Emissions, synergy between brands and subcontractors decisive for the cut

Fashion is responsible for about 10% of the total greenhouse gas emissions into the atmosphere. And, according to the Ellen MacArthur Foundation, it alone exceeds those of the maritime and aviation industries. Today, the fashion industry is facing complex economic and business conditions. The European Union's commitment to sustainability is also slowing down, with the aim of rebalancing environmental impact reduction with industrial competitiveness. Among the objectives that Brussels has not, for the time being, postponed or revised, are the decarbonisation targets: Europe is still aiming to be the first zero-emission continent in 2050 and, in order to cut the ambitious target, is aiming to cut emissions by 55% (compared to 1990) in 2030 and reach -90% in 2040. The challenge, therefore, is still ongoing and companies in the fashion industry continue to work in this direction.

The crux of the matter is once again the supply chain: according to a recent McKinsey paper, so-called Tier 2 suppliers, who could be called Tier 1 subcontractors, produce between 45% and 70% of the emissions identified as Scope 3, i.e. greenhouse gases that are emitted not by the company but by its supply chain. Many companies do not have a direct relationship with the entire supply chain - beyond their first point of contact, Tier 1 suppliers, who are usually packagers - but according to McKinsey, reducing emissions from Tier 2 suppliers would have huge payoffs, all costs being equal: the consultancy speaks of up to a 50 per cent reduction in Tier 2 emissions in a near-neutral manner with a production cost increase limited to +1 per cent. To achieve this, suppliers would be required to use technical decarbonisation levers including renewable energy sources such as solar panels: Tier 2 suppliers, again according to McKinsey, can achieve cost savings of up to $250 per metric tonne of carbon dioxide equivalent (CO2e).

"Decarbonisation is very challenging," explains Gemma D'Auria, senior partner McKinsey and global leader of the Apparel, Fashion and Luxury sector for the firm, "but focusing on Tier 2 allows a substantial cut in emissions in an efficient manner. The complex historical period may take attention away from sustainability issues, but it imposes a reflection on the protection of the supply chain: 'In these periods of extreme volatility we tend to think about contingency and less about the medium to long term,' continues D'Auria. 'For some months now sustainability has been downgraded among the priorities, but to leave these challenges behind would be risky, given that the industry is among the most impactful. Tariffs could force the industry to rethink the supply chain and, going back to our work on decarbonisation, to make it more efficient in terms of both costs and emissions'. According to D'Auria, 'the first important lever for decarbonisation is synergy: brands should act as conductors, involving all stakeholders, calculating the relationship between costs and benefits at each level. They should also build long-term relationships with suppliers, who should be trained in this sense'. Then there are the financial incentives: "The most virtuous suppliers can be rewarded as such, perhaps acting as intermediaries and guarantors with banking institutions to obtain financial support for their suppliers".

Confirmation that greater synergies within the supply chain are not just a good omen but are really, albeit slowly, taking place, comes from Francesca Rulli, co-founder of Y-Hub, the holding company, in which Brunello Cucinelli and Claudio Rovere also have a stake, which deals with supply chain traceability, environmental impact measurement and also consultancy in sustainable transformation, with a focus on Italian SMEs, but also in direct dialogue with the big brands for which these small companies produce: "There are small signs: we are starting to see brands recognise the ESG assessment from a strategic perspective and thus reward the most virtuous suppliers," says Rulli, "and then we see companies co-investing to help the supplier improve its environmental impact.