Trucost Blog / 28 Mar 2014

What is the true cost of fashion?

Widespread adoption of natural capital accounting in financial and corporate reporting is needed to accelerate the integration of environmental and social considerations into decision making.

Fast and cheap fashion is available across the high street, with companies competing to undercut each other on low price, good value garments. But does this market undervalue the true cost of clothing? This is a question that the Sustainable Fashion Academy (SFA) and The Prince’s Charities Sustainability Unit, in partnership with Trucost, have set out to answer.

In 2012, the global apparel market was worth $1.7 trillion. The industry is vast and multinational, employing close to 75 million people worldwide. Apparel products are bought by all and are often viewed as an extension of the self, being a way for individuals to express themselves and represent their personal identity.

But with the positive impacts of the sector come environmental degradation and some dubious social practices, highlighted by the tragic collapse of the Rana Plaza in April 2013.

Growing demand for garments which can be cheaply made, and with fast turnaround to support the many clothing ‘seasons’ per year, is contributing to water scarcity, resource depletion, toxic chemical use (and often ill-managed disposal) and increasing  carbon emissions.

While the sector has advanced significantly since the days of sweat shops in every supply chain, there are many regions in the world where textile workers continue to face human rights violations, long and dangerous work conditions, a lack of employment rights, and yes – evidence of child labour is still widespread.

Increasing water scarcity is threatening crop production, demonstrated by cotton slumps and price hikes following droughts in China (2010) and the US (2012).

In this vulnerable market, several companies shine out as leaders in moving the sector towards positive action. Companies and industry stakeholders such as governments and trade associations are driving improved practices, creating more transparency in supply chains and encouraging better practice through sustainable procurement, innovative materials and product design, and social auditing.

The Global Leadership Award in Sustainable Apparel (GLASA) is an annual prize presented to organizations responsible for outstanding achievement in sustainable apparel. The theme of this year’s awards, to be held in Copenhagen on 23 April, is natural and social capital accounting. The award will be presented to one of four short-listed nominees: The Danish Environmental Protection Agency, Kering, the Natural Capital Coalition or Pants to Poverty/Pi Foundation. Each has contributed to advancing the sector in this discipline.

Earlier this year, Trucost published a draft white paper on behalf of the SFA and The Prince’s Charities Sustainability Unit, discussing the sector’s progress in adopting natural and social accounting and the barriers to more widespread uptake of financially orientated sustainability metrics. Following industry consultation, the final version will be launched at the GLASA event in April.

Trucost’s research found that stakeholders are generally optimistic about natural capital accounting, such as the PUMA/Kering Environmental Profit and Loss account. The EP&L was widely considered an innovative and helpful exercise, spurring the sector into discussion and some action. The value of monetizing environmental and social impacts is seen as a useful means of communicating sustainability issues with CEOs and investors by creating a single, comparable and easily understood metric.

However, broader collaboration will be needed to standardize the methodology for the industry. More widespread adoption of natural capital accounting in conventional financial and corporate reporting is also needed to accelerate the integration of environmental and social considerations in mainstream business decision making. Many organizations are striving to make this happen, including The International Integrated Reporting Council, which launched its <IR> Reporting Framework in December last year.

The GLASA event should be a great springboard for action and we look forward to having some fantastic discussions on what we can do to accelerate this transition.

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