When the emergency is over, will we be driven by different needs? Will we be more attentive to collective and environmental well-being?
A traditionally consumer-driven industry, the fashion and luxury compartment is seriously reconsidering its role in society after the end of the coronavirus crisis, which is dramatically affecting the whole world. In this complicated social and economic context, defined by uncertainty and fear, sustainability is emerging as a key factor to relaunch the industry. An omnipresent buzzword in the sector, sustainability demonstrated over the past few years to be much more than a marketing tool, but a solid principle to guarantee a brighter future for fashion and luxury.
“Consumers are waking up to a new day in which intangible values become evidently more pivotal, such as equality, liberty, health and well-being. Translating this into personal behaviors, we all will become more conscious and sensitive,” said Hakan Karaosman, an expert working in fashion supply chain sustainability and acting as a project expert for the United Nations Economic Commission for Europe for enhancing transparency and traceability of sustainable value chains in the garment and footwear sectors. “That being said, fashion brands that take serious actions in the case of this humanitarian crisis and that justify responsible leadership through the act of empathy will be positively remembered.”
“The pandemic clearly demonstrated that we cannot take advantage of globalization without taking global risk and responsibilities. Pollution, economic crisis and viruses have no boundaries. The expression ‘we are all in this together,’ which continues to resonate across media, is not valid without each single state. The Amazon rainforest fires don’t only interest Brazil and the same thing goes for the Arctic ice loss,” said Antonello La Vergata, professor of history of philosophy at the Modena and Reggio Emilia University and author of the book “Ecology and Sustainability: Philosophical Aspects of a Debate.”
“I really think that there are measures which need to be taken, including the fight against plastic, as well as the reduction of waste, even if they don’t immediately reduce the level of human unhappiness. They just need to be done,” he said.
If at a social level sustainability seems to be non-negotiable, will fashion and luxury companies be willing to invest into technologies and new strategies to make their operations and products greener? Will the long-term sustainable approach win over an old-school, quick-profit strategy? Experts feel positive.
Sustainability: A lever for post-crisis relaunch?
Absolutely yes, according to Filippo Bianchi, managing director and partner at Boston Consulting Group. “In the post COVID-19 scenario, everything related to sustainability and ethics will be an important driver. Consumers will definitively pay more and more attention to the impact of companies’ activities on both the environment and social health, from CO2 emissions, materials sourcing and waste management to the security of workplaces and the well-being of employees. Why? Because the health emergency is both causing a structurally lower confidence in the market and generating a shift in the value sets,” he said, adding that consumers are getting more introspective, they look for authenticity, they are becoming more emotional and they are attracted by what is considered ‘good.’ “Fashion and luxury companies have to react accordingly. The society is demonstrating its fragility and companies have to respond to consumers’ request for protection and reassurance, also when it comes to demonstrating the actual impact of their activities on the environment.”
Shifting from an idea of sustainability considered as an individual practice to the development of a fully integrated system will be crucial to guarantee a future for companies, according to Karaosman. “We now need to build a new system that is more elaborate, restructured and more strategic and that puts people and planet before profit. We should move beyond ‘sustainability: a risk mitigation tool’ toward ‘sustainability: a supply chain culture’. Robust strategies will, therefore, be needed to make sure more regenerative, more inclusive and more responsible production and supply systems take place,” he said. “Fashion brands that have taken serious actions to create shorter, more resilient and more transparent supply chains have seen that unexpected situations can be better controlled. Therefore, those brands that have created a supply chain culture through commitment and responsible leadership already demonstrate that sustainable supply chains can indeed lead to competitive advantage in terms of operational performance.”
However, according to Edo Ronchi, president of the Sustainable Development Foundation, there will definitely be entrepreneurs “saying that the economic growth in all the sectors needs to be relaunched at any cost, easing the environmental restrictions if necessary,” he pointed out. “It’s really hard to tell which position will prevail or if we will find a balance between the two of them.”
What aspects of sustainability?
Decarbonization and circularity are the hottest themes in the sustainability arena, according to Ronchi. “Decarbonization for the reasons highlighted by the European Green Deal and for the evidence of what’s happening around us. I think we don’t want to be hit by another global crisis, global warming, which might have an even more dramatic impact than this terrible pandemic,” he said. “Circularity offers new opportunities to reconsider manufacturing processes, products, technologies, consumption and waste management, giving the chance to relaunch economic activities and create jobs.”
The crisis will show fashion companies the necessity to rethink their supply chains, according to Karaosman. “Social justice and environmental stewardship will need to be integrated into the core of business strategies. Radical changes in the way supply chains are formed and managed will emerge post-pandemic that will help the industry embrace a more resilient future,” he said. “Consumers are becoming more conscious and are learning how to live with limited resources, which will result in less consumption. Fashion companies, on the other hand, are seeing that supply chain resilience is needed to overcome unexpected disruptions. Therefore, many fashion brands are now realizing that shorter supply chains will help overcome contingencies.”
Sustainability: An essential investment or an extra cost?
“Companies tend to find investments into sustainability essential since the luxury and fashion industry is consumer-driven, but at the same time sustainability is considered a cost because it requires significant upfront investments,” explained Guia Ricci, principal at Boston Consulting Group. “However, we believe that investing in sustainability can guarantee an important competitive advantage in the long term, both in term of business leadership and profits and losses.”
According to Ricci, in the post COVID-19 crisis, the implementation of sustainable practices will follow two different approaches. On the one hand, small and medium-sized companies will opt for already tested and established technical solutions, which can guarantee a pretty quick return on investment. At the same time, in this economic scenario defined by a lack of liquidity, only conglomerates will be able to take some risks, investing in more disruptive and innovative technologies and solutions.
“Those brands that embed sustainability into their core operational and business strategies will adopt even more radical strategies to make sure their supply chains are resilient. Sustainability can be seen as an additional cost for those that approach it through marketing purposes; however, this is no longer an option and those brands will soon realize that sustainability is a business imperative for long-term survival,” said Karaosman. “Some natural disruptions, including climate change, floods, fires and diseases, show that sustainability must be embedded into design, operations and supply chain strategies. Luxury is dependent upon natural resources and human skills both of which are diminished; hence, it is time to reflect and restructure this system to integrate supply chain sustainability as a central focus.”
What’s next? Possible strategies.
“The industry is definitely facing an unprecedented moment of uncertainty. The most important thing that companies should do is prioritize the health of their employees, adopting all the measures required by the emergency. Then the most urgent issue to face is a possible shortage of liquidity,” Bianchi said, adding that in the luxury sector, the problem needs to be addressed throughout the entire supply chain, which is integrated and is made up of small, sometimes artisanal companies. “Luxury players need to critically review the spring 2020 collections together with the fall 2020 and the summer 2021 lineups, re-balancing stock planning, reviewing promotions on the main line and differently leveraging the outlet and other stock clearance channels, in alignment with wholesale.”
Bianchi also suggested that brands would have to cope with a promotion and markdown period of uncertain length and likely characterized by stronger overall promotional pressure. “However, despite the immediate difficulties they have to face, we believe that companies should consider the rebound effect of their strategies. It’s crucial to define customized actions for the different markets,” he said. “We think that in the long term, this crisis will generate a sort of ‘new normal.’ It is our view that this ‘new normal’ will be characterized by a different calendar and collection structure, by a different channel mix — more skewed towards the online — and by a more data-driven approach, thanks to AI and analytics. If companies try to take advantage of the moment, they will have the chance to grow their business, making it more agile, balanced and sustainable.”
Social justice, environmental stewardship, transparency, collaboration and consciousness will be vital to pave the way for a more resilient future for the fashion industry, according to Karaosman. “This is a difficult moment for humankind; therefore, we need to self-reflect and reshape our personal and managerial choices. More vulnerable communities, such as millions of employees working across lower-tier fashion supply chain stages, are affected dramatically, and it is our moral duty to create joint resolutions. Profit-driven production patterns (at all supply chain levels!) and self-centered consumption patterns need to be transformed into a transparent and fair playground to spread financial, technical and emotional support across fashion supply chains,” he said. “The fashion industry thus needs to reconfigure design, operation and supply chain strategies. We cannot afford to go back to business as usual when the growth is measured only in financial terms. We need an inclusive dialogue in which purchasing, consumption and corporate strategies put people before profit.”