How fashion brands can help their customers be kinder to the planet

by Natasha Mawdsley Associate

Email +44 (0)7483 0407346

by Akyeamaa Akyeampong Associate

Email +44 (0)7483 407339

An increasing number of consumers want to know what impact their fashion purchases are having on the planet. By applying new methodologies, companies can meet that demand.

The days when fashion brands could overlook their impact on the planet are passing; today’s consumers want to know.

Concern is particularly acute among younger generations: 90% of generation Z (born between 1996 and 2011) in the US will buy a product because it has a social or environmental benefit. Globally, generation Z will comprise 40% of all consumers by next year and, along with millennials, already represent about $350 billion of spending power in the US. Brands that ignore their concerns are swimming against the tide.

Consumers are right to be concerned. According to several scientific analyses, we have already exceeded earth’s key ecological limits.

The way we buy clothes does not help. The average person buys 60% more items of clothing today than they did 15 years ago and keeps them for half as long. Textile production contributes more to climate change than international aviation and shipping combined, according to a UK Parliamentary report.

Brands’ moves to label their clothes ‘sustainable’ are steps forward, but still raise questions. What do these terms mean in practice? How have they been measured and costed? Can they be trusted?


How brands can measure and report on their impact

Today, brands can answer these questions robustly if they choose.

Methodologies for translating the environmental costs of producing goods into monetary value are maturing into internationally-recognised methodologies. The ‘Environmental Profit and Loss Account’ (or EP&L) pioneered by Kering (owner of brands such as Gucci and Balenciaga) is one such approach. It provides a methodology to measure a company’s impact and express it in a way that everyone can understand and compare - taking the well-established profit and loss financial accounting format and applying it to environmental impacts.

PwC’s environmental valuation methodologies measures the cost to society of an organisation’s environmental impacts. They take into account carbon emissions, air pollution, water use, water pollution, waste generation and how land has had to be adapted to produce the product. It maps how each impact could affect people in wider society, for example by damaging their health, impeding their ability to maintain their livelihoods, or using up a natural resource that they rely upon for food, clean water or even a beautiful view. Finally, it uses economic techniques to calculate the monetary value created or eroded by those effects. As a result, we can produce ‘natural capital accounts’ for the operations of each company and even product.

Since Puma publish the first EP&L in 2011 (until recently one of Kering’s brands), others have followed suit. Kering extended the EP&L across its entire Group and recently launched a digital platform dedicated to its EP&L account. The Digital EP&L showcases Kering’s interactive 2018 Group EP&L and provides access to unprecedented open data with an aim to support luxury and fashion players with information and insight into the complexities of their own environmental impacts.

Making information about the environmental cost of doing business more transparent, understandable and accessible is one of the levers for transitioning to a more sustainable economy and a more sustainable future for society. That’s why PwC has open-sourced its pioneering environmental valuation methodologies by publishing the assumptions and data sources behind the calculations, so that other practitioners can build upon what we have done and accelerate the change we need to see.


Opening up the conversation

Methodologies like the EP&L are already leading to change within companies and consumer mindsets.

Companies find that EP&L accounts don’t just help them understand and communicate their environmental impact, but also start other fruitful conversations within the business. For example, they make it easier to identify and prioritise strategies for reducing impact.

They can be used to communicate environmental consequences across the supply chain and benchmark environmental progress against competitors. And once impact metrics are widely available, internally accessible and culturally embedded, they can also be used to empower employees to suggest new environmentally positive products and services, and to encourage suppliers to suggest new opportunities to reduce their own impact.

Kering has set ten-year impact targets with the aim to reduce its overall EP&L by 40% in its own operations and across the supply chain by 2025, and its GHG emissions by 50%. To leverage the datasets underlining its EP&L account, the Group has developed internal tools for decision making (sourcing, design, production) in order to help its brands consider the environmental impact in their day-to-day business activities.

At a consumer level, transparency about environmental impacts is giving consumers better information on which to base their choices. Apparel company Patagonia, for example, includes metrics on their garments on water or plastic saved thanks to its processing techniques.

At a market level, the method is likely to spur demand for brands with low environmental impact at their heart. There are already signs that the process has started. In 2010, there were only seven B Corps (businesses committed to building a more inclusive and sustainable economy) in the fashion, beauty and apparel sector. By 2018, the number had increased to 200.


How the EP&L will shape consumer behaviour

Relatively recent improvements in research and data on how companies affect the environment and society have enabled tools like the EP&L to drive business actions for the benefit of the environment. Expect to see many more imaginative applications in the years and decades ahead. One day soon you may, for example, be able to enter a shop (in person or online) and see a simple monetary ‘environmental price’ listed for each item of clothing as you browse the (digital) rails and choose your purchases.

In this way, companies may be able to gently inform consumers about the relative impacts of their choices. A brand might choose to nudge us towards choosing items made from organic cotton rather than conventional cotton, for example, as it requires less water and fewer pesticides to grow, uses no toxic chemicals and allows farmers to maintain a higher quality of land.
And not only will tools be outward-facing. They will also look at consumers and how the habits we all have about the way we treat our own clothing and accessories directly affect our personal environmental footprint. To this end, Kering has recently launched an international survey to understand the Luxury consumer’s behavior around product use and end of life. The results of the paper “Capturing Impacts of Consumer Use and Product End of Life in Luxury” will be reflected in an updated EP&L methodology and open-sourced, as per Kering’s opening-sourcing philosophy. PwC will support Kering with the development of the methodology and also the approach of how to include these additional insights from the survey into the EP&L.
At the same time, natural capital accounting itself is likely to evolve, perhaps with the addition of more sophisticated environmental data. Consumers are not only interested in environmental impacts, but also social impacts such as worker welfare. PwC’s Total Impact Measurement & Management framework expands the view from purely environmental to social, economic and fiscal impacts.

Once a generation has grown accustomed to comparing water, land and climate impacts as easily as we compare prices today, companies are likely to compete on these metrics too. The result will be that markets such as fashion will have built-in incentives to produce products that are more compatible with the long-term health of the planet.

You can learn more about PwC’s methodologies for valuing corporate environmental impacts here.

by Natasha Mawdsley Associate

Email +44 (0)7483 0407346

by Akyeamaa Akyeampong Associate

Email +44 (0)7483 407339