Sustainable Raw Materials Will Drive Profitability for Apparel Brands

Sustainable Raw Materials Will Drive Profitability for Apparel Brands

The fashion industry is facing intensifying scrutiny regarding the environmental impacts of its raw materials and production processes. Over the next few years, more than 35 new sustainability-linked regulations globally will target issues like import restrictions, product design, labeling requirements, and more. More than 85% of leading fashion brands have publicly declared supply chain decarbonization goals, indicating an urgent need to adapt.

Fashion brands require a strong strategy to secure future supplies of preferred sustainable raw materials. Implementing such a strategy swiftly and decisively will likely yield positive returns. Brands that take immediate action to ensure a reliable supply of chosen raw materials in the future will be in a favorable position to achieve an anticipated average increase in profits of 6% after five years. A fashion company with $1 billion in yearly sales could potentially access a cumulative opportunity worth around $100 million over five years.

For the past century, the fashion industry has prioritized minimizing raw material costs, often at the expense of vulnerable communities and the environment. However, the industry has reached an inflection point, as the underlying resources and regulations that have shaped its strategy for a hundred years are transforming. Potential risks include:

  • Upcoming regulations that may jeopardize 8% of earnings for non-compliant brands.
  • Climate change impacts on raw material availability, access, and pricing.

The Materials Manifesto outlines 6 principles to guide strategic materials sourcing: 

1) Enable traceability to understand impacts

2) Use science-based decisions

3) Diversify the materials portfolio

4) Create win-wins for suppliers and nature

5) Strengthen supplier relationships

 6) Engrain sustainability incentives and knowledge.

This report was originally published by Boston Consulting Group.

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