Dive Brief:
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About two-thirds of fashion businesses are “behind on their own decarbonization schedules,” according to a recent analysis of 30 brands and retailers published by McKinsey & Company.
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Brands included in the analysis have committed to reducing scope 3 emissions by an average of 35% by 2030. But 40% of these brands have seen their scope 3 emissions output increase since making their sustainability commitments, according to the analysis.
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Previously, McKinsey found that the industry’s emissions are expected to increase by about 30% by 2030 if brands don’t change their behavior. But “most fashion brands” could reduce their emissions “by more than 60 percent for less than 1 to 2 percent of their revenues,” even without relying on costumer-dependent changes like resale, according to the new analysis.
Dive Insight:
The fashion industry is responsible for anywhere from 3% to 10% of total global greenhouse gas emissions, according to various sources, with about 70% of those emissions happening upstream in scope 3.
The new analysis looked at fashion brands and retailers with revenue above $1 billion that are included in the Carbon Disclosure Project, a not-for-profit charity that runs the global disclosure system for companies, governments and investors. In total, these businesses represented more than $300 billion in revenue for 2022. The analysis compared brands’ historical rates of Scope 3 emissions with the pace of change required to reach their emissions targets. Rather than look at the overall quantity of greenhouse gas produced, the analysis looked at “emissions intensity,” which is the ratio of emissions to revenue, a proxy for emissions per unit of production, which accounts for changes in volume of production.
Of the companies included in the analysis, 23% will need to increase their progress by about 10 percentage points each year to reach their targets. Another 40% will need to increase their progress by more than 10 percentage points a year. McKinsey did not give data on specific companies, as that goes against company policy, a McKinsey spokesperson wrote in an email to Fashion Dive.
The results are in line with a recent analysis that found that 38% of 55 signatories to the United Nations Fashion Industry Charter for Climate Action saw their emissions increase.
The analysis identified six main challenges to reducing a fashion brand’s climate footprint, including a lack of transparency, which recent regulations like the Securities and Exchange Commission’s disclosure rule and the European Union’s Corporate Sustainability Reporting Directive seek to mandate. The analysis noted that most brands “rely on industry-average data for tier-two emissions,” the report authors wrote. “Relying on secondary data can be problematic, as we have found up to a 20 percent difference in emissions when comparing a brand’s life cycle assessments based on primary data with its assessments based on industry-average data.”
To make greenhouse gas emissions possible, the analysis suggested six behavior changes, including creating value from sustainability, switching to more sustainable materials, and helping suppliers change to more sustainable energy sources.
“The entire fashion ecosystem will need to collaborate if the industry’s decarbonization goals are to become a reality,” the analysis authors wrote.
