The underestimation of sustainability and the lack of awareness of its potential competitive advantages were some of the main insights emerged from Sustainability and Fashion Report 2020.
However, since then market conditions have changed, and the fashion industry has been forced to evolve. As a consequence of Covid-19 pandemic, companies were asked to make several sacrifices and they had to demonstrate their adaptability and resolution to survive and transform. As an example, the simplification of their business model was one of the required changes. Indeed, according to McKinsey, post-pandemic context will require a demand-driven model, a reduction in complexity, and a recalibration of volumes-profits equation.
Also, an increase in consumers’ sustainability concerns was observed as well. Search queries with the “sustainability” keyword increased by 37%, and second-hand clothing demand grew by 45% between November 2019 and February 2020.
Sampling and research method
For the research, Italian fashion businesses were selected according to the following Italian Chamber of Commerce’s ATECO codes: 13, 14, 15, 46.16, 46.41, 46.42, 46.76.10, 47.72.10 An initial sample of 147,864 businesses was obtained. Only those businesses whose revenue and number of employees were available, were taken into account, reducing the initial sample to 24,619 businesses.
Subsequently the sample was furtherly reduced, selecting only those companies whose revenue accounts for more than 1M. From here, two final representative samples were obtained, distinguishing between brands and fashion industries. The first sample included 47 brands (4 of which manufacturing also for third parties), the second one accounted for 53 fashion supply chain industries.
The choice of selecting companies with a revenue accounting for more than 1M, was due to the will of obtaining a sample whose concrete economic resources allowed investments in sustainability. This in order to investigate the faced challenges.
The selected methodology was qualitative phone interviews with founders, management, ownership, and sustainability managers.
The interviews collected qualitative insights, as well as structured data obtained from questionnaire responses, serving as guidelines for the interview.
Sustainability awareness and challenges among Italian fashion businesses
Awareness of sustainability relevance increased
From Sustainability and Fashion Report 2020 it emerged that 61.2% of companies were dealing with sustainability or were planning to do it, especially for personal interest and competitiveness.
According to recent analysis the number of companies actively embracing sustainability noticeably increased, reaching 89% of the interviewed sample.
Such growth is especially due to an increase in market demand. Among companies in fashion industry investing in sustainability, 59.8% is doing it for competitiveness, and in particular 22.7% because of consumers’ requests.
Also, as an indicator of increased awareness, the percentage of companies investing in sustainability for personal interests is rising as well.
How did companies’ sustainability drivers change?
The relevance of implemented sustainable practices increased
28% of interviewed companies are currently at the basic level of sustainability, 41% are at the intermediate level, and 31% at the advanced level. Companies’ sustainability levels were defined according to the number of adopted sustainable practices and their relevance. As an example, changes in packaging and communication have a little environmental and social impact, if not associated with other measures.
In the last year, the substitution of packaging with more sustainable alternatives was mentioned by businesses as the only sustainable practice adopted. Conversely, in the current year no company has claimed to have adopted this measure exclusively.
As revenue increases, the number of implemented relevant practices increases as well
By analysing the relevance of implemented practices in relation to revenue, it emerges that:
· 33.3% of small enterprises are currently at the basic level of sustainability, an additional 66.5% as compared with large companies.
· 40% of large companies are at the advanced level of sustainability, an extra 42.3% as compared with small enterprises.
Since companies’ sustainability level is computed on the basis of the number of adopted sustainable practices and their relevance, it is possible to assume that a higher number of practices is managed more efficiently if there is a dedicated team within the company. It is more likely to occur within large companies (because of financial resources, as well as the need to manage more complex industries).
Social issues concern is increasing too
In the last Report, it emerged that sustainability in fashion industry was perceived exclusively from an environmental perspective. The protection of employees – an industry’s relevant issue – was cited only by 8 companies out of 83.
From recent analysis it emerges that people’s safeguard and corporate welfare have increasingly become frequent requests from consumers, especially as a result of Covid-19 emergency. Social concerns have increased also among companies; as a matter of fact, businesses dealing with social issues have increased by approximately 150%.
However, it is still a topic partially tackled by companies, only 20% declare to consider it a priority for the business.
Circularity is still not considered enough
The theme of circular fashion is fast-growing and companies which can anticipate it will gain a competitive advantage.
However, only a very few companies mentioned the topic as a priority. Only 7% affirm that investing in leasing, second-hand sales, repairing, or circular design projects, is a priority with respect to sustainability.
Sustainability self-assessment mirrors reality only partially, but it is still necessary to work on awareness!
From the analysis, it emerges that there are companies underestimating themselves (20%), as well as others overestimating themselves (25%).
Overall, 45% of interviewed companies have a self-perception which does not mirror reality. Therefore, on the one side, they could better enhance themselves and benefit from a competitive advantage; on the other side, they enhance themselves more than they should and risk falling into greenwashing.
The sustainability journey may include obstacles
Among interviewed companies, only 22% declare to not having faced any obstacle in implementing sustainable practices.
The main obstacles (difficulties or failures) faced by companies are complexity in the implementation process (20.8%), high costs (15.4%), and the valorisation of their activities in the eyes of clients (14.1%).
The loss of quality is a limited problematic
Loss of quality was a relevant concern in the past, however in years technology and innovation have progressively allowed to improve materials and manufacturing performance, reducing environmental impact. Businesses which substituted their materials with more sustainable alternatives confirm it, only 7% of them actually observe a loss of quality.
Why sustainability is an investment and not a cost
Despite costs representing one of the most worrying challenges for the next months and years – mentioned by 17% of companies – during the interviews several virtuous companies underlined the economic advantages resulting from their investments. Companies claimed that investments allowed them to cut inefficiency costs and gain several financial advantages.
Sustainability consultants – costs or benefits?
Companies which did not entrust fashion sustainability consultants took such decisions especially because they thought to possess the required competences (47.6), and to save money (18%).
However, results demonstrate that companies which take advantage of external sustainability consulting firms succeed in reaching high levels of sustainability more easily, and they face cost problems to a lesser extent afterwards.
Indeed, fashion companies which entrust sustainability consultants and occupy the advanced level of sustainability represent an additional 56.7% as compared with those which are not supported by experts. Whereas those which are at a basic level of sustainability are 64.1% less. Furthermore, companies which entrusted sustainability experts perceived the cost problem to a 16% lesser extent afterwards, with respect to companies which dealt with sustainability internally.
Such results are probably due to the fact that – although relying on fashion sustainability consultants took an economic expense – experts’ competences allowed them to easily achieve results and reduced inefficiency costs.
Competences of sustainability help to prevent failures
65% of companies’ failures are linked to the lack of competence.
The choice of sustainable materials (32.6%) and sustainability communication (13%) are among the main failures (i.e., the most critical obstacles that companies did not succeed in overcoming). Difficulties in the implementation of such aspects might be reduced through competence.
Overall, 65.2% of interviewed companies’ failures are not due to external causes (problems in logistics, high costs, difficulties in the traceability of the supply chain), but to the lack of internal competences.
Communication requires competences as well
Along with the choice of sustainable materials, sustainability communication is another priority for companies.
Among the interviewed businesses communicating their sustainable fashion practices, 40.3% faced difficulties in the communication process. Among the main difficulties are succeeding in structuring an involving communication (51.9%), managing technicity/empathy trade-off (14.8%), dealing with the complexity of the communication process (14.8%), and elevated costs (14.8%).
In this case as well, the majority of difficulties can be more easily faced with more competences.
Designing a strategy allows to avoid obstacles
37% of companies at the basic level of sustainability claim that strategy development is a priority
Designing an efficient sustainability strategy allows us to cope with many obstacles, such as high costs due to inefficiencies or accidents.
Among companies at the basic level of sustainability, only 37% declared their will to define a sustainability strategy. Actually, it should be the basis to reach stated goals minimizing inefficiencies.
Read the full report on Cikis website.