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Towards a sustainable fashion and luxury sector

The Institute for Positive Fashion (IPF) sits at the heart of the British Fashion Council (BFC), and Deloitte are proud to support as the Delivery Collaborator to the Institute for Positive Fashion (IPF) annual forum. The 2022 IPF Forum focused on accelerating a circular fashion ecosystem – creating the roadmap for change through innovation and best practice through a series of keynote addresses, innovation showcase, roundtable and ‘hack’ sessions which brought together over 300 leading members of the fashion and luxury industry to address the largest sustainability issues facing the industry today.

Now as we prepare to build on last year’s success with IPF Forum 2023 we are reflecting on the insights gained from the Forum and our ongoing work in sustainable fashion, to collate key challenges to help explore ways to overcome them.

Challenges to Sustainable Fashion

With the creation of a single garment often spanning multiple countries through the process of its design, manufacture, production, marketing, and retail, the fashion industry is a multi-billion-dollar global industry. Beyond the economic impact, fashion has a great cultural and social significance for most people across the world. As a result, the fashion industry has a responsibility to act in the best interests of both people and the planet.

A key challenge facing the industry is that clothing manufacturing has an intense reliance on raw material inputs. A significant contribution to fashion companies’ Scope 3 emissions is within the raw material extraction and material development phase of the value chain. Alongside this, key inputs such as water and energy are particularly intensive. In the World Economic Forum’s 2021 report ‘Net-Zero Challenge: The Supply Chain Opportunity’ it is estimated that fashion and textiles industry consumes 98 million tonnes of non-renewable resources every year, and uses 93 billion cubic metres of water annually. The World Resource Institute estimates that the industry emits 2% of global greenhouse gas emissions.

Garments are highly polluting at the end-of-life phase within the value chain. Large inefficiencies in the industry, such as clothing underutilisation and lack of recycling, causes over $500 billion of value being lost annually and much of the clothing ending up in unregulated landfills resulting in huge piles of textile waste. [1]

Finally, while consumer awareness on the impact of the fashion industry is growing, there continues to be limited understanding of what can be done to resolve these challenges. For example, consumers often discard old clothing because the material is damaged or worn out, contributing to the cycle of waste caused by the industry.

What we, as members of the fashion sector, can do about these challenges

To accelerate progress towards a truly sustainable fashion and luxury sector, we believe there are three immediate areas for policymakers, industry, and the wider ecosystem to focus on:

  1. Embedding circular design principles at the design stage
  2. Reconfiguring approaches to end of life
  3. Using digitisation and data to achieve goals

Embedding circular design principles at the design stage

As significant material inputs are located within the raw material extraction and material development, a high proportion of a fashion company’s Scope 3 emissions originate from this area of the value chain. Innovations in material sciences have led to the introduction of many more eco-friendly fabrics into the fashion system, including organic and recycled materials. Regenerative approaches are also starting to gain traction and investment from brands in innovation is driving progress in development of next generation materials. Designing garments for recycling, by ensuring that any item is easy to breakdown into constituent parts and recycled, is also critical to enable effective management at the end-of-life phase. Designing more durable, longer lasting clothing, both in terms of style and functionality, will facilitate re-use, re-wear, and re-purposing more effectively, without being limited by deterioration in quality.

In the short term, brands who invest in durability and circularity might see a moderate increase in commodity costs because of increased spend in recycled and sustainably sourced fibres, but it is reasonable to assume that recycled food stock will become more competitive as recycling capacity increases. It is also worth considering how early investment in circular design will reduce exposure to increased costs arising from extended producer responsibility (EPR) charges.

Reconfiguring approaches to end of life

New business models provide the opportunity to rethink approaches to the traditional linear fashion model of ‘make-take-waste’, whereby garments are produced to be purchased by one individual, used, and then discarded. A circular fashion system deploys business models that reduces the amount of clothing going to waste and reimagines it, either through reuse, repair or re-purposing. As an example, rental business models are gaining traction as a means of increasing the life of a product and reducing linear consumption through peer-to-peer sharing.

Brands considering the transition towards new business models should consider their intrinsic strengths such as substantial economies of scale, mature supplier relationships and the ability to mitigate a wide range of input costs without compromising value to customers. Each of these will prove essential to mitigating a modest increase in costs over the course of the transition.

Using digitisation and data to achieve goals

Recent innovations in digitisation will accelerate sustainability efforts across the fashion industry. In particular, digitisation and increased levels of data for traceability throughout the value chain will allow identification of areas of high emissions intensity throughout the manufacturing process. Increased real time data will provide suppliers with greater certainty when forecasting with future orders and help brands plan their production accordingly with more predictable orders and cashflows.

Collaboration and data sharing among players across value chains and industries will be crucial to access real time data. Visualisation of data will inform conversations to foster strategic relationships between players along the value chain and align on decarbonisation and Net Zero targets. This way, companies will be able to adopt best practices along their supply chains to increase manufacturing efficiencies with an overall reduction in material inputs and emissions from manufacturing. Alongside this, innovations in size calculators and consumer avatars have the potential to reduce the rate of returns by ensuring garments are more likely to fit upon receipt.

Unlocking growth through sustainable fashion:

In addition to tackling emissions and meeting net zero targets, sustainable fashion presents many exciting opportunities for growth and customer engagement. There is a strong business case to suggest brands who commit authentically will be rewarded.

  1. Higher sales from existing and new customers - orientating your business towards less extractive outcomes, aligns your business with the next generation of consumers who have increased propensity to purchase based on sustainable factors. By 2040, Generation Z (1995-2009) and Generation Alpha (2010 to 2025) will make up 41% of the global population, bringing a distinct new set of generational values with them. As consumers, they are hyper-informed, scrutinising claims made by brands and are choosing brands which represent their values. (The Future Laboratory, The Zalpha Reckoning)
  2. Lower costs – efforts to decarbonise the value chain through enhanced energy efficiency and switching to renewable sources provides opportunities to achieve a positive OpEx impact through lower operating costs and lower energy costs. The case for this has intensified in light of current soaring energy prices.
  3. Mitigate the ‘cost of inaction’ – from January 2026 the Carbon Border Adjustment tax will redefine global value chains by raising the cost of high-carbon inputs. Given the UK Government has enshrined its net-zero commitment by 2050 into law, businesses can expect other policy and regulation change in support of this ambition.
  4. Enhance brand and reputation – from attracting top talent who increasingly want to work for purpose driven organisations, to boosting employee motivation and strengthening investor communications and partnerships – there are multiple less tangible value drivers which support the business case for sustainability.

The transition is now and requires us all to act

Ethical consumers are constantly navigating the pitfalls of the way the fashion industry has typically operated, seeking more transparent, ethical, and sustainable products. As we move towards a more sustainable fashion system, it will be crucial for fashion companies to introduce next generation design into their product development, to rethink their business models and move away from a wasteful linear system, and to understand how to leverage data to their advantage. The extent to which companies effectively act on these initiatives will not just underpin our transition to sustainability, but also provide a competitive and consumer advantage in the months and years to come.

Deloitte is proud to continue our association with the BFC and to support the Institute of Positive Fashion as the IPF Forum 2023 Delivery Collaborator.

If you found this article interesting you may also be interested in reading: Digitisation and circularity: how changes to luxury retail are vastly improving the industry’s outlook, and its reputation


[1] A New Textiles Economy: Redesigning fashion’s future, Ellen Macarthur Foundation, 2017,