The ‘Price’ versus ‘Value’ Paradigm: Reframing Cost as Investment Authors: La Rhea Pepper with Joy Saunders. Researchers and Contributors: Cara Smyth, Glasgow Caledonian University – Fair Fashion Center, Annie Gullingsrud, Fashion Positive+, Maggie Kervick, Glasgow Caledonian University – Fair Fashion Center, Sevilla Granger and Anne Gillespie, Textile Exchange

2

Executive Summary

Challenges around the cost and value of more responsible and organic (preferred) fibers and materials has been around since the introduction of organic cotton in 1991. Price has always been a key factor in decision making and assessment of return on investment. Many brands have explored this in detail, to ensure value for their shareholders and established good practices – but one size does not fit all and widespread adoption of preferred fibers and materials remains an ambition for many. In recent surveys with the Textile Exchange membership and community, price was identified as the KEY reason brands and retailers are struggling to scale or increase use of preferred fibers and materials. As one of the primary purposes of Textile Exchange is to identify barriers to growth and drive collective action to overcome challenges. We hope this briefing paper catalyzes a conversation around promoting responsible and fair pricing practices and takes an initial look at some of the solutions that will help companies reframe the ‘price’ conversation to one around ‘value’, re-imagining business models that will help accelerate the uptake of preferred fibers and materials. We are calling this the ‘price’ versus ‘value’ paradigm. The current or typical business model (paradigm) focuses on price. We are seeking to redefine the discussion around value and therefore the emergence of a new value paradigm. The main problem with the price paradigm is that traditionally we have looked only through the lens of financial returns not a holistic view of environmental, social, and financial returns. Most business models do not look holistically and without social and environmental costs being shown in financial profit and loss statements we miss the value that preferred fibers and materials bring. As a result, the sector has often promoted a fast-fashion model that seeks to reduce cost or price and neglects environmental or social considerations. However, the truth is that conventional products actually cost more when you consider the impact on broader society and future generations. By adding in social and environmental factors not just financial, we start to see the value of investment, not just the cost. Addressing the price paradigm ensures that we build a business model that is fit-for-purpose, builds into our sustainability goals, fairly rewards investment of time and resources and adequately remunerates effort and risk. For this to become a reality, a change is needed towards designing and promoting products that last and build models and systems that encourage and make it easy to recycle or re-use. If done well it ensures we construct the right incentives to encourage honest, ethical, accountable behavior across the supply network. It also addresses the business risk of resources running out without effective stewardship. Insufficient investment in renewable resources will undermine long-term business models and will be costly to businesses and wider society if not planned effectively.

3

Solutions highlighted in this paper are:

1. Invest at all levels of the supply network to ensure sustainability efforts can be delivered with sufficient premiums for living wages and fair profits;

2. Invest in a new textile economy1 – based on circular economy principles that lead to better economic, environmental, and societal outcomes;

3. Adopting Science Based Targets (or Natural Capital Accounting) such as Kering’s Environmental Profit & Loss statements to show the real value of sustainability efforts;

4. Collectively approaching governments asking them to commit to policy decisions that support sustainable fibers through published commitments, preferential tariffs and public procurement processes;

5. Investing in Impact – providing a holistic return on investment in order to demonstrate real change and real value for water, soils, forests, and the life we need to protect.

6. Increasing consumer engagement setting out the costs and benefits of sustainable fibers and using that to create a market driven solution that fairly rewards risks and effort.

This paper is intended to be a thought-starter with more in-depth exploration of these subjects and various solutions further at our Textile Sustainability conference in Vancouver, Canada during 15-18th October 2019. Join us and contribute to the debate there! Find out more in the following sessions at the Textile Sustainability conference:

1. Breakout Session 1G – Measuring the Environmental Impact of the Supply Chain - Wednesday October 16th at 11:00am.

2. Plenary 3 – Impact Credits - Wednesday October 16th at 1:45pm.

3. Breakout Session 2B – Impact Credits: Efficient and Targeted Change - Wednesday October 16th at 2:30pm.

4. Breakout Session 4J – Sure, I’ll Use More Preferred Fibers as Long as It Doesn’t Cost Me Any More - Thursday October 17th at 2:30pm.

5. Breakout Session 4G – Connecting the Missing Links to Accelerate Circularity - Thursday October 17th at 2:30pm.

6. Plenary 8 – Consumer Engagement at Textile Sustainability conference in Vancouver, Canada on Thursday October 17th at 4:30pm.

1 Source: Ellen MacArthur Foundation, A new textiles economy: Redesigning fashion’s future, (2017, http://www.ellenmacarthurfoundation.org/publications).

4

Introduction - the value of sustainable fibers

Textile Exchange has dedicated itself to invest in and drive industry transformation in sustainable fibers because we believe they have immense value. Research shows the environmental, social and financial benefits to minimizing the harmful impacts of the global textile industry and the industry are aligning efforts towards building the Sustainable Development Goals (SDG).

We know that sustainable, responsible, organic, and regenerative fibers hold an intrinsic value. For illustration, we know that farming systems based on the organic principles of health, ecology, fairness and care, build bio-diversity, build thriving and resilient communities that attract people to stay on the land rather than move to cities, regenerating and nurturing the earth, its resources and its people. Adopting preferred fibers demonstrates progress towards all of the SDGs. For further information, we have summarized some of the benefits of organic fibers below in Appendix A under the two principles minimizing harm and maximizing positive impact.

5

Investing in sustainable solutions - the challenges and implications

However, years of experience demonstrate that these principles of minimizing harm and maximizing positive impact have a cost. Effort and investment is required to move from the status quo (or doing nothing to protect our environment) to maximizing positive impact. The table provided in Appendix B highlights some of the effort that is needed to move towards a regenerative or net positive impact. Up to now this has added price pressure to business models, by introducing extra cost (training in organic farming techniques, certification, extra monitoring and evaluation) wi thout always articulating the extra value it brings to people, animals, environment and planet. The industry is starting to mobilize around sustainability efforts, and we recognize the journey many are on to increase positive impact. However, the wider industry has been quick to crave the benefits but slow to provide sufficient financial investment or premiums to address the full cost of the efforts needed. Textile Exchange recognizes both the value of textiles and the impact on the environment of their creation so is encouraging a transformational shift or a “value” paradigm that is not based solely on price but on the wider environmental and social returns whereby consumers are encouraged to buy quality not quantity, recycle and re-use. In additional to adopting preferred fibers when sourcing fibers and materials, a significant change is needed towards designing and promoting products that last and building business models and systems that encourage and make it easy to recycle or re-use. According to the Ellen Macarthur Foundation2, brands and retailers have started to address specific environmental or societal challenges within their supply chains. However , most of these efforts are focused on reducing the impact of the current linear system – for example, by using more efficient production techniques or reducing the impact of materials – rather than taking an upstream, systemic approach to tackling the root cause of the system’s wasteful nature directly, in particular, low clothing utilization and low rates of recycling after use. Other proactive approaches are needed to cross the threshold of doing less harm, to investing in materials. Several of these solutions are highlighted below and this paper intends to catalyze thinking that will enable new eco-systems and paradigms to emerge. Greater investment at all levels within supply networks can, and will, change the system, but we have to recognize that for this to be done in a sustainable way we have to strengthen business models, address the flaws and price pressures at various points in the supply network while driving innovation that delivers the impacts and results we all crave to meet our sustainability targets. Further investment will also have the consequence of reducing integrity challenges as we block the negative incentives that has allowed fraud around the intersection of financial pressure (underinvestment in sustainability that has led to excessive price pressure), rationalization (the need to deliver sustainability targets) and opportunity (where loopholes in processes exist).3

2 Ellen MacArthur Foundation, A new textiles economy: Redesigning fashion’s future, (2017, http://www.ellenmacarthurfoundation.org/publications). 3 Cressey, D. R. (1973). Other People's Money. Montclair: Patterson Smith.

6

Figure 1: The Cressey Fraud Triangle

The result will be the emergence of new systems that allow the textile industry to move away from the pockets of poverty, being one of the world’s biggest pollutants4 and the social and environmental problems that have dogged it for decades.

4 Ellen MacArthur Foundation, A new textiles economy: Redesigning fashion’s future, (2017, http://www.ellenmacarthurfoundation.org/publications) states that the textile industry uses 98 million tonnes of non-renewable resources per year, 93 billion cubic metres of water annually, with greenhouse gas emissions from textile production being 1.2 billion tonnes of CO2 (2015).

7

Potential solutions

With this paper we want to highlight some great examples that are confronting thinking around not only the price, but in reality – value - so that we can collectively move toward a more responsible and equitable model (or ‘value’ paradigm) that is good for the environment, meets Sustainable Development Goal (SDG) targets, and results in better livelihoods and working conditions for all stakeholders within the supply network. By investing in business models and addressing inequality in pricing we want to encourage a systemic change within the industry that encourages investment that fairly rewards risk (production, marketing, financial, legal and human resource risk), and delivers on the Sustainable Development Goals by minimizing harm and maximizing positive impact. At Textile Exchange, we want to open up the discussion by encouraging the industry to accelerate, to investigate, adopt and scale innovative pilots that are systematically changing our perceptions on sustainability by providing sufficient funds into the industry to deliver on our sustainability targets. The next several pages highlight examples of emerging initiatives that are worth exploring further. Please join us at our Textile Sustainability conference in Vancouver, Canada during 15-18th October 2019 to discover more.

8

1. Invest at all levels of the supply network to ensure sustainability efforts can be delivered with sufficient

premiums for living wages and fair profits.

Brands need to make sure that they are creating a market-driven solution when they choose and procure sustainable, responsible, organic, and regenerative fibers. Trading responsibly and paying a fair price must be part of that solution; otherwise, all efforts to improve the situation will be undone by the poverty of the people at its heart. There is much to learn from the traditional luxury supply chain. In these networks, brands are confident in the craftspeople whose skills define the quality of their products, and artisans themselves are linked through craft guilds that work to certify and improve their skills.

Solutions can be found in model “supply networks”, where risk and reward are shared transparently and where price differentials produce much needed social and environmental benefits. Best practice trading models and alternative pricing mechanisms require suppliers and brands to work as a network rather than as a top-down” chain”. Responsible trade is built on trust and recognition of the interdependence within the network.

Research performed by Textile Exchange and Kering on organic cotton trading models5 show that the following ingredients help to combat price squeezing and build in rewards and incentives that have the power to transform the way supply chains work.

• The first is to start with an open conversation about the pricing and trade of fibers and materials - Throughout history, trading systems have been characterized by the anonymity of participants, encouraging fluidity in relationships and the freedom to move from one supplier to another in the search for the ”best deal”. To address this, transparency and traceability provides connection, which, can enable fair distribution of risks and reward along the supply network.

• Prosperity of farmers is fundamental to sustainable development - farmers are on the sharp end of climate change, water scarcity, and loss of biodiversity. By moving away from commodity market prices one can bring a level of stability and surety that better reflects the costs of production and benefits to society and nature. Paying a fair price has to be part of the solution, otherwise all other efforts will be undermined by the poverty of the people involved.

• Investing in new business models, based on innovative trading mechanisms and pricing policies will support longer term sustainability – ideas such as direct sourcing (agreement between brand and supplier to secure product, price and terms & conditions of trader), cluster partnerships (supporting long term business sustainability and stability within supply networks) and collaborative communities (alliances of SMEs aggregating demand and committing to rewarding best practice) are emerging and provide a model for others to follow.

5 A world beyond certification – a best practice guide for organic cotton trading models: https://textileexchange.org/wp-content/uploads/2017/11/OrganicCottonTradingModels_FINALforpublishing.pdf

9

Textile Exchange has also partnered with the Fair Fashion Center, an applied research lab based out of Glasgow Caledonian New York College, on a Blended Fiber Challenge. Many brands and retailers are currently using a portfolio approach to adopt preferred fibers and materials. As the portfolio strategy evolves, brands will move along a continuum to more sustainable solutions and options. The Challenge encourages brands to partner with key mills to blend in small percentages of preferred fibers. Focused initially on cotton, the challenge called for a collective position on organic and transitional cotton to send a clear market signal that the textile industry is making a commitment towards continuous improvement of cotton production that restores health to the planet and creates regenerative ecosystems. A blended approach will address cost and availability constraints while sending clear market signals to the supply chain to support expansion of a more sustainable farming production system. It also avoids risk related to certifying a garment; minimizes disruption to existing supply chains; stabilizes fair prices; and encourages farmers to convert to organic production systems. Starting with cotton, the model is being applied across preferred fiber and material portfolios. FIND OUT MORE: Breakout Session 4J – Sure, I’ll Use More Preferred Fibers as Long as It Doesn’t Cost Me Any More at Textile Sustainability conference in Vancouver, Canada on Thursday October 17th at 2:30pm.

10

2. Invest in a new textile economy6 – based on circulate economy principles that lead to better economic, environmental, and societal outcomes

At its core, a new system for the fashion industry is a system that starts with sustainability (on all levels), is able to perpetuate sustainability (use of sustainable materials for recycled materials or use of existing materials/recycled) and one that keeps materials and products in flow within industry. In short, a new textiles economy intelligently takes existing materials from industry, considers them “assets” and is adequately able to return them to industry. Within this basic structure, the implications of adopting this system are:

• Development of sustainable, regenerative and preferred materials (getting “health” and “safe” into the system) as well as addressing areas of concern and impact, such as substances of concern and microfibers.

• Development of safe, circular materials (keep materials in the system - circular materials require the use of recycled content).

• Support commercialized development of recycling technologies that address the most highly used fibers.

• Support development of material and product embedded identifiers – such as digital ID —to ensure materials and products can be efficiently identified at take-back checkpoints.

• Development of business models that would allow for scaled approaches for garment and material cycling (resell, rental, etc).

Ultimately, sustainable fibers increase the value and embedded quality of an overall product—but only ONCE (first-sell). At this time, we are unable to truly capitalize from the investment of these sustainable fibers in circular economy models. This is because sustainable investment cannot be identified after first point-of-sale. Most “embedded” information, such as sustainability info, factory name, is entirely lost after the garment gets out of the brands hands—it’s not on the tag, unless certified and 30% of the time, tags are cut off the garment. Resellers and recyclers are UNABLE to identify these ‘better’ materials. We can design for durability or “circularity” all we want, but if these garments and materials cannot be identified after point of sale (a set of embedded circular instructions, if you will) all that investment is absolutely lost.

6 Source: Ellen MacArthur Foundation, A new textiles economy: Redesigning fashion’s future, (2017, http://www.ellenmacarthurfoundation.org/publications).

11

We must CONTINUOUSY CAPTURE that sustainable investment – which create a chain of positive reactions through circular business models. A sustainable fiber used once can be a large investment for brands. But these investments can become much further reaching through circular business models—allowing brands and resellers to further promote and leverage these sustainable fibers and their efforts at second, third and fourth point of sale. They must become intelligent assets. Intelligent assets that are also highly valuable to the recyclers. Providing a digital infrastructure, that leverages data that is needed by stakeholders in the circular economy could provide the framework for leveraging this investment. We believe that with this digital infrastructure and standard, all the investment that brands are putting into development of Circular Materials for Fibers and Materials will pay off and as an aside, it has the potential to create deeper accountability and integrity for the brands who are using sustainable, responsible, organic, and regenerative fibers. An example of group working on digital infrastructure includes Eon’s Connected Fashion Initiative7. Their mission is to establish the shared digital foundation for circular business. They are a global initiative collaborating to incentivize the adoption of circular business practices essential to the long-term health of our ecosystem and environment. Other successes coming to the fore include ThredUp8 (world's largest online thrift store where you can buy and sell high- quality second-hand clothes), Rent the Runway9 (a subscription fashion service that powers women to rent unlimited designer styles for everyday and occasion). Also brands like Urban Outfitters and Express are using rental models as a demonstration of evolving business models. While the high-end market for resale for apparel, handbags and footwear remains in the early stages of development the initial public offering (IPO) of Real adds extra credibility to this increasingly growing market for resale of luxury items. FIND OUT MORE: Breakout Session 4G – Connecting the Missing Links to Accelerate Circularity at Textile Sustainability conference in Vancouver, Canada on Thursday October 17th at 2:30pm.

7 Source: https://www.connect-fashion.com 8 Source: https://www.thredup.com 9 Source: https://www.renttherunway.com

12

3. Adopting Science Based Targets (or Natural Capital Accounting) such as Kering’s Environmental Profit &

Loss statements to show the real value of sustainability efforts

Companies are starting to measure efforts towards sustainability through environmental profit and loss statements (EP&L) – a type of corporate natural capital accounting which encourages management or investors to seek environmental and social reassurances before deciding where and how much to invest. An environmental profit and loss account is a company's monetary valuation and analysis of its environmental impacts including its business operations and its supply chain from cradle-to-gate. It is a more holistic approach to sustainability, reporting for the future that respects natural resources. An EP&L works best when the company has already committed to targets around sustainability as it helps teams measure how their sourcing and purchasing decisions build towards internal targets. The EP&L helps to reframe the culture and incentivizes individuals who are looking holistically at financial, environmental and social impact rather than just valuing price or cost to the business (traditional financial profit and loss statements), so an EP&L helps reward teams that choose wisely in sustainability terms.

With EP&Ls currently being used to show progress towards sustainability commitments and change the reward culture to value environmental targets, it’s too early to tell whether the use of EP&L will translate into financial savings for companies. However, there is a logic to the argument that moving to a “value paradigm” gives significant returns that impacts on the financial bottom line as with more stability around partnerships, greater transparency and traceability, higher quality products and more resilient supply chains less internal effort and resource is needed to maintain consistent supply. In an ever-increasing volatile world where uncertainty costs businesses dearly, setting sustainable or regenerative commitments that can be measured through an EP&L may be one way to reduce the pressure on financial returns.

By using Environmental Profit and Loss statements Kering10 have pioneered a new way to assess how to develop activity while preserving natural resources.

10 https://www.kering.com/en/sustainability/environmental-profit-loss/what-is-an-ep-l/

13

By understanding their environmental footprint, Kering can analyse the environmental outcomes and their impact on people. The data collected is presented with a monetary value to help provide context (as we can relate to monetary amounts) and helps them consistently measure the cost of their activity. It allows them to compare their environmental performance in different areas of the business, between different initiatives and over time.

As investors increasingly demand decision useful Environmental Social and Governance (ESG) information that focus on financially material issues, risk and opportunities to be able to assess sustainability value when judging overall business performance, demonstrating a journey of continuous improvement becomes critical.

Companies and investors are realizing that sustainability risks and opportunities have material financial implications for business performance through direct effects on the bottom line, corporate reputation and license to operate. Research demonstrates that resource efficient companies produce higher financial returns that benchmark indexes and exhibit higher levels of innovation and corresponding margins, returns on assets and returns on equity. The Fair Fashion Center11 is guiding brands and retailers on building strategies and communicating progress with investors and working with the Sustainability Accounting Standards Board (SASB) and investors to contextualize the challenges and opportunities surrounding raw materials and other key ESG focus areas. Within raw material usage its critical to discuss the environmental and social risks associated with sourcing of priority materials and the percentage of raw materials third-party certified to an environmental or social sustainability standard. With the financial community mapping progress and the supply chain with publicly available information its critical brands communicate progress in accepted measurement and metrics by the financial community.

FIND OUT MORE: Breakout Session 1G – Measuring the Environmental Impact of the Supply Chain at Textile Sustainability conference in Vancouver, Canada on Wednesday October 16th at 11:00am

11 Source: https://www.gcufairfashioncenter.org

14

4. Collectively approaching governments asking them to commit to policy decisions that support sustainable

fibers through published commitments, preferential tariffs and public procurement processes.

The Preferential Tariff Project (PTP) for Benefit Fibers aims to create and pass a law through US Congress that would reduce or eliminate tariffs placed on sustainable fibers thus incentivizing the inclusion of sustainable fibers in textile products imported into the United States of America (US).

The premise of this initiative is that we know that the use of environment sustainable fibers has immense value but also can increase product costs and therefore cost premiums for those products. Products sourced outside of the US face import tariffs up to 40%. Combining these tariffs with production premiums can result in retail costs being prohibitive for consumers, suppressing demand and therefore uptake of sustainable fibers.

The hope is that providing reduced tariff rates will incentivize brands to use more sustainable fibers in their supply chains by helping to lower costs and increase investment. Thereby creating an upward cycle of sustainable fiber uptake.

The PTP working group, facilitated by Textile Exchange is working with industry organizations such as USFIA, AAFA, OIA, RFA, OTA and others to structure a bi-partisan support group that will create legislation with the aim of passing a bill through Congress and into law.

Current partners include Outerknown, Levi Strauss & Co, Nike, NSF, Eileen Fisher, Lenzing, Vandegrift. We welcome more participants.

FIND OUT MORE: Please contact Ryan@TextileExchange.org or Sevilla@TextileExchange.org

15

5. Investing in Impact – providing a holistic return on investment at the farm-gate.

Textile Exchange has developed the concept of “Impact Credits” and we are looking at applying them to the fibers and materials we are addressing, and we are also looking at partnering with other NGOs to use them for additional commodities that can also deliver on positive impact. Impact Credits refer to the certificates that are traded in support of a sustainability claim. The credits are issued when a set of criteria have been confirmed to have been met. The physical goods and the credits are traded separately from each other. The credit certificates represent a specified quantity of verified material that has been produced but has not been physically traded as verified goods. Impact Credits:

• Are issued to farms that meet a set of baseline expectations (eg: transitional or organic cotton, Responsible Leather)

• Give brands a means to provide financial support and incentives to farms to follow best practices.

• Address the long, complex and opaque nature of the supply chain where traceability is difficult, expensive and sometimes impossible to achieve.

• Provide the most efficient means of value transfer from brands to farmers: almost the full amount that brands pay for best practices will go directly to the farm or farm group, as the supply chain members will not add their margins to any premiums attached to the raw materials.

• Avoid the cost of certifying for chain of custody along the full supply chain.

• Provide an effective way to quickly grow the number of responsible/sustainable farms, accelerating the scale of the impacts, and creating a strong supply base for brands that want to have traceable sourcing.

• Are supported by labeling and claims language that will have to be clear so as not to mislead consumers.

Birthing farms

Slaughter

Tannery 2 Tannery 3 Production Brand/retail

Credit System:

$

Backgrounder farm

Direct farm

TS* TS* TS*

Tannery 1

Feedlot

TS*

Trading Platform

Credit flowCash flow

NGO Fees

1.

2.

3.4.

5.

5.

*.TS = traceability system (ear tag,GTA+CAR in Brazil with Visipec, DNA, etc.

16

Impact Partnerships Textile Exchange is also developing a tool called “Impact Partnerships”. These will be set up to help drive progress towards the benchmark thresholds. Brands will give money to program partners by buying Partnership Credits, and the programs will then work with producers on capacity building, data collection, verification and trading support. Farmers or producers can be part of the Impact Partnership for up to three years, and when they exit the partnership, they can trade credits directly (which is a financial incentive). Impact Partnerships address the idea of additionality – rather than only rewarding those farmers that are already meeting best practices, or are close the meeting them, the Impact Partnerships support farmers to learn and invest in meeting the best practices. They support change where it is needed.

Opportunities with Impact Credits and Impact Partnerships a) Speed and Scale Credits will drive rapid adoption and scale by providing an efficient, fast way for brands to deliver support to the beginning of the supply chains. Credit trading (also known as Book & Claim) has been the engine behind the growth of Sustainable Palm Oil and Responsible Soy:

b) Minimizing costs to the system Credits allow brands to deliver premiums to the beginning of the supply chain, without having the premiums multiplied by the normal mark-ups that occur when goods pass along through the supply chain.

Data collection

Trading support

Increased availability of responsible and

traceable cattle

Trainings

Verification

Program Partner

Farmers/Farm Groups

Brands

Data

Stories

Credibility

Credit trading

Credit trading

$$

$$

Impact Partnerships & Impact Credits

Facilitator

RTRS Sales

17

FIND OUT MORE: Plenary 3 - Impact Credits at Textile Sustainability on Wednesday October 16th at 1:45pm or Breakout Session 2B –Impact Credits: Efficient and Targeted Change on Wednesday October 16th at 2:30pm

18

6. Increasing consumer engagement setting out the costs and benefits of sustainable fibers and using that to

create a market driven solution that fairly rewards risks and effort.

We, at Textile Exchange, recognize that the industry is designed to promote fast-fashion and exponential growth by selling more and more quantity each year. However, to really address the business and environmental concerns raised above requires a radical change of perspective. To change business models, we need to educate consumers on sustainability in such a way that that this affects what they are willing to pay. The consumer is a key driver for demand by virtue of the purchases they make so transformational change needs customer backing. Apparel is facing many challenges today, each largely driven by the so-called new consumer, who is empowered, informed and enabled by the Internet. This savvy set of shoppers is changing the face of retail and necessitating updates across the entire supply chain. Among these overhauls is the need to supply a level of detail about the origins of each of its products12. Emerging from concerns for the environment, workers’ rights and their own well-being, younger consumers especially are looking for brands to disclose more about what goes into their garments and prove the marketing claims they make—an expectation the apparel industry is ill-equipped to meet currently. An example of a brand that sets out the value of sustainable fibers who have created a business model from fair reward of risk and effort is Patagonia. For the past 45 years, Patagonia has been a business at the cutting edge of environmental activism, sustainable supply chains, and advocacy. They changed their mission in 2018 to better reflect their focus on sustainability and recognising that future business requires addressing environmental risks “Patagonia is in business to save our home planet”. This mission statement is backed up by various policies on repairing, re-using, post-consumer recycling, and upcycling13. They are not shy in setting out the value of quality products and have built a customer base by building long-lasting products, that cause no unnecessary harm to the environment. There are other examples (Ellen MacArthur Foundations new jean manufacturing guidelines14) where companies have shunned the traditional fast-

fashion business prototypes in search of more sustainable (financial, environmental and societal) models.

12 See for example H&M Conscious Shop where they are sharing how and where their products are made: https://www2.hm.com/en_gb/sustainability.html 13 Source: https://www.patagonia.com/static/on/demandware.static/-/Library-Sites-PatagoniaShared/default/dw2ca0a0c1/PDF-US/Patagonia-Global-Recycling-Strategy-and-Upcycling-Policy.pdf 14 This year, Ellen MacArthur Foundation has launched new jeans manufacturing guidelines based on circular economy principles to set out minimum requirements on garment durability, material health, recyclability and traceability and are aimed at ensuring jeans last longer and can easily be recycled. The Jeans Redesign Guidelines are based on input from more than 40 denim experts from academia, brands, retailers, manufacturers, collectors, sorters and NGOs and aim to educate the sector and help them with consumer education.

19

However, case studies of good practice are not plentiful - even champions of sustainability do not advertise widely through their retail shops - but we know that organizations will invest when consumers demand change. The NPG Group published research in 2018 stating that consumers are increasingly seeking out sustainably produced textiles. A quarter of US adult customers claim to have purchased “sustainable apparel” but there remains a gap between sustainability efforts and customers understanding of those initiatives. A challenge to brands is that the same study showed that two thirds of consumers surveyed indicated they were not willing to pay more for sustainability; indicating they would look for that to be included as part of a brand’s social responsibility. This highlights that more work is needed around customer education on the value proposition to obtain buy-in for investment. NPD’s chief industry advisor, Marshal Cohen stated in 2018 “To attract consumers, particularly young adults and women, apparel brands and retailers will need to stay in touch with social responsibility issues, and educate and inform their customers with clear messaging and labelling about their sustainability efforts,” he continued, “Brands can’t rely on the fine print on the inside label, it needs to be woven into the ‘fabric’ of the brand.”15 NPG Group believe that consumer engagement or education is critical to achieve the transformational shift within the industry to advance the sustainability agenda and narrow the price / value gap. FIND OUT MORE: Plenary 8 – Consumer Engagement at Textile Sustainability conference in Vancouver, Canada on Thursday October 17th at 4:30pm.

15 https://www.npd.com/wps/portal/npd/us/news/press-releases/2018/sustainable-apparel-is-evolving-but-consumers-need-to-be-educated/

20

Conclusion

Addressing the price paradigm ensures that we build a business model that is fit-for-purpose, builds into our sustainability goals, fairly rewards investment of time and resources and adequately remunerates effort and risk. For this to become a reality, a change is needed towards designing and promoting products that last and build models and systems that encourage and make it easy to recycle or re-use. With this paper we have highlighted some great examples that are confronting thinking around not only the price, but in reality – value - so that we can collectively move toward a more responsible and equitable model (or ‘value’ paradigm) that is good for the environment, meets Sustainable Development Goal (SDG) targets, and results in better livelihoods and working conditions for all stakeholders within the supply network. This paper is intended to be a thought-starter with more in-depth exploration of these subjects and various solutions further at our Textile Sustainability conference in Vancouver, Canada during 15-18th October 2019. Join us and contribute to the debate there! We will be having several different follow-up programs associated with these initiatives. Please join – not only the conversations but in being part of the solution!!! Contact any TEam member – or send me a note: LaRhea@TextileExchange.org

21

Appendix A: Minimizing harm and maximizing positive impact

This table highlights the regenerative impact of the benefits that sustainable fibers can have on our environment:

Benefit Minimizing harm Maximizing positive impact

Decreased land erosion

Decreasing the loss of fertile land and decreasing pollution and sedimentation in streams and rivers supports increases in fish and other species. Protected and restored ecosystems and the biodiversity they support can help mitigate climate change.

Healthy lands are able to hold onto water, which can stop flooding. Lower temperatures resulting from decreased carbon dioxide (CO2) levels can have a positive impact through reduced loss of water from soil and rainfall in drylands and provide increased resilience in the face of increased human pressures and mounting disasters.

Mitigating climate change

Less extreme weather events and a lowering of sea levels helps farmers’ crop yields and reduce risk season to season.

Improved energy efficiency of renewable energy uptake will enable a range of co-benefits such as air-pollution impacts, technological innovation, energy-supply security through increased energy diversity, reduced fuel cost and employment possibilities.

Increased biodiversity

Healthy ecosystems can better withstand from a variety of disasters.

Healthy ecosystems boost productivity and can better recover from a variety of disasters including pollution breakdown and absorption, contribution to climate stability, and maintenance of ecosystems. Greater species diversity ensures natural sustainability for all life forms.

Clean water Prevents disease outbreaks and protects us from pollution.

Supports and maintains healthy communities.

Building resilient rural communities

Addressing food security eases the burden of poverty.

Access to quality, nutritious food is fundamental to

human existence.

Infrastructure resilience builds communities' capacity to cope, rebuild, and recover from extreme weather and natural disasters. Secure access to food can produce wide ranging positive impacts, including economic growth, development of agricultural markets and job creation.

Reduced pollution

Reducing air pollution helps tackle climate change. Cleaner air benefits human health and reverses the effects of climate change.

22

Appendix B: Investment needed to move towards positive impact

This table taken from discussions with our Textile Exchange team as we work to define a preferred fiber illustrates some of the effort that is needed to move towards a regenerative or net positive impact:

Status Quo – or no effort Mitigating risk – or causing less harm Positive impact - verified and measured

Waste Water is not considered There is a design for biodegradable, or a reduction of pre-consumer waste. Effort is made in educating the consumer about open loop systems.

There is a reduction of post-consumer textile waste. Aim for zero waste or use of fully biodegradable and / or fully recyclable waste. No use of toxic substances.

Green House Gas

Carbon / emissions not considered Efforts to reduce petroleum, and/ or implementation of rotation (crop and grazing) to reduce carbon. Reduction or elimination of deforestation.

There is measured / verified carbon sequestration. There are no petroleum inputs with renewable energy used instead. Limited transportation of products.

Biodiversity Mono-cropping, clear cutting or deforestation.

Rotational processes in place with some bio diversity and investment in reforestation (move to positive). Reduction or elimination of deforestation.

Use of regenerative crops, monitoring and verifying of positive impacts on biodiversity and soil health. Reforestation.

Water No set restrictions or considerations or use or pollution. There may be high input / use, with no treatment.

Intentions and movement towards improvement but no obligations, use of advanced irrigation systems and improved waste water.

Restricted/limiting water quantities, "zero" discharge, positive impact on water systems, low input/use, rain-fed, process around water recovery, 3 stages of water treatment. Elimination of all possibly harmful chemicals and investment in restorative processes.

Social Spot market / commodity market pricing. No procurement policies which allows for sourcing in high risk countries. Using animal materials/furs (slaughtered for materials).

International Labour Organization, Terms & Conditions trading agreements in place with auditing schemes in place. Sourcing in lower risk countries for animal / humans. Compliance with Health & Safety good practice, prevention of animal cruelty, respecting cultural rights and gender equality.

Promoting positive cultural and gender rights and opportunities, providing full-cost (production and livelihood) and living wages. Implementing reward and incentive schemes (carbon trading). Having gender programmes and community development commitments and measuring progress in these areas. Investment in increasing quality of life for animals.

Toxicity No set considerations above legal requirements, reach American Apparel & Footwear Association Restricted Substance List

Chemical regeneration programs in place with guidance in place around toxicity, transitional programs and closed loop systems.

Zero discharge of harmful chemicals. Restricting the use of chemicals in type and quantity. Controlled emissions and high recovery rates.