A USD 2.5trn industry at risk? What if consumers stop buying disposable clothes?

Fashion’s heavy environmental footprint is now front page news; pressure on both consumers and companies is growing. A business model built on cheap garments, speed to market, and constant newness means that the majority of garments are landfilled or incinerated within a year of production. The industry emits more CO₂ than aviation and shipping combined, causes c20% of industrial water pollution, and uses 79bn m3 of water per year.

Quantifying changes in consumer behaviours is fraught with difficulty. We leveraged UBS Evidence Lab data including consumer surveys and spend monitors. We used UBS Evidence Lab's Deep Theme Explorer to analyse trends in consumer sensitivity to ESG-related news on the retail sector. We also examined analogous ESG-relevant consumer behavioural changes, including “flight shaming”, recycling, sugar taxes and food waste, and reviewed the impact of regulation and campaign group pressure. We believe a 10-30% reduction in fast fashion units sold over 5-10 years is possible.

The apparel and textile industry is truly multinational, fragmented and opaque. Supply-chain traceability and visibility is limited. Solutions are complex and will be difficult to enact broadly. In our opinion, reducing quantity is absolutely crucial to solving the “problem.” System redesign is required (fewer items sold, items lasting longer, fewer items disposed of, achieving circularity), rather than replacing conventional garments with “more sustainable” alternatives.

Actions by major retailers include redesigning ranges to include more recycled product (e.g., recycled polyester), swapping conventionally-grown cotton for organic, addressing the use of chemicals in fabric treatment, and collecting used garments at point of sale. But we see few if any examples of retailers offering fewer items or raising prices. In this report, 22 analysts across multiple sectors explore the impact of this trend across the value chain and conclude certain Business Support Services and Real Estate stocks appear positively positioned. We also assess expected impact on retailers across the US, APAC and EMEA.