Deloitte Sustainability DK - Value opportunities in sustainable fashion


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Sustainability and value in the global fashion industry

A Deloitte presentation of how a sustainable business approach may contain significant opportunities for companies operating in different part of the extensive fashion supply chain. The presentation connects one value opportunity to each part of the fashion value chain though many of the value opportunities is relevant in different parts of the value chain as well.

For more information contact DK Deloitte Sustainability Manager, Bahare Hagshenas,

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  • General description of the presentation:
    In order to conceptualize/put into a clear framework the business potential of considering sustainability in the fashion industry one may consider different sustainability value opportunities as being connected to different parts of the product life-cycle (or in a globalized industry as the fashion industry; different parts of the value chain). The presentation will therefore separate the fashion value chain into 7 segments and connect one key value opportunity to each of the 7 segments:
    This framework is to be understood primarily as an instrument to make clear that the business case for sustainability in fashion is a complex matter dependent upon which part of the value chain one is trying to address. It should therefore be emphasized that one value opportunity, in this presentation, connected to one segment may very well connect to other segments as well.

  • Key value opportunity connected to the design segment:
    Attract and retain future talent

    The argument for this slide:
    The millennial generation will be increasingly important to employers (including employers in the fashion industry)
    The millennial generation prefers to work for employers that are innovative
    The millennial generation expect that businesses (hence employers) do a lot in terms of sustainability
    Therefore, employers should be innovative and do a lot in terms of sustainability in order to attract and retain future talent (i.e. members from the millennial generation)

    Support for the argument:
    Kering Group connects the importance of attracting talents to their business and assert that sustainability is key in this
    Kering Group:
    Revenue 2013: 9.7 billion euros, 35.000 employees, 22 brands: e.g. Gucci, Puma, Bottega Veneta
    H&M connects sustainbility to the attraction and retention of employees
    Nike has made a free app especially for designers to use. The app show the different impacts associated with the use of different materials. This indicates that Nike is doing employer branding by positioning themselves as focused on sustainability.

    Note that the connection of the value opportunity (attraction and rentention of future talent) is based on the idea that “design” is understood as the process (i.e. making sustainability part of the criterias for the work process of designing products), not the result (i.e. sustainable product design (e.g. durable design)). Only so is the argument valid

  • Key value opportunity connected to sourcing segment:
    Increase resilience against externality risks

    The argument for this slide:
    Different materials (i.e. textile fibres), have different impacts
    Impacts may be understood as externalities
    However, there is a risk that externalities may (due e.g. to changing regulation, resource scarcity and depletion) become internalized
    By taking into account the impacts of different materials when one sources one reduces one’s exposure to these risks
    Therefore, one should ‘source sustainability’ (i.e. source low impact materials) in order to reduce risks. However, one should note that since different materials have different non-straightforwardly-comparable impacts it is not an easy task

    Note that the impacts enumerated are impact associated only with the fabric production stage of the life-cycle. This stage include:
    (1) Resource production and processesing;
    (2) pretreatment;
    (3) sizing;
    (4) Spinning;
    (5) desizing;
    (6) warping sizing;
    (7) Fabric formation;
    (8) Finishing;
    (9) printing an dyeing
    Note under polyester that the impact on resource availability is to be understood as the external cost resulting from the production of one kg of fiber. The resouce availability impact is US$100 pr kg of cotton (see p. 83 in

    Case-based support for the argument
    A very large coalition of stakeholders from the industry (including all the major players) have joint the Sustainabile Apparel Coalition. Their current focus is development, piloting and broad adoption of the Higg Index, a tool for measuring the environmental and social performance of apparel products.
  • Key value opportunity connected to the manufacture segment:
    Mitigate supply chain risks

    The argument for this slide:
    The freqency of risks events in the supply chain has increased
    The risk events in the supply chain is becoming more costly
    CSR/sustainability risks are pertinent supply chain risks
    Therefore, one should consider RSCM as a way to mitigate the number of costly risk events in one’s supply chain. This is also the case in the fashion industry (if not especially in the fashion industry where value chains are long, complex, and often placed in high risk areas)

    Support for the argument.
    Rana Plaza factory complex collapse:
    1.129 peple lost their lives
    Industry response:
     Accord on Factory and Building Safety in Bangladesh

    Hver opmærksom på at billedet vedr. Rana Plaza er copyrightet (hvilket jeg også har anført) men, hvis jeg var dig vil jeg tage chancen for ligesom at fastholde publikum lidt 
  • Key value opportunity connected to the distribution segment:
    Lower your costs

    The argument of this slide:
    By considering sustainability in connection with packaging and transport of one’s products one can reduce one’s costs
    One should reduce one’s costs’
    Therefore one should consider sustainability in connection with packaging and transport
    Support for the argument:
    Through PUMAs Clever Little Bag Campaign they reduce in the, in the presentation, enumerated ways.
    The table indicates that the GHG emissions varies heavily dependent on which kind of transport you choose (note that, as it is GHG emissions may not be considered a cost (because it is de facto not), however, it may very well become one.
    The ‘Globe with the lines’ indicates that another important factor is the route by which one transport one’s products and the supplier one uses.
    In 2008, Levi Strauss reviewed and altered its international shipping routes. It used less air and truck transport, and increased rail and ship usage. Many routes decreased greenhouse-gas emissions by 50 percent to 60 percent.
  • Key value opportunity connected to the retail segment:
    Benefit from emerging market opportunities

    The argument of this slide:
    The majority of consumers say they are willing to pay more for sustainable products
    Consumers say that they find it increasingly important that business are transparent about their conduct (transparency, I here consider as interchangeable with sustainability)
    The consumer segment that are most influential – the millennials (they consume 25-40 percent more than the average consumer) – believe that they should improve the state of the world (e.g. through their shopping)
    Therefore, fashion companies should try to benefit from these trends (note here the ‘attitude-behaviour gap’ – and argue for bridging it )

    Support for the argument
    C&A Europe’s total revenue grew by € 212 million in 2012 to € 6,8bn, a gain of 3.2 %
    Immense growth in sales of organic textiles
    In 2010 13% of C&As entire cotton collection was made of organic textile
    Note that Nudie jeans is a frontrunner in sustainable fashion:
    Nudies offers recycling schemes where they re-purpose used denim for new jeans styles and rugs. Consumers can bring their worn out Nudie jeans to any of their stores to be recycled
    Nudies encourages consumers to wear their jeans for for extended periods of time (up to 6 months) without washing. Helps consumers extend the life of their jeans through repair shops and repair kits. 20% discount off new items for those who bring in used pairs. Those jeans are then repaired and sold again to customers who prefer a more worn-in look

  • Key value opportunity connected to the retail segment:
    Increase customer engagement, loyalty and brand identification

    The argument of this slide:
    Customer engagement is import to businesses strategy
    Increased customer engagement has a strong positive impact on business success
    Sustainability is a way to increase customer engagement
    Therefore, fashion companies should use sustainability to increase customer engagement
    Support for the argument:
    Patagonia – ‘Don’t Buy this Jacket campaign’:
    On Black Friday (shopping frency day in USA) Patagonia, the outdoor apparel clothing company, advertised a full-page ad on the New York Times, showing one of their bestseller jackets with the message “Don’t buy this jacket. On the ad itself Patagonia asked people to think about the environmental impacts on their consumption and “to buy less and to reflect before you spend a dime on this jacket or anything else.”
    Patagonia is a front runner in terms of sustainable outdoor fashion
    Patagonia has had a partnership with E-bay since 2005 where people sell and buy unwanted patagonia clothing and gear
    Levi’s – ‘Water>less campaign’:
    In 2009 Levi’s released updated caretags to encourage people to wash their jeans in cold water, line dry them, and donate them at the end of their natural lives. More recently, they launched the water>less campaign pairing a product line which boasts drastically reduced water usage with a consumer education campaign.
  • Key value opportunity connected to the discard segment:
    Internalize product value

    The argument of this slide:
    Clothes has a very high environmental impact (a little supplement to the argument – not really a premise)
    A lot of clothes are recycled
    This recyled clothes has a high value
    This value is currentlyg out of reach to the fashion companies
    Therefore, fashion companies should internalize this value by offering consumers to take back their unwanted clothes.
    Support for the argument:
    H&M has initiates a take-back system in all of their 53 markets
    In 2013 4.2 million kilos of clothes was collected
    In february 2014 H&M has sent out a ‘Capsule Collection’ of five denim pieces using 20% fibers from the garment collection program.

  • Summary of the presentation
  • Logo er altid venstrestillet og der er altid legaltekst på bagsiden.
  • Deloitte Sustainability DK - Value opportunities in sustainable fashion

    1. 1. Business opportunities in sustainable fashion A value chain perspective
    2. 2. © 2014 Deloitte Sustainable fashion: Understanding the business case 2 Value chain
    3. 3. © 2014 Deloitte Designing sustainability Attract and retain future talent 75% of the global workforce will in 2025 be members of the ‘millennial’ generation (born in 1983 or later). 78% of the millennials are influenced by how innovative a company is when deciding if they want to work for them. Millennials believe business can do more to help society Resource scarsity Climate change Income inequliaty 68% 65% 64% Source: Deloitte. 2014. Big demands and high expectations. The Deloitte Millennial Survey “Talent is the energy that powers our Group. Without talent we would not be here…Sustainability is key to talent management.” Source: “I’m also really happy to see that our…colleagues show such interest in sustainability. This opens great opportunities to…attract and retain the talent we need for our continued growth.” Karl-Johan Persson, CEO 3
    4. 4. © 2014 Deloitte Sourcing sustainability Increase resilience against externality risks Polyester Since polyester is a petroleum product it has a significant climate change impact (27 kg CO2 eq/kg). Again, since polyester is a petroleum product and petroleum is a non- renewable resource, polyester presents a high impact on resource availability ($US157/kg) During the production stage polyester requires 18.3 kilowatt hour per pound of fiber Cotton 2,4% of the world’s cultivable lands is covered with cotton, but cotton production accounts for 24% of the world’s use of pesticides and 11% of the world’s use of insecticides. Accordingly cotton has the highest level of freshwater eco-toxicity of all the most common textile fibres. Cotton is one of the thirstiest crops. The production of 1 kg of cotton takes between 7.000 and 29.000 litres of water. During the production stage cotton requires 8.6-9.4 kilowatt hour per pound of fiber Sources: European Commission. Environmental Improvement Potential of Textiles (IMPRO-textiles) Danish Ministry of the Environment – Danish EPA4
    5. 5. © 2014 Deloitte Manufacturing sustainability Mitigate supply chain risks A Deloitte report on how 600 manufacturing and retail executives view the growing challenge of supply chain risks shows that… 48% find that the frequency of ‘risk events’ in the supply chain has increased. 53% think that the costs associated with ‘risk events’ has increased. 56% see ‘macro-environment’ and CSR/sustainability risks as the biggest threat. Source: Deloitte. 2014. The Ripple Effect. How manufacturing and retail executives view the growing challenge of supply chain risks (n=600) 5
    6. 6. © 2014 Deloitte Distributing sustainability Lower your costs GHG emissions connected with shipping a container of apparel from a Chinese field to an American store Xinjiang to Shanghai Shanghai to Los Angeles Los Angeles to Denver Truck Rail Ship Air Truck Rail Miles 2435 2744 6591 6488 1032 1163 Kg of CO2 eq 3656 1357 950 96.618 1550 575 Kg of Nox 12.7 16.5 17.0 418.8 5.4 7.0 Kg of PM10 3.7 0.6 2.7 12.7 1.6 0.2 Transport Source: Natural Resources Defense Council. 2012. Clean By Design: Transportation Packaging 20 million MJ of energy 8.500 tons of paper 1 million litres of water 500.000 litres of diesel 1 million litres of fuel oil 275 tons of plastic …saved annually Source: PUMA. Clever little Bag Infographic 6
    7. 7. © 2014 Deloitte Retailing sustainability Benefit from emerging market opportunities 63% of respondents under the age of 40 said in a global survey that they are willing to pay more for socially-responsible products/services. Source: Nielsen. 2012. The Global Socially-Conscious Consumer 53% 66%2012 2013 Percentage of consumers who consider transparency and honesty important when dealing with a business or buying from a brand. Source: Cohn & Wolfe. 2013. From Transparency to Full Disclosure 84% of the world’s most influential shoppers – the millennials – believe it is their duty to improve the world. Source: World Economic Forum. 2013. Engaging Tomorrow’s Consumer 78% growth in 2012 sales of organic cotton 69% growth in 2012 sales of organic cotton Source: Textile Exchange. 2013. Organic Cotton Market Report 7
    8. 8. © 2014 Deloitte Use sustainability Increase customer engagement and brand identification 60% of respondents in a global survey among executives asserted that they see customer engagement as very important to their strategy. 60% of the respondents believed that a strategy of creating deeper customer engagement will have a strong positive impact on their company’s future growth. Source: Economist Intelligence Unit. Beyond Loyalty. Meeting the Challenge of Customer engagement “The recession was starting to hit hard. It was an important shift. People were investing in more expensive products that would last a long time, rather than disposables. We wanted to engage with these people – these were our people. Engaging around quality products is a great way to lower the impact of our products.” Rick Ridgeway, VP Environmental Affair, Patagonia “I think material re-capture enhances the brand because it speaks to the long- term quality. Many consumers feel good about the program because it speaks to the long term value of the product.” Chip Bergh, CEO, Levi Strauss & Co. 8
    9. 9. © 2014 Deloitte Discard sustainability Internalize product value 25.000 tons of clothes were in 2012 handed in for recycling in Denmark. Mostly to thrift shops. This equals an average of 7 pairs of jeans per person. Source: Statistics Denmark 3650 litres of water 3 kg of chemicals 400 MJ energy 13 m2 land Source: Deloitte. 2013. Fashioning Sustainability $1.9 billion was in 2009 the value of global used clothes exports from the OECD countries. Source: UN Comtrade Data. 2011 4.200 tons in 2013 9
    10. 10. © 2014 Deloitte Sustainable fashion: Understanding the business case Attract and retain future talent Increase resilience against externality risks Mitigate supply chain risks Lower your costs Benefit from emerging market opportunities Increase customer engagement, and position brand Internalize product value 10 Value chain
    11. 11. © 2014 Deloitte Bahare Haghshenas Manager Deloitte Sustainability Tlf.: 31 31 04 31
    12. 12. Deloitte Touche Tohmatsu Limited Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. © 2014 Deloitte Statsautoriseret Revisionspartnerselskab. Member of Deloitte Touche Tohmatsu Limited