Fashion has found its purpose — or, at least, is having purpose thrust upon it.
As WWD kicks off a series of stories looking back at a remarkable year — defined by coronavirus lockdowns, a reckoning with systemic racism, financial crisis, political turmoil and existential dread — companies across the spectrum are redefining or extending their mission.
• Gap Inc.’s chief executive officer, Sonia Syngal, speaks of the company, which owns the B Corp.-certified Athleta, as a collection of “purpose-driven lifestyle brands.”
• Gucci’s Changemaker program gives to groups supporting social change and seeking to build connections and opportunities within communities of color.
• VF Corp. CEO Steve Rendle has spent the last four years pulling together “a purpose that really captures all of our brands and all of our people across our functions. And that purpose is about powering movements of sustainable and active lifestyles for the betterment of people and the planet.”
The list goes on from every corner of the industry.
Like the push to e-commerce or the rise of casual style, the move toward what is sometimes called compassionate capitalism was already underway in fashion even before COVID-19 shut down the globe. But it accelerated and was strengthened during the pandemic.
The old mantra that had companies serving the narrow financial interest of shareholders and nothing else simply doesn’t fly anymore — at least in public.
And even if some companies and executives want to talk the talk, but not walk the walk, they will find it harder and harder to keep up the old ways.
Change has come.
It is perhaps most clearly seen in the way brands have embraced the Black Lives Matter movement and pushed diversity in new ways, addressing long-ignored racism following the killing of George Floyd and other unarmed Black people at the hands of police, which sparked coast-to-coast protests in the U.S. and others worldwide.
The move toward purpose is also broader, spanning social justice, climate change, global poverty, working conditions and more.
Having true purpose is not a universal reality, and likely never will be, but the voices pushing companies to serve the interests of society and not just the almighty dollar are growing louder and coming from both within and without the industry.
• More big-money is looking to invest using ESG standards that take into account environmental, social and governance issues.
• Consumers are more attuned than ever to what kind of companies they’re buying from and what kind of impact they’re having.
• When companies do misstep, people are ready to swarm on social media.
• And many high-level executives in fashion care about working for the social good (and if they don’t, their companies are filling up with Gen Z and Millennial workers who by and large do).
Taken together, that is just too much pressure for the status quo. It suggests that even if companies or whole sectors go off the rails — and they will — purpose is here to stay.
Cara Smyth, founder of the Responsible Business Coalition at Fordham University, described it as “a collision of market forces.”
“As a sustainability nerd, I was rather worried the pandemic would push sustainability out to sea because of competing priorities,” Smyth said. “Instead, actually what we found is there’s a rapid move toward data-driven environmental, social and governance as a management approach, embedding it into every vertical.”
New tools exist now to better understand what is happening in the world in real time and to make sophisticated changes, like using AI to sharpen supply chains, making them both more efficient and more sustainable.
“We’re in sustainability 2.0, which I would call data-driven ESG,” Smyth said. “Sustainability isn’t enough, even the word isn’t right. Sustainability sometimes feels unclear on the fact that we’re also talking about environmental, social and governance.”
The next level will require more collaboration, she said.
Some of that started in the pandemic as companies shifted gears to, for instance, ramp up the production of hand sanitizer, produce personal protective equipment, administer tests, distribute vaccines and more.
“New ecosystems, new partnerships, new relationships need to be formed, that’s the next generation,” Smyth said. “This constructive collaboration is required to drive the acceleration.”
More and more players across the spectrum are getting into the game.
“The whole concept of ESG investing has gone from being the purview of the enthusiasts and true believers to being something that is much more mainstream,” said John Godfrey, who is corporate affairs director at U.K. financial services firm Legal & General and was policy head under former British Prime Minister Theresa May.
“There’s also a level of self interest in this,” said Godfrey, noting companies attuned to ESG values perform at least as well as other firms, while it can bring down their cost of capital and helps avoid reputational risks.
“There will always be business players who say, ‘Yeah, I recognize the social pressure and the economic pressure and I’ve got to change. But I’m going to be the last one to make that change until I absolutely have to do it and will squeeze a little bit of extra margin out of this [in the meantime],’” Godfrey said. “That’s a really difficult game to play because public policy can change quickly….This is a fast-moving agenda and to try to be the last supplier of something that is not hugely ethical, it’s quite a big gamble to take.”
It’s a gamble that investors are increasingly unwilling to make.
A record $51.1 billion flowed into ESG-focused investment funds last year, twice the previous record from 2019, according to Morningstar. That means nearly $1 out of ever $4 put into investment funds in 2020 flowed to sustainable and socially conscious options.
And of the 52 U.S. large cap sustainable funds tracked by Morningstar in a recent study, 25 ranked in the top quartile in terms of returns, outperforming three-quarters of similar competitors.
As the big money funds and their investors watch from the finance side, consumers are watching at ground level.
“There is basically no choice but for companies to be good citizens, empathic and socially aware and involved,” said Felipe Korzenny, professor emeritus at Florida State University and coauthor of “Hispanic Marketing: A Cultural Perspective.”
“Their actions are too transparent and public in this era of social media,” Korzenny said. “There is nowhere to hide anymore. Moral behavior becomes imperative when social scrutiny is possible. In my experience with consumers they tend to gravitate to companies that not only provide products and services they want and need, but to those that make them feel good about themselves. That is what I call ‘elevating self-esteem.’
“That has been particularly important to Hispanics because for many, their battered self-esteem has been only elevated by brands, not government or even society,” he said. “In sum, yes, social capitalism is the new capitalism.”
So being good — or even better, lining up with what the broader society sees as good — is also a competitive advantage and potentially an access point to increasingly important consumer bases.
There are, for instance, more than 60 million Latine people in the U.S., an increase of 20 percent since 2010, and they have a median age of just below 30, versus 38.4 for the country overall.
Together they have spending power estimated at more than $1.5 trillion and are a consumer force too big to be ignored or treated in a monolithic fashion.
But the benefits to being good and making consumers feel good and being inclusive from the C-suite down through marketing and being easy on the environment have always been there. Why is becoming a purpose-driven company so pressing now?
“It’s been building,” said Jane Randel, social impact adviser and co-founder at Karp Randel, a consultancy that helps companies make a positive impact on society.
“It’s an acknowledgement of racial injustice that’s been building for years,” Randel said. “It was the political climate that made it very difficult for large groups of people. And then I think it was the pandemic.
“It was the first time that we were all facing the same thing at the same time,” she said. “It didn’t impact everybody the same way, but there was this sort of joining and working together to begin to attack this problem. And you had not a lot of leadership from the government.
“Companies are stepping up because they see the void and no one else is. That’s actually not new, the number of companies that are stepping up is newer, thinking about climate, thinking about social issues. There were, especially over the last four years, a lot of voids in the social space. Companies stepped in to fill those needs.”
And operators of all sizes are on the move, changing habits and patterns of thought that have been ingrained for decades.
“It’s very real and very big,” said Mark Lipton, graduate professor of management at The New School’s Parsons School of Design, of the push to what he prefers to call “stakeholder capitalism.”
“Important legacy companies are kind of getting on the bandwagon for it in very meaningful ways,” he said. “Not because I think they’re moralistically or idealistically attuned to it, but because there’s pressure. This is a huge mind-set change or pivot from being maniacally focused on your shareholders to, I guess, equally as maniacally focused on all of your stakeholders. In this country we suffer from short-termism and you don’t think about, not even all of your shareholders, you think of some of your shareholders.”
The devil, of course, is in the details and much of the real work toward a greater purpose will happen deep in the corporate structure — from the boardroom to the accounting office.
“One of the elements that does not get spoken about in this conversation is, ‘Where’s the board with all this?’” Lipton said. “Boards are pretty much behind the curve, I think, and it really needs to be very much at the top of their agenda.”
Board members are important because, as they watch over the CEO and broad strategy, they can set the agenda in a still amorphic world.
Right now, purpose is patchwork, with companies using the same words to mean different things and reporting with different, often self-selecting, metrics.
“What gets measured has meaning,” Lipton said. “And if companies are going to start measuring what they’re doing around ESG, whatever it is that’s related to purpose, to stakeholders, there has to be standards around their measurement, otherwise it’s like green washing. We’re still trying to get our arms around standards.”
One space to watch is the Financial Accounting Standards Board and the Securities and Exchange Commission, which set many of the rules for the corporate game. Lipton said the SEC has been slow to move, but could change now under the administration of President Joe Biden.
“Unless that’s unleashed, we’re not really going to make uniform change,” he said. “It’s boring, but it’s absolutely essential.”
Until regulators are fully on board, it seems it will be consumers who play the watchdog role, taking to social media. And the desire to see companies push for a better world runs deep.
The closely watched Edelman Trust Barometer, the product of a survey of 8,000 people across eight countries in October, found that 86 percent of people expect brands to solve both societal and personal problems, including by ensuring proper treatment of employees and producing in the domestic market.
Price and quality are paramount, ranking just ahead of trust in the survey, but Edelman found that “trust attributes are deeply important in purchase, including reputation and purpose.”
“High trust consumers have more brand loyalty (75 percent importance in purchase), engagement including sharing personal data (60 percent) and advocacy including recommending or defending the brand (78 percent),” Edelman said.
If that is born out across the broader consumer base, few if any fashion companies will be able to stand still.
“The mission of a company can’t be separated from their mission to their neighbor and to society in general,” said John Ruth, CEO and founder of Build Asset Management. “That’s here to stay and some are quicker to that understanding than others.
“Capitalism itself is something that I view very much as altruistic when we compare it to the other choices we’ve had to work with,” Ruth said. “If applied the right way, it’s really about the idea of empowering the individual. It’s good that we’re going down this path and thinking more broadly around impact. A top rule of business is, ‘Know thy customer.’
“Part of delivering the best value to your shareholders is to know your customer,” he said. “Today, it seems like these [social issues] are important considerations for the customers, where consumers have made it abundantly clear that they’re willing to cancel you.”
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