DECARBONIZING THE FASHION INDUSTRY

According to Fashion Revolution, all major fashion brands must disclose where their clothes were made, how many were produced, and their environmental impacts. This should include disclosing a full supplier list across all Tiers or stages of production. The 4 Tiers of the fashion supply chain are:

• Tier 4: Raw material cultivation and extraction. (e.g. cotton farming, oil extraction).
• Tier 3: Material processing. (e.g. spinning fibres and weaving yarn into fabric).
• Tier 2: Material production. (e.g. dyeing and finishing fabric).
• Tier 1: Product assembly. (e.g. cutting and sewing clothing).

As part of this disclosure, brands should also report on the number of products produced per year, and provide location-based emissions accounting along with details on energy consumption, fuel mix, and renewable energy procurement. This level of transparency allows for a deeper understanding of fashion’s reliance on fossil fuels and environmental impacts and risks across the supply chain and provides a clearer picture of the hotspots where action is needed most.

At COP28, the world agreed to a swift, just, and equitable phase-down of fossil fuels (coal, oil and gas). Fashion companies must follow this mandate by committing to a transition away from fossil fuels as the main sources of electricity and thermal energy in their supply chain.

In particular, stopping fossil fuels from being burned to generate heat for textile dyeing and processing must be an urgent priority, in order to address a significant portion of the fashion industry’s greenhouse gas emissions.

Climate scientists recommend that renewable energy capacity must be tripled by 2030 in order to meet the emissions reduction demands of the Paris Agreement, which will be driven in no small part by corporate procurement as global renewable energy capacity grows rapidly.

Therefore, fashion companies must switch from planet-warming fossil fuels to clean renewable energy in their supply chains. Wind and solar power are zero-emissions sources of energy and have minimal adverse social and environmental impacts. Fashion manufacturing can be powered by renewable electricity using measures like rooftop solar panels and PPAs (power purchase agreements) from local wind and solar power.

Studies show that textile producers in several key sourcing countries for the fashion industry can reach net zero emissions through the electrification of dyeing and processing systems, for example through electric steam boilers and industrial heat pumps. This not only saves energy due to reducing fuel consumption and heat loss from traditional combustion boilers, but also enables manufacturers to source clean renewable electricity, rather than just switching out one polluting fuel for another, like coal-to-gas.

Energy efficiency measures such as heat recovery and water recycling, improved boiler efficiency, improved insulation, compressed air optimization and condensate recovery can also support manufacturers to reduce emissions.  Another contributor to decarbonization in the fashion supply chain is innovation in technologies such as dry processing and waterless dyeing, which could use 93% less energy, 99% less water, and 90% fewer chemicals, and reduce the global warming potential of the dyeing process by up to 70%.

There are several decarbonization solutions in the fashion supply chain that can lead to cost savings over relatively short payback periods, such as energy efficiency measures, heat pumps and onsite solar. However, suppliers say that significant upfront capital investment is required for many decarbonization measures, and operating costs mean that renewable energy doesn’t always have an attractive return-on-investment from a purely financial perspective in the short term.

This is why brands and retailers, which make billions of dollars in annual revenue, must take responsibility for financially supporting their suppliers - many of which are SMEs (small and medium enterprises) that are already under pressure in the fast fashion business model to reduce the costs of production as much as possible. Brands’ climate targets must be accompanied by a credible climate finance strategy, which should include at least 1-2% of revenue dedicated to supply chain decarbonization.

Researchers suggest that up to $1 trillion USD is required to reach a net zero fashion industry, including technological innovation, low-carbon materials, renewable electricity, and coal phase-out. In their modeling, this funding comes from a mix of debt, equity, loans, and grants from banks, governments, philanthropy, and venture capital. Other financing models have also been recommended for a greater level of equity, accessibility, and affordability for suppliers, including green bonds, sustainability premiums, and shared climate funds between brands and suppliers.

Uneven power dynamics between brands, suppliers, and their workers may create a challenging environment for implementing the decarbonization measures required to cut emissions in line with the Paris Agreement. To address this, collective action is required to shift responsibility for climate action to be shared across the apparel value chain, rather than brands setting targets and leaving suppliers to pick up the pieces without a credible decarbonization strategy in place.

Multiple brands often share the same suppliers, and therefore collaboration is required even amongst fierce competitors. A recent examples of this collaborative approach is the European Outdoor Group’s Carbon Reduction Project and Impact Accelerator Fund. We also need to see cost and resource sharing amongst brands and manufacturers, and meaningful engagement in dialogues with workers to ensure a just transition towards deep decarbonization in the fashion supply chain.

According to Dr. Hakan Karaosman from Fashion's Responsible Supply Chain Hub (FReSCH), "Distributive justice needs to happen whereby risks and benefits are shared fairly, and power is distributed between the supply chain actors....It is time to bring all of those working across multiple tiers of supply chains together to learn from their knowledge and lived experiences. It is only through this radical collaboration that the fashion industry will finally see what, how, and by whom radical and inclusive climate action can be operationalised." (source).

In order to address regulatory barriers for suppliers switching to renewable energy in sourcing countries (eg. a lack of infrastructure for PPAs, limits to onsite renewable energy generation, fossil fuel-heavy national grids, and high costs for green electricity), fashion companies must develop policy advocacy strategies for working with local governments to improve and incentivize renewable energy capacity and corporate access.

On home turf and in consumer markets, companies should also support the development of legislation for corporate climate accountability. For example, policies that require scope 3 emissions reporting, emissions reduction targets and environmental due diligence, incentives for sustainable products and circular business models, and mechanisms for carbon pricing.

According to Changing Markets, the growth of cheap polyester (made from fossil fuels) has driven the growth of fast fashion throughout the 21st century. Because of fashion brands’ dependence on polyester for the majority of their material mix, they are incentivized to produce and sell more and more low-cost, low-quality products. To address this, virgin polyester must be phased out and replaced with fewer and less carbon-intensive materials, in order to reduce the overall quantity of garments produced.

NewClimate Institute also recommends that in order to reduce the fashion industry’s greenhouse gas emissions in absolute terms, decarbonization measures should be underpinned by a shift to a slower and more circular fashion system. This includes reducing overproduction (clothes that are made but never sold) and scaling up circular systems (repair, reuse, resale, and recycling).

For a factory to transition from largely fossil fuels to largely renewable energy, upfront investment is required. However, it may not cost as much as some assume, and more importantly, major fashion companies which make billions of dollars in revenues have plenty of resources to financially support their suppliers to transition.

According to McKinsey & Co, most fashion brands could reduce their GHG emissions by more than 60 percent for less than 1 to 2 percent of their revenues, largely by targeting energy consumption at tier 2. Meanwhile, Apparel Impact Institute suggest that energy efficiency improvements cost about USD 500k - 1M per facility and renewable electricity costs about USD 1M - 5M, while a good investment in terms of return-on-investment for emissions reductions is suggested to be around $70 USD per tonne of carbon dioxide, making decarbonization relatively affordable for major international brands, retailers and supplier conglomerates.

Apparel Impact Institute and Fashion for Good calculate that $1trillion USD is needed to decarbonize the entire fashion industry, with more than half of this dedicated to coal phaseout, energy efficiency, and renewable electricity measures, using a combination of existing and innovative solutions. It suggests that this money can come from a mix of debt, equity, loans, and grants from banks, governments, philanthropy, venture capital, and brands and manufacturers, as well as sustainability premiums. A report from Transformers Foundation suggests other sources of funding and innovative financial models, including equitable shared climate funds between brands and manufacturers.

Notwithstanding, some decarbonization solutions also offer operational cost savings over a relatively short payback period, such as energy efficiency measures, heat pumps, and onsite solar.

Barriers to decarbonization in many sourcing countries are significant, including electricity grids being dominated by fossil fuels, a lack of policy measures that enable or incentivize corporate renewable energy procurement, onsite coal burning being the cheapest thermal heat option for suppliers, and state-owned energy companies impeding progress for onsite renewables. However, with strong climate policy advocacy from major brands, this regulatory environment can begin to turn the tide.

For example, in Indonesia, the world’s ninth-largest emitter for whom apparel represents 5% of all exports, major fashion companies like H&M and Nike signed a statement of mutual aspiration in 2021 encouraging the government of Indonesia to achieve at least 50% RE energy mix by 2045. In 2023, Indonesia announced new plans to increase the portion of renewable energy in its power generation to 44% by 2030.

Meanwhile, in Vietnam, the world’s third-largest fashion manufacturing hub where the garment and textile industry represents up to 16% of GDP, H&M and Nike have been working to advocate for the creation and implementation of its Power Development Plan. The government has since launched its renewable energy Direct Power Purchase Agreement (DPPA) pilot program, which these fashion companies are pushing for acceleration of.

In the absence of strong renewable energy policies and green energy grids, there are still many different decarbonization solutions companies can support suppliers to implement to start reducing emissions immediately, including the installation of rooftop solar panels (eg. Puma in Bangladesh), private agreements with energy companies (eg. Chanel in South Korea), investing in waterless dyeing technologies (eg. H&M in India) and energy efficiency measures (eg. Gap in China).

More and more fashion brands are promoting ‘sustainable’ products and making claims about the impact of different fabric choices (such as virgin vs. recycled polyester or conventional vs. organic cotton). While raw material (Tier 4) impacts are significant, representing 24% of total impact, the majority of fashion industry emissions are produced at the dyeing and processing stage (Tier 2 - 52%). That means that even when a product is made from a more ‘sustainable’ fabric, it could still be produced using fossil fuels. This is why climate action in the fashion industry needs to be addressed at the energy system level, not just at the individual product level.

In many cases, when brands have set climate targets for Scope 3 or their supply chain, these targets are intensity-based. This means that they might promise to reduce emissions by 50% per product made, per item sold, per dollar of revenue, or another volume-based metric. This means that a brand could sell twice as many t-shirts but report half as many emissions because each t-shirt might be less emissions-intensive (usually, by switching from one fabric to another).   

Intensity-based targets, therefore, could in theory be met regardless of the growth of absolute emissions, material output, and resource use. NewClimate Institute found that amongst companies setting 2030 intensity-based emissions targets, these translated to a median absolute emission reduction commitment of just 15%. Ultimately, the planet can’t tell the difference - only individual companies benefit from reporting intensity-based emissions reductions while global emissions soar.

To address this, brands must set absolute emissions reduction targets in order to meet international climate agreements - in fact, the IPCC recommends that absolute emissions from all sectors need to be halved by 2030. To meet those targets, brands should address emissions hotspots, such as transitioning from fossil fuels to renewable energy at Tier 2.

Coal, the world’s most carbon-intensive fossil fuel, is commonly burned in factories in order to generate thermal heat to dye and process textiles, despite growing momentum to phase out coal globally. To address this, 100 brands and manufacturers have committed to eliminating coal from their supply chain by 2030 as part of the UN Fashion Industry Charter for Climate Action. However, many brands are using a ‘fuel switch out’ strategy to meet this commitment, in other words, burning gas or biomass in coal’s place.

Gas is a concern because, even though it releases less carbon dioxide than coal when burned and therefore companies are able to report emissions reductions, methane from natural gas traps about 85 times more heat than carbon dioxide over a 20-year period. Using gas also keeps fashion companies trapped in a cycle of fossil fuel reliance and delays the urgent need for acceleration of renewable energy capacity. Biomass is no long-term solution either, due to widespread concerns about the impacts of deforestation and air pollution on local communities, as well as accounting loopholes that fail to recognise the payback period for carbon debt.

According to NewClimate Institute, there are concerns about the feasibility of fashion companies’ 2030 emissions reduction targets, because they currently encourage suppliers to switch to biomass or natural gas, which are not credible decarbonization options for the fashion industry. Instead of burning toxic fuels to produce textiles, companies must invest in proven renewable energy solutions, like electrifying the dyeing process with industrial heat pumps.

Many companies rely heavily on standalone Renewable Energy Certificates (RECs) to meet their climate targets, despite mounting evidence that RECs are unlikely to contribute to additional renewable capacity. In many cases, there is no physical link between the grid where RECs were generated and the grid where the renewable electricity is claimed. Other renewable energy procurement instruments are more likely to have a legitimate impact, such as Power Purchase Agreements (PPAs) for new and local renewable generation capacity.

Carbon offsetting is another instrument that companies use to reach their net zero goals, but there is a growing consensus that carbon offsets are not a credible way to claim emissions reductions and removals due to the flawed accounting promoted by the misleading carbon credits market. Additionally, there is mounting evidence of human rights abuses in carbon offsetting schemes, including occupation of Indigenous land and gender-based violence.

Instead of relying on ‘credits’ to offset their impact, it is fashion companies’ responsibility to invest in reducing absolute emissions in their own supply chain by moving away from fossil fuels and accelerating clean renewable energy, like solar and wind.

There are many examples of factories in the fashion supply chain powered by renewable energy, even in challenging locations. For example, in India, where almost half of the national energy grid is made up of coal and only 3% is renewables, textile suppliers are investing in decarbonization:

• Sangam Ltd is procuring renewable energy through a solar PPA that meets 25% of total energy needs.
• RSWM is using 23 MW of solar power from the largest onsite captive solar plant for a single off-taker in India.
• L.S. Spinning Mills owns nine wind turbines with a combined capacity of 6MW.
• Fashion brand Rapanui manufactures in an Indian factory that owns two wind farms and a 150KW solar PV installation.
• India’s largest apparel exporter, Shahi Exports, recently invested in two solar power plants of 32 MW and 52 MW in Karnataka which catered to 65% of electricity requirements.
• Arvind Ltd sources 16.2MW of renewable energy the largest rooftop solar installation at a single location in India.

Even if 100% renewable energy isn’t possible for 100% of suppliers at present due to technical, financial, and policy-related barriers, it is important for brands to set strong, time-bound targets for accelerating renewable energy in the supply chain in order to mobilize resources to address these barriers.

According to the Apparel Impact Institute and Fashion for Good, commercially available solutions represent 47% of fashion’s emissions abatement potential towards net zero by 2050. Investment in these existing solutions, together with innovation in emerging technologies, and a strong policy advocacy strategy, it is absolutely possible to decarbonize the fashion supply chain - and absolutely necessary in order to align with the Paris Agreement and limit global warming to 1.5°C.