Dive Brief:

• Fashion companies need to wade deeper into supplier operations and local policy in the countries where suppliers are located to make the progress necessary to halt global temperature rise at 1.5 degrees Celsius by 2030, according to McKinsey. Based on current apparel and footwear industry emissions reduction efforts, as well as pre-pandemic production levels, industry emissions will be double the amount of the goal.
• More than 70% of apparel and footwear emissions originate in the supply chain before most brands take possession of finished goods, McKinsey reported.
• Encouraging energy transitions upstream is crucial in the effort to decarbonize the fashion industry, according to McKinsey, which puts energy's share of the industry's carbon abatement requirements at 63%. Transitions to cleaner energy sources and improving energy efficiency can both help make progress on that score.

Dive Insight:

Some fashion brands have ambitious goals for carbon reduction. Ralph Lauren and PVH have pledged to reduce total emission by 30% by 2030, from 2020 and 2017 baselines, respectively. Nike has pledged to reduce emissions from its energy purchasing and owned operations by 65% by 2030 from a 2015 baseline. But these and the dozens of other textile, apparel and luxury retail companies that have joined the Science-based Targets initiative represent a minority of global fashion brands.

McKinsey's conclusion is that, to meet global emissions reduction goals in line with the Paris Accords, buyer-supplier relationships need to gain depth and complexity.

Supplier emissions are a growing concern in corporate sustainability, as companies reach their initial goals of reducing the emissions of the assets they own and the energy they purchase for their own operations (scopes 1 and 2). These internal emissions reduction efforts address just 18% of the apparel and footwear industry's emissions abatement needs, according to McKinsey.

Doing the same for suppliers, or encouraging suppliers to do it for themselves, represents the majority of the needed emission abatement work. The report points to longer-term contracts that include language around energy purchasing, which would put suppliers on better footing to seek financing for energy conversion.

Apart from suppliers' energy mix, transitioning to more sustainable materials would have a positive impact on the industry's overall emissions. But this switch is not as simple as requesting lower-tier supply chain partners to source these materials. Switching out wholesale materials can have knock-on effects upstream, all the way to the farm, that will lead to higher costs — for which brands need to be ready to compensate.

Near-term actions may present new costs, but McKinsey said 55% of the actions companies should take to reduce emissions would result in cost reduction.

The report lays out a stark reality, when it comes to longer terms goals stretching beyond 2030, which is where most stated reduction goals end. "To stay on the 1.5-degree pathway, the industry needs to go beyond this vision of accelerated abatement to fundamentally redefine business models and current imperatives of economic growth and rising consumerism," reads McKinsey's report.