Fast fashion refers to the rapid production of chic, low-cost clothing designed to meet ever-changing consumer demand. Brands like Shein, Zara, and H&M excel at this model, but it often presses against labor rights and environmental sustainability.
As awareness grows, ESG supporters are demanding an increase in transparency regarding how their clothes are made and whether these brands use ethical strategies to operate.
Does your fashion brand care?
Fast fashion’s low price typically masks its dark side: unfair labor practices and harmful environmental impact. Many fast fashion garments are produced in countries with weak labor conditions, where workers must work in unsafe workplaces for minimal wages. The Rana Plaza disaster in 2013, which claimed over 1,100 lives in Bangladesh, is a tragic reminder of the unsafe conditions in many garment factories.
Yet, labor is only part of the equation. The environmental impact of fast fashion is drastic. This sector produces over 10% of global greenhouse gas emissions, emitting 1.2 billion tons of CO2 annually. By 2030, this statistic is expected to increase by 50%, surpassing the emissions of both the aviation and shipping industries combined. The expansion of polyester—derived from petroleum and responsible for more emissions than cotton—aggravates this climate issue. Polyester takes around 200 years to break down and accounts for approximately 35% of all microplastic pollution in the oceans.
Moreover, the industry’s water consumption is unsustainable, with nearly 79 billion cubic meters of water used every year. Countries like India and China, where much of the production occurs, face severe water stress. Despite the alarming environmental footprint, textile recycling remains minimal, with only 1% of used clothing being recycled.
Companies at the forefront of fast fashion
One of the leading corporations in fast fashion is Shein, whose embrace of AI to boost production has led to soaring carbon emissions. Although this carbon output is a notable illustration of the corporation, it is only one of many scandalous ventures Shein has engaged in. In November 2023, the clothing company attempted to join the New York Stock Exchange as a public organization with tradable stock. It was brutally rejected numerous times from the stock exchange along with major retail organizations. This critical setback was a result of not only their devastating carbon output, but also growing awareness of the meager wages it paid to employees and accusations of harvesting cotton through forced labor.
H&M has also been linked to major environmental concerns. While H&M has claimed to make commitments towards sustainability, shareholders argue that the company’s overall business model is unsustainable. Most of the resources used for their products are not eco-friendly and there has been little display in sustainable growth within the company. These greenwashing attempts likely correlate to the methods of trade that H&M uses. CNBC’s website says the clothing line trades on an unconventional “grey market” which is an informal way to buy and sell stocks issued by organizations that have been suspended from official trading or can’t get listed on an exchange. Unsustainable products and questionable methods of trading its stock give investors quite a few reasons to rule H&M out of their portfolio. In the case of ESG investors, they can buy shares in H&M and demand change through a united shareholder front.
Why transparency matters
Transparency is the first step in holding fashion brands accountable for their labor and environmental practices. When brands disclose where and how their garments are made, investors can make more informed decisions. For example, companies like Nike and Adidas have responded to pressure by publishing factory lists, allowing for public review.
Yet, only 2% of brands disclose whether their workers earn a living wage, revealing how much further the industry needs to go.
What can you do?
Shareholders have significant power to drive change in the fashion industry. Here are two ways to push for more ethical practices:
- Demand Transparency: Investors should prioritize brands that openly share their supply chain details. Tools like the Fashion Transparency Index assess how much information major brands disclose about their social and environmental policies.
- Join the Movement: Campaigns like Fashion Revolution’s WhoMadeMyClothes empower consumers and prospective stockholders to ask brands directly about their manufacturing processes. This simple action increases pressure on companies to improve transparency and accountability
While the demand for transparency is growing, progress is slow. According to a 2022 report, only 52% of major fashion brands are publishing more detailed information about their supply chains
Many still fall short when it comes to issues like fair wages and environmental harm from machine-made materials.
Real change in the industry will require a joint effort between ESG advocates and brands. By supporting transparent and ethical companies and urging for accountability, we can help shift the fashion industry toward more sustainable and moral practices.
For more insights and guidance on traversing the push for transparency in fast fashion, stay tuned to our blog for future updates and expert analyses.
And help us build a more sustainable and prosperous world through responsible investment practices by becoming a member of the Advance ESG community. It’s free to join and there are no future financial obligations. Together, we can make a difference in safeguarding our planet for future generations.
