Future Fashion & ‘Beautiful China’ – Together Forever?

By Dawn McGregor 18 August, 2016

Now is the time to fight to ensure a bright future for fashion

China's regulatory landscape has shifted & textiles is less strategic; global fashion faces short & long-term risks
China has de-prioritised cotton & the new green Chinese consumer may have different idea of the future of fashion
Brand action is not enough; need to meet new standards, go ZDHC & become circular faster = risks & opportunities

I don’t design clothes. I design dreams“, said Ralph Lauren. “Fashion has two purposes: comfort and love. Beauty comes when fashion succeeds“, said Coco Chanel. As we can see, some of the great and the good of fashion see beauty and fashion encompassing each other.
And it’s not just them; such attention is paid to the “glamour”, “style” & “beauty” of fashion, the Oscars come to mind.  But is it really? Can fashion be beautiful with such a dirty and thirsty evolution? China also wants to be “beautiful” by 2020. But can it be when it produces half of the world’s textiles?
This puts the industry in a bind. Is there a future for fashion in a Beautiful China? Can they be “together forever”?

Regulatory landscape has shifted – no longer conducive for cheap fast fashion

China’s lax environmental policies in the past two decades facilitated the rise of cheap fast fashion. However, China is now stepping up environmental standards and regulations along its path towards balancing economics and the environment. Back in 2014, with CLSA’s Dirty Thirsty Fashion: Blindsided by China’s Water Wars, we warned of a change in regulatory landscape with negative implications for the global fashion industry.
Today, the regulatory landscape has indeed changed. With all three pollution prevention and control action plans in place, we update our views on the sector in the brief: Today’s Fight for the Future of Fashion – Is there room for fast fashion in a ‘Beautiful China’?”
Key risks and opportunities for the future of fashion are:CWR - Today's Fight for the Future of Fashion

  • Dirty thirsty fashion: a clear target in ‘Beautiful China’
  • Short-term risks: Water Ten Plan
  • Stricter enforcement: new environmental law & policies
  • Long-term risks: high raw material exposure, soil clean-up & ‘Made in China 2025’
  • High reputational risk: continued NGO pressure & the new Chinese consumer
  • Brand rankings on sustainability: leaders & laggards
  • The future of fashion: closing the loop & who can help

The fashion industry is at a crossroad – in an increasingly difficult operating landscape with new, more stringent regulations and an uncertain future, the industry can go circular or shutdown in China.

Textiles less important to China; 2015 cotton production down 9.3%

This may seem somewhat far-fetched but is it? Given China’s need to protect its precious water resources, the textile sector is vulnerable – it is strategically less important than food or energy security.
Moreover, the sector’s contribution to national GDP is falling. It is unlikely that the textiles sector will be more important to China than ensuring food and energy security. Already we saw China remove cotton subsidies in the parched North China Plain, an area which holds around 12% of the nation’s total coal output and approximately two-thirds of the nation’s wheat production.
Impact on cotton is already being seen. Cotton prices have also jumped 16% after hovering around USD0.6 – 0.65/pound for the past two years, now selling for around USD0.7/pound but reaching as high as USD0.85. There are various causes for this increase, one of which is reduced production. China’s cotton production is down 9.3% to 5.6 million tonnes in 2015 from the previous year. India has now replaced China as the top global cotton producer after China made a conscious decision to deprioritise thirsty and dirty cotton.

Not just short-term risks from the Water Ten but also long-term raw material risks…

Short-term operational and financial risks are present. China’s war on pollution has been ramping up since 2014, with new stringent policies like the ‘Water Ten Plan’ driving this. Related laws to protect the environment are also currently undergoing revisions. All these point to the consolidation of textile, apparel & footwear manufacturing in China. Although painful in the short term for factories in China, we expect to see bigger, stronger & cleaner OEMs, with better pricing power over brands to emerge.
That said, in the longer term, both manufacturers & brands face similar upstream challenges with raw material production as China transitions to higher-value products in line with ‘Made in China 2025’. The direction here is clear with China wanting the industry to go circular. There is naturally a plan for this but there is still a long way to go. Amongst other obstacles, the right incentive structures, waste collection and logistic issues need to be addressed in closing the loop. However, with the promise of textile waste per year worth RMB60billion, surely it is worth the investment.

26 mt of textile waste per year presents opportunities for recycling and up-cycling

Another perspective is the sheer waste the textile industry generates. Pre and post-consumer textile waste in China is estimated to be around 26 million tonnes per annum. For perspective, this is more than half of China’s total chemical fibre production in 2014; and China produces two-thirds of global chemical fibres. At this size, given that landfill space is fast becoming a premium in China, it is not surprising that the government is pushing for the win-win solution of recycling/ up-cycling garments.

New, green Chinese consumer may have a different idea of the future of fashion

The good news is that brands are stepping up their game on this front. More brands starting circular initiatives this year compared to the last. But is this enough? There is much more at stake than merely demonstrating the drive to be “green”. With the spotlight on pollution in China, brand reputational risk is high. Studies show that the new, more green-conscious, Chinese consumer shows strong willingness to reduce purchases from poor performing brands. This shift in Chinese consumer attitudes towards clothes that do not contaminate their waters means that the largest consumer market in the world may have a rather different idea of the future of fashion.
More collaboration is needed, as is awareness. On this front it was great to see that the Sustainable Apparel Coalition has opened up its proprietary suite of Higg Index tools to non-member small and medium-sized (SMEs) brands and retailers – the SME Access program. Also, actor Emma Watson, through collaboration with Calvin Klein & Eco Age, wore a dress made from recycled plastic bottles to the Met Gala – she looked fabulous. More on circular fashion today here.

Closing the loop needs to encompass entire businesses; not just a few “eco” lines

In short, for fashion to have a bright future in China, it needs to become “beautiful” too. Ensuring that their supply chains are treating wastewater discharge from textile dyeing, finishing and tanning and committing to ZDHC are the least brands should do. Their efforts need to move beyond these to serious action on closing the loop. At the moment, there are lots of innovation and initiatives but scale needs to be increased. Closing the loop needs to encompass their entire business; not just a few “eco” lines.
Brands can continue with business-as-usual and move to source from other countries with lax regulations where they can continue to pollute, or they can choose to work with Chinese manufacturers to revamp the industry from within. Even with these risks & challenges it’s exciting times. We could be wearing clothes with lace made from strawberries, materials from algae and more. The time to come together and fight for a “future fashion” is now. The dream is not just a ‘Beautiful China’, it is to make fashion beautiful inside & out.
See you at World Water Week in Stockholm!

Further Reading
CWR - Today's Fight for the Future of Fashion.jpgIn our new brief, “Today’s Fight for the Future of Fashion – Is there room for fast fashion in a Beautiful China?”,  we look at the pre-existing but now more robust risks as well as new ones, with the backdrop of China’s aim of building a “Beautiful China”; “where the sky is blue, the land is green and the water runs clear”. Risks and opportunities are covered in the brief through:
-Dirty thirsty fashion: a clear target in ‘Beautiful China’;
-Short-term risks: Water Ten Plan;
-Stricter enforcement: new environmental law & policies;
-Long-term risks: high raw material exposure, soil clean-up & ‘Made In China 2025’;
-High reputational risk: continued NGO pressure & the new Chinese consumer;
-Brand rankings on sustainability: leaders & laggards; and
-The future of fashion: closing the loop & who can help.

  • Circular Fashion Today – Closing the loop in the fashion is not new. But perhaps now that China,  the world’s largest manufacturer of garments, wants to go circular, it might become a reality. Get on top of the latest trends with leading circular fashion innovators
  • 1 Year On: Where Are The Top Fashion Brands? – It’s one year on but have brands upped their sustainability actions? We take a closer look at who’s not going circular and who’s leading the pack with more initiatives and engagement with NGOs
  • Water Ten & Fashion: 8 Reasons to Leap or Fall – China Water Risks’ Hu shares 8 reasons why China’s Water Ten is actually an ultimatum for textiles to leap or fall. They need to decide which soon, as there is only two to three years before the paradigm shift
  • Still Exposed! Fashion Materials in China – With 32% to 75% of global hides, wool, cotton, chemical fibre and silk either produced in or passing through China via imports, exposure is sky high. China Water Risk’s Tan expands on the future of the industry
  • Dirty Thirsty Wars – Fashion Blindsided – CLSA report titled “Dirty Thirsty Fashion: Blindsided by China’s water wars”, examines how China’s water risks could blindside the US$1.7 trillion global fashion industry. Is this the end of fast fashion? Debra Tan expands
Dawn McGregor
Author: Dawn McGregor
Dawn leads CWR’s work to help corporates navigate increasingly disruptive & material risks from water & climate threats, as well as transitional risks in the supply chain arising from new regulations in China. Here, Dawn engages extensively with the global fashion industry delivering on-ground workshops in China to keynotes and strategic input at European HQs. She has written at length on the end of dirty and thirsty fast fashion and her report to overcome gaps between brands and manufacturers for a clean and circular future inspired the industry to create a new wastewater tool. Dawn also works closely with the property and tourism sectors where she not only conducts strategic assessments of their exposure but builds collective action toward resilience via closed door working groups and invite-only events. Having helped build CWR, Dawn is a frequent keynote, panellist & moderator at events, including being twice selected as the lead-rapporteur at World Water Week. Her articles are cited in various industry publications including the UN’s ‘World Without Water’. Dawn previously worked in a global investment bank assessing geo-political risk, crisis management and business resiliency. She was born and bred in Hong Kong and has lived in France, England, Singapore and Beijing.
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