Innovative collective financing model to decarbonise the fashion sector

Source: © 123rf 123rf The Future Supplier Initiative offers a collective financing model to support decarbonisation in the apparel sector

Some of the world’s biggest fashion brands have joined forces to participate in this innovative initiative to decarbonise the fashion sector.
The initiative will begin with a programme in Bangladesh, supported by Bestseller, Gap Inc., H&M Group and Mango.

In its first year, the cohort will prioritise factories based on impact, build technical proposals for achieving deep decarbonisation, and de-risk lending to suppliers to implement these projects at more attractive rates.

Year two of the programme will focus on project implementation and monitoring of the climate impact created through these investments.

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Transitioning to renewable energy sources

With an estimated 99% of total fashion brand emissions occurring in the supply chain, the Future Supplier Initiative aims to accelerate the transition to net zero by sharing the financial risks and responsibilities of transitioning to renewable energy sources in Tier 1 and 2 garment and textile factories.

The initiative is a brand-agnostic mechanism that will develop and finance projects to support both brands and suppliers to meet their Science Based Targets (SBTs) and stay within the 1.5-degree trajectory.

A combination of technical support and financial incentives will be used to help overcome the barriers that prevent many factories from adopting electrification and renewable energy solutions.

“To achieve this industry’s ambitious climate goals, it’s imperative that every stakeholder leverages their influence to drive tangible change,” says Lewis Perkins, president and CEO, Apparel Impact Institute.

“A joint effort among brands and retailers is essential to create conditions where suppliers are motivated and capable of making these investments.

“Financial institutions are poised to offer better finance options provided there’s a robust pipeline of suppliers ready to embrace decarbonisation efforts.

“The acceleration of these efforts occurs when the industry aligns its resources and investments toward the most impactful solutions,” explains Perkins.

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Overcoming barriers to decarbonisation

To achieve significant emission reductions, suppliers might adopt a range of energy-efficient technologies and processes as well as transition to renewable energy sources, often with lengthy payback periods that can take decades.

This deters many suppliers from embracing electrification and renewable energy solutions, hindering progress towards decarbonisation goals.

To help accelerate progress and bridge these gaps, the Future Supplier Initiative aims to reduce the cost for suppliers by working with fashion brands to decrease the cost of capital for loans that can accelerate decarbonisation.

Alongside financial incentives, technical support will be provided to help suppliers identify and implement low-carbon technologies and solutions.

Baselining and monitoring emission reductions will also be conducted to demonstrate the impact of projects financed and implemented by the initiative.

The initiative seeks to identify and match projects with the highest potential for impact.

Identifying common factory units, interventions and costs will enable a global and regional joint effort between fashion brands, moving from targets and roadmaps to implementation and measurable reduction, beyond energy efficiency measurements.

Eva von Alvensleben, executive director and secretary general of The Fashion Pact says that the cost of inaction on climate change is unaffordable.

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“If the fashion sector is to meet its goals and transform its supply chain, we urgently need to address the gap between ambition and action.”

For her, the Future Supplier Initiative is a unique opportunity for fashion retailers to join forces. “They can drive progress towards science-based targets, and offer much-needed financial and technical support to apparel suppliers in their journey to decarbonisation.

She adds that no single business alone can solve this challenge, but by sharing the costs, risks and responsibilities of the transition to renewable energy. “In this way we can build an ecosystem of solutions and kickstart a new era of change.”

Anders Holch Povlsen, owner and CEO of Bestseller says they are working intensively to improve our climate footprint.

“We have largely managed to tackle our direct emissions, but it is clear that emissions in our value chain require ambitious efforts on a scale that calls for innovative, joint solutions.

“The Future Supplier Initiative represents a new mindset for how fashion companies can come together and accelerate the solutions necessary for the green transition across the industry and specifically in countries specialised in manufacturing.

“We know that as an industry, we still have many steps ahead of us, but we believe that the Future Supplier Initiative can make a positive and significant difference.

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Commitment by industry

Richard Dickson, president and CEO, Gap Inc. says Gap Inc. is committed to bridging the climate gap by collaborating with our supply chain partners to reduce emissions and that they are eager to see their commitment matter even more.

“That’s why we participate in the Future Supplier Initiative, which unites brands, technical partners, and financial institutions to drive meaningful climate action across the industry, better and faster than any one company can on its own.”

Daniel Ervér, CEO of H&M Group says the Future Supplier Initiative shows that solutions are readily available and come with proven impact, but it requires commitments from brands and investors that are willing to invest.

“We encourage others to join our efforts to tackle our industry’s negative climate impact”

Sustainability a journey

Mango sees sustainability as a journey the fashion industry has to make to achieve a more just society and to reduce its environmental and social impact.

“To reach our climate ambitions, fashion companies inevitably need to decarbonise our supply chains,” says Toni Ruiz, CEO of Mango

“The joint effort that represents the Future Supplier Initiative is a huge step forward from the industry in allowing for affordable funding for factories to engage in energy efficiency initiatives, and a sign that cooperation is possible in our sustainability journey,” adds Ruiz.

The Future Supplier Initiative is actively recruiting more brands, to expand to other key apparel manufacturing regions including Vietnam, India, China, Italy and Turkey.

By bringing in more brands and geographies into the programme, the Future Supplier Initiative aims to support brands and their supply chains in achieving their near-term science -bsed Targets by 2030.