With the importance of ESG at an all-time high, leaders within the fashion industry are brainstorming ways to stem the tide of overconsumption without sacrificing profitability. Large retailers are taking steps to decarbonize their supply chains, circular fashion companies are growing in popularity, and technology startups are bringing AI into consumers’ closets. While the “fast fashion” model remains popular, these changes (each as described in greater detail below) indicate that fashion can be both fast and more sustainable moving forward. 

Supply chain decarbonization

Many household-name retailers are making efforts to reduce their carbon footprint and increase the availability and use of low-impact manufacturing materials. For example, several global fashion companies have joined The Fashion Pact, a CEO-led sustainability initiative launched by French President Emanuel Macron in 2019, which focuses on prioritizing the use of renewable energy, lower-impact materials, and lower-impact production practices in the fashion industry. Retailers are also investing in textile decarbonization and offering textile recycling programs to consumers. These efforts reflect the emphasis that governments, investors, and consumers alike are placing on ESG in the retail sector.

A C-suite executive of a large clothing retailer in attendance at the event discussed the brand’s success in partnering with other companies to invest in energy transformation technology, polyester waste recycling programs, and other efficiencies in shared factories. Harmonized legislation across jurisdictions, she noted, is an important piece of the puzzle. Tax exemptions and reductions on import fees make the business case for investing in ESG.

Circular business models

Clothing rental and resale models continue to grow in popularity with consumers. While consumers have historically sought out rental and resale options as a way to access more affordable goods, consumers are increasingly interested in these businesses as an antidote for fast fashion, as they offer both variety and sustainability. However, in a world where fast fashion companies comprise 90% of the industry, as one of the panelists said, the only way for circular models to continue to gain traction is if consumers prioritize cost per wear over the sticker price of garments.

In the clothing rental business, the key challenges are managing the return, restoration, cleaning, and shipping of garments. Panelists noted, however, that these fulfillment expenses are only slightly higher than those of traditional retailers if managed efficiently. Additionally, because the rental model requires less inventory to derive more value, rental companies can scale comparatively quickly.

In the resale business, the key challenges are trust and authentication, which go hand-in-hand, and the difficulty of effectively catering to both buyers and sellers. With the popularity of vintage fashion on the rise, however, the time is right for resale companies to pioneer ways to overcome particularly the challenge around conducting authentication, and communicating such methods, in a way that bolsters consumer trust.

AI in fashion

Experienced retailers and technology start-ups alike are increasingly bringing AI to the fashion industry, allowing consumers to design their own clothing in just a few clicks. One global retailer at the event highlighted its generative AI technology turns customers’ text prompts into unique garments. Another fashion start-up discussed how they are combating over-production and over-consumption by using AI to enable the efficient design, production, and delivery of “one-of-one” consumer-designed clothing.

In addition to inspiring creativity, AI is also overhauling the traditional retail supply chain. Over-production is a longstanding problem for both the environment and retailers’ bottom lines, so several companies are employing machine learning algorithms to optimize supply chain operations and predict consumer demand.

With AI offering ways to boost efficiency behind the scenes while also presenting consumers with new opportunities for brand engagement, we expect to see more applications of AI in fashion moving forward.

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Authored by Rachel Shelbourne and MK Barker.