs, heat pumps, solar PV, energy efficiency measures and PPAs.
To explore options around creating a decarbonisation strategy for your company, contact your NUS consultant or email contact@nusconsulting.com.