By accelerating changes all along the value chain, the industry will be able to substantially reduce, and ultimately minimize, its contribution to global warming.
The fashion industry was responsible for at least 4 percent of global greenhouse-gas (GHG) emissions in 2018—more than the carbon output of the economies of France, Germany, and the United Kingdom combined. Even taking into account the reduction demand effected by COVID-19, new McKinsey research shows that, without substantial carbon-abatement measures, the current trajectory will lead to an industrywide emissions level that is still twice the size of that required to meet the Paris Agreement’s target for 2030.
In fashion, as in many industries, attaining sustainability has become imperative, in part because investor expectations are skyrocketing and consumers are starting to expect sustainable products. In addition, environmental regulations are becoming stricter, industry talent is moving to sustainable companies, and significant value from attaining sustainability is at stake—value that first movers are already starting to capture. During a McKinsey Live webinar, senior partner Karl-Hendrik Magnus and partner Anna Granskog identified ways that industry stakeholders—brands, retailers, manufacturers, investors, policy makers, and consumers—can play a part in reducing GHG emissions.
The carbon-abatement goal is for industry emissions in 2030 to be 1.7 gigatons of CO2 equivalent less than they are today. Reaching that ambitious target requires the acceleration of abatement efforts all along the industry’s value chain. Upstream activities—fabric production and processing, garment manufacturing, etc.—have the potential to deliver about 60 percent of the total reduction in emissions, actions by brands have the potential to deliver about 20 percent of the reduction, and the remainder would come from changes in consumer behavior. Most of the changes necessary to accelerate carbon abatement require upfront investment, but a surprising number of them would, rather than be costly, lead to net cost savings industrywide.
Among those cost-reducing changes on the upstream portion of the industry value chain is, first and foremost, increasing the energy efficiency of manufacturing and retail operations, plus reducing overproduction and deadstock. Reducing the waste that occurs during garment production—by, for example, making closed-loop recycling more common—would contribute to the acceleration while also reducing costs.
The biggest accelerant that would add costs would be for all the countries in the value chain to reach 100 percent renewable electricity. Changes in the material mix could also contribute to the acceleration but would be adding cost. For example, increasing the use of organic cotton, which comes without use of fertilizers and pesticides and decreases GHG output by 50 percent, comes at the cost of a smaller yield per hectare of land. Increases in fiber-to-fiber recycling, the use of human-made cellulosic fibers such a rayon and modal, the end-of-life recycling rate, and closed-loop recycling at the end of garments’ lives would, at a cost, also reduce emissions.
Brands need to begin their acceleration efforts by determining and making transparent their current emissions and forming strategic partnerships to enable the various types of investments that the efforts require. And, among other measures, the industry needs to increase its use of circular business models, such as clothing resale and rental.
After 2030, the industry will face the huge challenge of going beyond accelerating abatement to reinventing itself, in part by defining new business models and decoupling volume growth and value growth. With the application of the creativity and ingenuity that exists in the fashion industry, perhaps the pandemic could become a trigger for lasting changes that will minimize the industry’s contribution to global warming.
For more on this topic, please watch the webinar recording and read the reports “Fashion on climate: How the fashion industry can urgently act to reduce its greenhouse-gas emissions” and “The state of fashion 2020: Navigating uncertainty.”