The path to sustainable supply chains for Lululemon
Big fashion companies have a long list of shortcomings when it comes to their climate impacts. From weak emissions reduction targets and a lack of investment in renewables to relying on carbon offsetting, insetting and renewable energy certificates, it’s easy to spot the problems with corporate sustainability strategies. But it’s not all bad news. By implementing clear, credible commitments and investing in commercially available solutions for fossil fuel-free supply chains, brands can create a pathway towards deep decarbonisation.
Throughout our campaign targeting Canadian activewear brand Lululemon, we have shared practical, evidence-based solutions with the brand that would enable them to speed up the transition to 100% renewable energy in their supply chain. Here, we’ll explore some of those ideas in more detail.
1. Make a public commitment
The first step to any decarbonisation plan should start with a commitment to action by setting specific, measurable and time-bound targets that are grounded in climate science, such as 100% renewable energy in the supply chain by 2030, and a 50% reduction in absolute emissions from scope 3 by 2030. The commitments should be public-facing, for example published on the brands’ website and CSR reports, not just agreed internally. This is because it sends a strong signal to the sector that change is coming, including customers, shareholders, suppliers, industry associations and competitors, as well as those who can help enable this change to happen, such as energy suppliers and local governments.
Of course, targets alone are not enough without a credible strategy to accompany them, which includes interim goals along a realistic timeline, and clear commitments to financial investment to resource their level of ambition within the supply chain. Successful target-setting requires transparency and accuracy so that climate commitments can be scrutinised and held to account, such as reporting on scope 3 emissions using location-based accounting (emissions from energy consumed) rather than market-based accounting (emissions from energy purchased). As our campaign manager Ruth MacGilp expressed in her viewpoint for the Fashion Transparency Index: “Climate targets are not just something to splash on an impact report while farms, factories and mills are left to pick up the pieces….We need transparency on the actions taken to reach targets and robust accountability mechanisms for false sustainability claims.”
When it comes to renewable energy in their supply chain and a significant reduction in absolute emissions, Lululemon has not yet made a public commitment.
Even if there are some indications of work towards decarbonisation happening behind the scenes, Lululemon’s progress will not accelerate fast enough until they have at least publicly stated their pledge. If nothing is disclosed publicly about what they’re aiming for or how they plan to get there, we have to assume nothing is being done, and therefore Lululemon loses the trust of customers and broader civil society for failing to meet the climate challenge.
One area where bold commitments are being made is in the realm of ‘sustainable materials’, but we don’t see this same level of ambition for cleaning up the supply chain energy mix, where the majority of emissions can be attributed. For example, Lululemon has publicly committed to ‘make 100 percent of our products with sustainable materials by 2030’, which includes an interim target to ‘achieve at least 75 percent sustainable materials for our products by 2025.’
However, according to Changing Markets’ Synthetics Anonymous report, 62% of the materials Lululemon currently uses in its products are fossil-fuel based fabrics like polyester.
This suggests that Lululemon has a long way to go to achieve their sustainable materials target, but they are showing early signs of progress, for example by investing in plant-based nylon. This investment has clearly been driven by a public commitment that motivates action internally in the business and invites collaboration across the sector. A public commitment has the power to catalyse a plan in motion and the allocation of resources.
2. Provide real support for suppliers
The fatal flaw for the fashion industry’s climate action so far has been a lack of recognition of where the majority of climate impacts are produced, and most intensely felt: within the supply chain. This is why brands must match their sustainability goals with a Supplier Clean Energy Programme in order to help their suppliers transition to renewable energy.
This programme must include a financial commitment — for example, we would like to see Lululemon invest in a Supplier Clean Energy Fund with at least 1.5% of their revenue (equivalent to roughly $121.5 million USD in 2022). It may sound like a lot, but there are large upfront costs involved in, for example, decommissioning coal-fired boilers and installing onsite solar panels. The good news is that there is a return on investment for brands, who not only enable their suppliers to help meet sustainability targets, therefore attracting ESG investment, but also receive payback on those initial costs over time with improved energy efficiency, reduced energy demand and waste, and the freedom from fluctuating fossil fuel prices.
In addition to financial support through the Supplier Clean Energy Fund, Lululemon must also provide technical assistance to suppliers, tailored by country.
This may include training staff on new processes and equipment, and providing assistance in brokering shared investment in wind and solar projects which suppliers can benefit from. As part of this, Lululemon should develop a Supplier Clean Energy Procurement Policy that requires suppliers to purchase the highest quality renewable energy available. This will be local and additional wind and solar power, rather than relying on Renewable Energy Certificates, carbon offsetting or false solutions like biomass.
Overall, purchasing practices must create an enabling environment for this programme to roll out across complex global supply chains. Many fashion brands engage in irresponsible purchasing practices, which include short term contracts, last minute changes and cancellations, short lead times, high-pressure price reductions and withholding of payments. This uneven distribution of power creates a barrier to successful decarbonisation, because in order to invest the time, money and resources necessary to transition away from fossil fuels, suppliers must be able to trust that their buyers will not abandon them and threaten the job security of their employees, and they must be assured that their efforts will attract and retain customers beyond simply meeting the specific targets of any individual brand.
3. Push for a green energy grid
The political landscapes of sourcing countries can be challenging for brands that want to invest in renewable energy, often due to the influence of the state over the national grid which favours the interests of fossil fuel companies. However, in all of the countries where Lululemon sources its products, onsite Power Purchase Agreements (PPAs) are available. This means that in their tier 1 and tier 2 factories in places like Vietnam, China, Sri Lanka, Cambodia and Indonesia, Lululemon could start the work of installing rooftop solar panels immediately. What’s more, in markets where Corporate Power Purchase Agreements (CPPAs) are available, such as Taiwan and South Korea, the brand can work with local authorities to procure energy from offsite wind and solar power, creating local and additional renewable energy capacity.
Where CPPAs are not available, Lululemon should engage in lobbying activities that advocate for corporate investment in renewable energy.
Lululemon could start by developing a Climate Policy Engagement Programme with specific goals and mechanisms for each main sourcing country, again with a focus on enabling quality wind and solar energy. As part of this, Lululemon must provide detailed reporting on its climate policy engagement, which should include advocacy activities by country, both by Lululemon individually and as part of industry associations or groups of multiple brands.
There are good examples of this type of advocacy from fashion brands, such as a letter to the Vietnamese government urging the country to introduce direct power purchase agreements, and a letter to the Cambodian government expressing concern about its plans to increase coal power generation. These efforts are impactful because global fashion brands have a significant financial influence in the countries they source from, such as in Bangladesh where apparel makes up 80% of all export earnings. When a government’s lack of progress on climate gets noticed by major corporations, this threatens their position as a leading sourcing country, and therefore their economic growth.
4. Invest in low-carbon technology
More than half of the fashion industry’s supply chain emissions come from Tier 2, which is the stage at which materials are processed, including washing, dyeing and finishing. The reason for this is that material processing at scale requires large quantities of hot water to produce steam, and traditionally this is heated by burning a fuel feedstock, such as coal.
In order to tackle this problem, many factories are switching from burning coal to burning biomass, which describes bio-based feedstocks such as wood pellets and rice husks. However, we do not believe that this is a credible climate solution for Lululemon, because there is little evidence that biomass can be sustainably sourced at scale without threatening biodiversity. Above all, biomass still requires combustion, which produces harmful air pollution that may be toxic to the health of workers and local communities, and still generates carbon emissions despite claims that these are offset by trees or crops re-growing, therefore biomass cannot be considered ‘renewable’
The alternative to combustion-based boilers is, naturally, electrification.
You can think about it in a similar way to the benefits of an electric stove vs. a gas stove. Of course, even with an electric boiler, the electricity supplying the factory may still be coming from a coal-powered national grid. But electrifying factories is the best way to future-proof for a net-zero future, while the climate policy engagement programme mentioned above comes in to fill the gap. What’s more, there are numerous technologies — such as onsite heat pumps — which can significantly reduce emissions.
In addition, Lululemon can start working with new technology that reduces or even removes the need for these heating systems altogether.
For example, several innovators as part of the D(r)ye Factory of the Future programme have developed dry processing technologies such as plasma and laser treatments, spray dyeing, supercritical carbon dioxide and foam dyeing. According to Fashion For Good, if these technologies were scaled up with the help of investment from fashion brands like Lululemon, dry processing has the potential to abate up to 26% of the industry’s greenhouse gas emissions.
Lululemon has the opportunity to lead fashion’s green transition
We believe that Lululemon’s influence as one of the largest sportswear brands in the world means that if it shifts to 100% renewables, it will accelerate demand for clean energy worldwide, and help develop the policy and finance solutions needed to support meaningful, systemic change towards a climate positive future.
You can help us ask Lululemon to take action for people and the planet – join our campaign!