The fashion sector is under pressure: we need to innovate to become more sustainable. To do it, in the report presented at the World Economic Forum in Davos entitled “Financing the Transformation in the Fashion Industry: Unlocking Investment to Scale Innovation” Boston Consulting Group (BCG) and Fashion for good have estimated the value of funding opportunities to develop and scale disruptive innovations in a sustainable way it is somewhere between 20 and 30 billion dollars a year.
In a scenario in which consumers are increasingly sensitive and regulations increasingly stringent, players see the need to put the sustainability goal at the top of the fashion industry's agenda and to move towards more responsible practices. However, the question above all concerns how the industry will transform itself to achieve a sustainable operating model, since a change of pace would require innovation on several fronts: new materials, processes, technologies and business models. To scale up the solutions needed to meet more sustainable standards, all fashion players such as fashion brands, supply chain partners and investors must work together to accelerate the innovation process and take advantage of untapped opportunities in a market that today is worth 2.000 billion dollars.
The main theme concerns under-financing in the fashion sector. Thinking about the $20-30 billion of investment opportunities, we see that half of them are at the top and bottom of the value chain, where raw materials and product end-of-life solutions have the highest potential for ecosystem impact. In this case, the increased capital requirement arises from the presence of several factors such as longer research times, continuous development process and complex supply chain integration. If we think, for example, of the infrastructure needed to enable the chemical recycling of textile waste, we notice that these require larger investments in collection and in the creation of facilities for sorting and cleaning. Many investors still miss out on opportunities to assess the potential of these technologies and make investment decisions, leaving out a significant chunk of opportunity.
Even looking at the world of venture capital, in 2018 only in the USA were investments in the beauty and fashion sector they limited themselves to about 1,5% of the total ($2 billion). This shows how much leeway is still available for bringing supply and demand together in the fashion and textile technology sectors. By implementing investments in sectors not yet considered, it would kick off the work of many innovators to develop and scale innovative solutions in fashion.
