Decarbonising the fashion and luxury sectors is no longer a side project, according to a recent Bain & Company report; rather, it is a crucial economic necessity that will change the competitive landscape over the coming ten years.
The study employed a marginal cost of abatement curve (MACC) to evaluate the ROI of various decarbonisation levers. Taking a distinct look at luxury and fashion clothing, the MACCs were created using a combination of public data, centred on short-term goals, and projected emissions growth through 2030 to match anticipated market expansion.
Fashion clothing procurement is a crucial decarbonisation lever. Bain states that although switching to recycled materials is a crucial initial step, the greater opportunity is in influencing supplier behaviour, such as employing lower-emission manufacturing techniques.
Durability and reduced effect per wear are essential components of premium businesses’ business structures, it was said. Scaling resale and reducing overproduction would be crucial levers to concentrate on. Due to their huge profit margins, luxury firms frequently ignore overproduction in an effort to prevent stock-outs. Unsold inventory, however, not only reduces profits but also has environmental consequences that are coming under more and more governmental attention, especially in Europe.
According to the report, firms can solve overproduction and increase inventory efficiency by utilising AI. About 60% of fashion firms currently utilise or are testing AI-powered sales forecasting, which allows for more precise estimates of customer demand across styles, sizes, and regions.
At the same time, about 50% of brands are using AI to more accurately distribute inventories. New production models are also being made possible by technology, and companies are starting to experiment with built-to-order and made-to-measure strategies, which drastically save waste by only creating what is required.
According to Bain, upcoming EU laws requiring digital product passports (DPPs) could double the lifetime value of fashion products, opening up new opportunities and benefiting customers.
Due to lesser profitability and the fact that most secondhand sales occur on third-party channels, the analysis concluded that secondhand remained a negative-ROI decarbonisation lever for the majority of companies. Furthermore, only when secondhand quantities increase at the expense of firsthand volumes do emissions decrease. Brands must transform secondhand into a lucrative, brand-owned channel that lowers emissions and increases customer lifetime value in order to overcome this obstacle.
