That’s the amount needed to be deployed per year toward the development and scaling of disruptive innovations and business models in the fashion industry in order to see a significant “step change” by 2030, according to a report from Boston Consulting Group and Fashion for Good.
Titled “Financing the Transformation in the Fashion Industry,” the report was announced Wednesday by Katrin Ley, managing director at Fashion for Good; in a panel discussion at the World Economic Forum’s annual meeting in Davos, Switzerland. Each year, the WEF welcomes thousands of attendees and over the last 50 years the emphasis has shifted completely to evolving a more inclusive and sustainable future.
Fashion is a $2 trillion industry with a sizable stake in the estimated $5 trillion to $7 trillion needed for “global sustainability transformation” championed by the U.N., International Finance Corporation and World Bank, by that same timeline. This is measured against the U.N.’s Sustainable Development Goals, touted as a “shared blueprint” for nudging as close to the coveted triple-bottom-line as possible, with fashion’s three high-impact areas of focus being energy, water and waste.
“The problem is there’s still a huge technology gap,” Sebastian Boger, managing director and partner at BCG, said to WWD in a separate interview. In addition to helping author this report, Boger played a crucial hand in developing the annual “Pulse of the Fashion Industry” report, completed in part by BCG and Global Fashion Agenda. That report’s findings were along the same lines as this latest report, in that pace of industry change is sluggish and potential is yet untapped and in a word: “tremendous.”
Progress is “too slow” and the major technology needed is not yet available at scale. Boger cited issues at both ends of the value chain, including the availability of sustainable raw materials entering the value chain and the potential recycling solutions at scale at the end of the value chain.
And according to the report, this is where the focus should be: “Nearly half of the financing opportunity lies at the beginning and the end of the value chain,” essentially begging the “highest-impact potential.”
Venture capital is not enough, and brand buy-in and private equity investment will be fundamental, with already firms such as Closed Loop Partners investing in every stage of the circular economy.
“In other industries, there are stage-gate processes for innovation that provide structure and greater predictability to the R&D and commercialization process. In the fashion industry, these processes are now being defined, as there is demonstrated appetite for sustainable change. This has created the perfect conditions for high-level innovation to enable major industry transformation to a more sustainable and profitable future,” said Caroline Brown managing director at Closed Loop Partners, in the report.
The report also identifies the importance of orchestrators such as the United Nations Framework Convention on Climate Change and the Fashion Pact as key to the transformation.
Of course, soft-tech (digital solutions like re-commerce and traceability software) and hard-tech innovations (involving physical, capital-intensive assets like recycling infrastructure or dyeing machinery) are already on the minds of brands — but the report calls for brands to take a “stronger position,” so that innovators can reach scale and commercialization.
While there is still a dramatic financing gap, the report highlights a “perfect storm of innovation and opportunity” forming in fashion and that those investors and companies willing to capitalize on it will ultimately win out.
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