Current consumer and social media trends clearly tell us there is no longer room for political neutrality for businesses. Boycotts, ESG ratings and demands for transparency have put power back into consumers’ hands regarding what ethical boundaries they value and what their money supports. There are a number of issues with this. Firstly, ethical consumption is extremely hard to achieve within the current complex supply chains which drive the fashion industry, as well as the broader economic forces embodied by supply and demand. It is often a huge financial risk for independent organisations to provide sustainable and ethically sourced clothing at the price we are used to, and a price we can afford in this current economy. For example, the rise in popularity of thrift shopping has led to the gentrification of many second hand clothes suppliers, which, while remaining sustainable, are no longer accessible for those in poverty and incentivises unsustainable systems of recycling clothes in order to meet this new demand. Secondly, the fast fashion unique selling point is that it is fast, fashionable, and extremely cheap. Those without wealth often have no choice but being complicit in an unethical and unsustainable system if they need affordable clothing. Investors have recently been paying greater attention to sustainable initiatives, investing a record breaking 120 bn euros in sustainability initiatives in 2019, but it is clear there needs to be more transparent information for the sustainable investor to ensure their investments are made sustainably and ethically.
Though consumer behaviour does go a long way in directing company behaviour, the BooHoo scandal is an excellent example of how environmental performativity can act as a mask, used purely to increase sales, and how people are willing to look past the human and governance issues within ESG as a trade off. This is also an excellent example of how public power has been used by companies to avoid acting responsibly in more meaningful (and costly) ways.
The BooHoo scandal revealed that a reason for their ability to keep their prices so low was that they were outsourcing their manufacturing, its main factory being in Leicester, which had reports of unethical labour exploitation and unfair rates of pay. There are clear sustainability problems here. Despite strategic moves from fast fashion companies to appear to be more ethical and environmental, mitigating the impacts of their ultra-consumerist business models will take a lot more than outsourcing certain materials for clothes. In fact, the very demand production has to outsource inevitably leads to overexploitation of the resources required to qualify as environmentally friendly. For example, BooHoo’s outsourcing of recycled or ‘sustainable’ textiles are usually produced overseas, because it is cheaper. However, the more people that buy into these clothes that champion sustainability, the more polluting air and boat travel is required in order to meet demand. This means the net result of BooHoo’s sustainability offering may lead to further environmental degradation, this is known as the Jevons Paradox. A report by MP’s in the fashion industry found that 1.2bn tonnes of Co2 is produced by the textile industry, and creates massive amounts of chemical and plastic pollution. It is easy to fall into this trap, and BooHoo appears not to have considered these sustainability issues as more than mere marketing opportunities. Morgan Stanely has suggested that ‘business models reliant on overconsumption will be avoided by the growing number of ESG investors’, especially as models based on reuse and circular economies will be favoured.
As a result, Boohoo lost nearly half of their values between June 30 and July 15, and has since dropped another 46 percent. One of BooHoo’s biggest investors, Standard Life Aberdeen, described the company’s actions as ‘inadequate in scope, timeliness and gravity’, and subsequently sold all shares. However, it is unclear whether they sold their shares because of the nature of Boohoo’s practices, or the damaging blow this dealt to its reputation and thus perceived value.
This scandal offers some insight into the value of ESG ratings. Alongside Boohoo, brands such as ASOS and Shein had, up until recently, built reputations for making sustainable commitments and had received a double-A rating from MSCI. Millions of shares in Boohoo have now been ‘offloaded by many leading names in asset management’, highlighting the oversights these often simplistic ratings can make. It is apparent that further investigation into corporate governance is required, making decisions more transparent and holding those who are actively profiting from these unsustainable models of business accountable. As there are concerns that fund managers and individual investors rely too heavily on ratings that are ‘only intended to be a starting point for further research’, perhaps there is a demand for a centralised ESG rating body to build a better, more independent and more publicly driven process that allows the consumer to be in the driving seat. However, the lack of a central system for ESG ratings means that companies are free to post whatever metrics they choose. However, we know that public opinion holds enough weight to bring media attention to these issues, as a 0 rating from the Fashion Transparency Index acted as the red flag that sparked the scandal.
As previously mentioned, fast fashion is obviously damaging to the environment and to social/human rights. However, it is a wicked problem, one that is almost impossible to be fixed because there is always some kind of trade off or compromise. For many, fast fashion is a source of affordable clothing, especially for those with larger bodies find it near impossible to source cheap, sustainable second hand clothing. The desire to avoid gentrification by making charity shops/thrift shops a trend means that fast fashion becomes its own guilty niche for those who struggle with the complexities of ethical consumption in the fashion industry. Companies similar to BooHoo are recognising and acting upon the ethical demands made by consumers but with a current lack of transparency and a consistent demand for a product they cannot ethically produce at the same rates, its difficult to assign sustainability ratings or investment risks ratings.
Perhaps a better way forward is to encourage a more publicly owned fashion supply chain. Many people are now setting up their own independent businesses and teaching themselves textiles skills in order to sell clothing at an affordable price, or buying their own material/cheap second-hand clothes to amend to suit them further. Etsy currently has 61,865 results for ‘handmade clothes’. However, this has proven an issue for people with larger bodies, who rely on those second-hand clothes or cheap fast fashion to find clothes that suit their body shape and fashion style. Currently, it is a skill for those who have the time, money and time to learn it. Once again, we see that sustainable practice is gatekept for a select few, and the options would be a radical trade-off between economic benefits, versus environmental and social benefits. Since global clothing consumption is expected to rise by 63 percent to 102 million tonnes by 2030, it is vital we change our practices to address multiple issues through nuanced ethical investment guidance and a better understanding of economic, environmental and social issues that intersect.
Analytics by Emily van den burg