What are the climatic risks of fashion?

Policymakers and business leaders who gathered for the United Nations annual climate summit over the past week have faced a grim reality: the likelihood that the world can avoid violating climate hot spots is shrinking rapidly, without a credible plan in place to avert disaster.

The world is emitting record amounts of greenhouse gases, according to the annual Global Carbon Budget report released on Friday. There is a 50% chance that temperatures will exceed the globally agreed limit that could avoid the worst effects of global warming by 2030, he found.

Devastating floods in Pakistan and droughts in the United States are just some of the ways the fallout is already making itself felt, with ripple effects for fashion. As the risks of extreme weather and record temperatures worsen, the industry faces threats to raw material production, labor rights and supply chain stability.

“There are clear risks and challenges along the supply chain,” said Dr Helen Crowley, partner of climate change consulting and investment firm Pollination. “The concept of entering an unstable climate is something we haven’t really dealt with before … [and] it will only become more volatile.

Here are some of the main ways these risks will play out for fashion companies.

Raw material

Volatile and extreme weather is already threatening the supply of key materials such as wool, cotton, leather and cashmere.

Pakistan’s deadly floods during the summer eradicated about 40 percent of the country’s cotton crop, according to government estimates, a blow to the world’s sixth-largest cotton producer. The adverse weather conditions of recent months, from drought to mudslides, have likewise ruined the top four cotton producers of China, India, the United States and Brazil.

“When you look at the physical risks in the production of raw materials, it starts to be really scary, because then you talk about drought, floods and fires and the actual direct impact it will have on your wool production systems, on your cashmere, on your cotton. and the livelihoods associated with it, ”Crowley said. Brands need to think not only about how their operations affect nature, but also how they depend on it, he added.

Fashion companies have pledged to strengthen their commodity supply chains, with brands like Allbirds, Ralph Lauren and LVMH promoting regenerative agriculture projects that promise to make the earth more resilient to climate change. Proponents say these agricultural practices geared towards restoring soil health mean water can be better absorbed during heavy rains and moisture better retained in drought, but such efforts are still relatively small in scale.

Labor rights

Big brands are already under increasing pressure from regulators and consumers to address human rights violations in the fashion supply chain. But climate change will greatly exacerbate the risk of these occurring, with many of the industry’s largest suppliers among the most vulnerable to climate in the world.

From sunburnt farms to poorly ventilated factories, rising temperatures exposes workers to heat stress and other related health and safety risks. The resulting loss of productivity will be equivalent to 80 million full-time jobs globally by 2030, assuming the world achieves its (currently distant) goal of limiting global warming, according to the International Labor Organization.

Meanwhile, rising food insecurity and mass migration caused by climate disasters will increase the risks of modern slavery, with garment manufacturing centers like Bangladesh, India and Pakistan likely to be the hardest hit, according to a published report. last month by risk consultancy Verisk Maplecroft.

Brands need to look at the extreme social and business issues that could result from climate change and how it could materialize in their supply chains, said Will Nichols, head of Verisk Maplecroft’s climate resilience team.

“You can’t just look at the climate in isolation, or at modern slavery in isolation … these things are all intertwined and interacting with each other,” he said.

Financial risk

In recent years, big fashion brands have had to adapt to supply chain volatility, as first the pandemic and then the war in Ukraine pushed the flexibility of global supply chains to the limit. Climate change risks taking disruptions to another level in terms of scale and frequency.

“The reversal that needs to happen is the recognition that this is not only presenting some difficulties in my supply chain, but that this is fundamentally a financial risk,” Crowley said. For example, finding and switching to alternative sources of raw materials is expensive, particularly if everyone is looking for the same rare raw materials, he added.

To be sure, many large fashion companies already have diversified supply chains geared towards managing outages, said Guillaume Leglise, a clothing analyst at Moody’s. The rating agency characterizes fashion’s climate risk as more reputational than financial, although categories with more concentrated and specialized supplier bases, such as footwear, are perhaps more vulnerable, Legise said.

Many brands will find it difficult to judge how exposed they are to climate risks because they still have very little exposure to their suppliers.

“If you don’t know where your raw materials come from,” said Cliodhnagh Conlon, associate director at Business for Social Responsibility consultancy, “it’s very difficult to have contingency planning.”

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