Profitability vs. Sustainability: Adversaries or Allies?

The Prevailing Assumption: Adversaries

A long-standing dilemma in the fashion industry: the perceived incompatibility of sustainability and profitability. Karl-Johan Persson of H&M once encapsulated this challenge, distinguishing between "good profits and bad profits." Lewis Perkins, president of the Apparel Impact Institute, adds to this narrative, pointing out the conflict between the lucrative nature of conventional business practices and the perceived financial burden of sustainability initiatives. This sentiment echoes across the industry, raising a critical question: can sustainable practices, often viewed as costly, align with the financial aspirations of fashion brands?

Indeed, as the industry faces mounting pressure from consumers, activists, and investors to adopt more sustainable practices, the real challenge emerges: demonstrating that sustainability can coexist with profitability and even enhance it. Fashion brands, while making bold commitments, often grapple with outlining the costs and the strategic investments needed to effect change. The question then becomes: Is the long-standing belief that sustainability is the antithesis of profitability truly accurate?

The Case for 'True'

From a design perspective, the pursuit of sustainability in the fashion industry does often come with higher costs. This is particularly evident when considering certified materials, organic and regenerative materials and new, innovative materials, each bringing its own set of financial implications:

Certified Materials: Certification processes add an additional layer of cost. For example, FSC-certified wood, which ensures sustainable and ethical forestry practices, typically costs up to 15% more than non-certified wood. Similarly, certified organic cotton can be 20%-30% more expensive than conventional cotton. 

Organic and Regenerative Materials: These materials are generally more expensive than their conventional counterparts. The higher costs can be attributed to a variety of factors, including limited supply relative to demand, higher labour inputs per unit of output, and the additional costs associated with segregating organic products from conventional ones during processing and transportation.

New, Innovative Materials: The development of new materials, such as CIRCULOSE® and Rubi, requires significant investment. The cost of research, development, and scaling production for these materials is substantial. These new materials signify a radical shift from traditional materials, demanding long-term commitment and financial backing to achieve scale and affordability.

In addition to materials, supply chains with lower production costs, often in countries reliant on coal, are financially more attractive than producing in Western economies.

Challenging the Status Quo: The 'False' Side

The pursuit of above sustainable materials represents a financial commitment for fashion brands, involving not only the direct costs of the materials but also the investments needed to integrate these materials into existing supply chains and manufacturing processes.

However, sustainability in fashion doesn't always require extreme material choices or significant additional costs.

Less Dramatic Material Shifts: Ask any product developer: during sampling, there are always multiple choices for fabrics and trims that are similar in functionality, at similar cost but lower in ecological footprint. For instance, replacing a cotton/elastane blend from a 95%/5% to 97%/3% makes the difference between a fabric that cannot be recycled to a recyclable one. The only issue today: in today’s high-paced product development process, at best cost is reviewed, but environmental impact rarely is. As a consequence, thoughtful material choices with lower ecological impact without a corresponding increase in costs are missed - and these differences scale fast with collection size.

Future Environmental Costs: Looking towards the future, environmental costs, particularly Environmental Product Responsibility (EPR) fees, are becoming increasingly relevant. These fees, based on the ecological friendliness and circularity of each product, will start to impact financials directly. Brands will need to consider these long-term costs, making sustainability a crucial factor in future profitability. This shift emphasizes that sustainable practices, previously seen as cost centers, may actually align with and enhance long-term profitability.

In today’s high-paced product development process, environmental impact is rarely reviewed; as a consequence, thoughtful material choices with lower ecological impact without a corresponding increase in costs are missed - and these differences scale fast with collection size..

Beyond design, several strategies show how sustainability targets can support financial goals:

Reducing Returns: Implementing sizing solutions helps brands reduce returns, a major cost factor. For instance, SAIZ's technology assists customers in finding the right fit, reducing returns and their associated costs.

Minimizing Waste: Effective planning and forecasting, like the solutions offered by Syrup Tech, can reduce unsold inventory, thereby minimizing waste and improving profitability.

Circular Business Models: Engaging in repair, resale, and upcycling through Digital Product Passports creates additional revenue streams while supporting sustainability, as demonstrated by service providers like EON.

These perspectives challenge the initial 'True' stance by illustrating how sustainability, when integrated thoughtfully and strategically, can offer value and even financial benefits in both the short and long term. 

Profitability vs. Sustainability: A Synergistic Future

The conventional view of sustainability in fashion often involves radical shifts in materials and supply chains, associated with higher costs. However, sustainability in fashion doesn't always require radical changes. For instance, leveraging technology for data-driven decision-making during product development, can identify design choices that lower ecological impact without necessarily increasing costs. Furthermore, with impending environmental regulations, the financial case for sustainable practices becomes increasingly concrete. Beyond material design, various strategies are already demonstrating financial benefits. 

This evolving narrative in the fashion industry reveals that sustainability, when adopting a more balanced perspective, doesn't have to be a choice between ecological responsibility and profitability. It can be a synergistic journey towards a more sustainable and financially viable future.