Purpose and Profit - Episode 2: Ethical Approach to Fashion
12 Oct 2020 2:09 pm by Mark Dunn
The Coronavirus crisis has led to increased scrutiny of businesses by consumers, investors and even politicians. While many have received praise for their responses, others have faced serious financial and reputational risk as a result of questionable business practices. Companies that demonstrate purpose—such as Environmental, Social and Governance (ESG) commitments —are most likely to survive and thrive in the future. Even before the pandemic, we were curious about how companies achieve socially responsible and profitable operations, so we sent a reporter to Amsterdam to investigate. In this second video in our Purpose & Profit series, we highlight Project Cece, which was founded in 2016 by a young team who want to promote ethical fashion brands whose supply chains are free from forced labour or environmental pollution.
Supply chain risk in the fashion industry
Supply chain risk has plagued the fashion industry in recent years, causing some firms financial, legal, reputational, and strategic damage. For example:
- Some international fashion brands suffered damaging headlines and compensation costs after a factory in Bangladesh used by their suppliers collapsed in 2013, killing 1,134 people.
- A recent report by the Intergovernmental Panel on Climate Change calculated the fashion industry produces 10% of global carbon dioxide emissions every year, with particular concerns about pollution from microplastics in certain fabrics.
- A 2020 report by UNICEF found that forced labour, and child labour in particular, is prevalent in low-skilled employment like cotton picking which takes place at the bottom end of companies’ supply chains.
A key cause of risk for fashion companies is a lack of visibility of their supply chain. “Companies that sell their products in Europe and the US have no clue where the textiles come from,” says Sofie Ovaa of the activist group Stop Child Labour. “Maybe they know their first supplier and there are codes of conduct in place, but further down the chain in the lower tiers it is very difficult to understand where the cotton comes from.”
Ethical expectations rising after Covid-19
COVID-19 hit the fashion industry hard, with government-imposed shutdowns closing manufacturing plants and retail stories, and the rise in remote working the reducing demand for new clothes. It also led to an unexpected trend: the growing popularity of sustainable fashion. The UK’s Royal Society of Arts, Manufactures and Commerce surveyed consumers in May and found that fewer than one in five want the fashion sector to return to business-as-usual after the pandemic. More than half of those surveyed now want fashion companies to do “whatever it takes” to become more environmentally sustainable and improve workers’ pay and conditions.
Before the pandemic, we visited Project Cece, which is Europe’s largest search engine for ethical clothing and sustainable fashion. Their mission is to promote and sell clothes that have been produced ethically. They do due diligence on fashion stores and brands to select those who are committed to the following criteria:
- Pay fairly and improve the communities in which they are produced with training and other support.
- Offer good working conditions and labour rights to workers in their supply chain.
- Use sustainable, non-polluting materials.
The younger generation demands ESG action
Project Cece’s founders have found that their mission has struck a chord with consumers. They have been able to expand into the UK and Germany and received early-stage investment from a venture capital fund. Cece’s clothes have been particularly popular with young people, which suggests they have strong potential for growth with the next generation of consumers and investors.
They have even found that companies who have visibility over their supply chains actually derive an additional benefit from understanding of their products’ journeys. “These brands have such an amazing story that makes you really want to tell that story,” says Project Cece co-founder Noor Veenhoven. “You want to show that a product is so much more than a cool piece of clothing, but it has a cool journey and story behind it.”
For our documentary, we also visited Asif Ventures, a fund which invests in Project Cece, in their glass-fronted office in Amsterdam’s innovative Start-Up Village. Their president, Federico Maroli, told us that “Social purpose plays a big role in our investment decisions”. “We consider it an integral part of the business model,” he says. “For businesses to grow and sustain over time, they have to look for solutions that do not have harmful impacts on society and the environment.”
Purpose & profit are possible
This six-minute film is the second in our Purpose & Profit series from Amsterdam. During the trip, we spoke to experts in business and investment who told us that companies will either fail or thrive based on whether they make the shift towards socially conscious business. “I think it’s really possible for a company to combine profits with values,” Melissa Wijngaarden says in the closing scene of our documentary. “Today we vote with our money and I think if people really buy according to their values, those companies that produce according to their values will grow and their impacts will grow. I think that will be a really beautiful world.”
Is your organisation ready to meet these ethical expectations—and still satisfy profit-focused stakeholders?