Business opportunities in sustainable fashionA value chain perspective

2 © 2014 Deloitte

Sustainable fashion:Understanding the business case

Design

SourcingM

anufacture

Distribution

Ret

ail

Use

Discard

Value chain

3 © 2014 Deloitte

Designing sustainabilityAttract and retain future talent

75% of the global workforce will in 2025 be members of the ‘millennial’ generation (born in 1983 or later).

78% of the millennials are influenced by how innovative a company is when deciding if they want to work for them.

Millennials believe business can do more to help society

Resource scarsity

Climatechange

Incomeinequliaty

68% 65% 64%

Source: Deloitte. 2014. Big demands and high expectations. The Deloitte Millennial Survey

“Talent is the energy that powers our

Group. Without talent we would not be

here…Sustainability is key to talent

management.”

Source: http://www.kering.com/en/talent/empowering-talent

“I’m also really happy to see that

our…colleagues show such interest in

sustainability. This opens great

opportunities to…attract and retain the

talent we need for our continued

growth.”Karl-Johan Persson, CEO

4 © 2014 Deloitte

Sourcing sustainabilityIncrease resilience against externality risks

Polyester

Since polyester is a petroleum product it has a significant climate change impact (27 kg CO2 eq/kg).

Again, since polyester is a petroleum product and petroleum is a non-renewable resource, polyester presents a high impact on resource availability ($US157/kg)

During the production stage polyester requires 18.3 kilowatt hour per pound of fiber

Cotton

2,4% of the world’s cultivable lands is covered with cotton, but cotton production accounts for 24% of the world’s use of pesticides and 11% of the world’s use of insecticides. Accordingly cotton has the highest level of freshwater eco-toxicity of all the most common textile fibres.

Cotton is one of the thirstiest crops. The production of 1 kg of cotton takes between 7.000 and 29.000 litres of water.

During the production stage cotton requires 8.6-9.4 kilowatt hour per pound of fiber

Sources: European Commission. Environmental Improvement Potential of Textiles (IMPRO-textiles)Danish Ministry of the Environment – Danish EPA

5 © 2014 Deloitte

Manufacturing sustainabilityMitigate supply chain risks

A Deloitte report on how 600 manufacturing and retail executives view the growing challenge of supply chain risks shows that…

48% find that the frequency of ‘risk events’ in the supply chain has increased.

53% think that the costs associated with ‘risk events’ has increased.

56% see ‘macro-environment’ and CSR/sustainability risks as the biggest threat.

Source: Deloitte. 2014. The Ripple Effect. How manufacturing and retail executives view the growing challenge of supply chain risks (n=600)

6 © 2014 Deloitte

Distributing sustainabilityLower your costs

GHG emissions connected with shipping a container of apparel from a

Chinese field to an American store

Xinjiang to Shanghai Shanghai to Los Angeles Los Angeles to Denver

Truck Rail Ship Air Truck Rail

Miles 2435 2744 6591 6488 1032 1163

Kg of CO2 eq

3656 1357 950 96.618 1550 575

Kg of Nox 12.7 16.5 17.0 418.8 5.4 7.0

Kg of PM10

3.7 0.6 2.7 12.7 1.6 0.2

Transport

Source: Natural Resources Defense Council. 2012. Clean By Design: Transportation

Packaging

20 million MJ of energy

8.500 tonsof paper

1 million litres of water

500.000 litres of diesel

1 millionlitres of fueloil

275 tonsof plastic

…saved annually Source: PUMA. Clever little Bag Infographic

7 © 2014 Deloitte

Retailing sustainabilityBenefit from emerging market opportunities

63% of respondents under the age of 40 said in a global survey that they are willing to pay more for socially-responsible products/services.

Source: Nielsen. 2012. The Global Socially-Conscious Consumer

53% 66%2012 2013

Percentage of consumers who consider transparency and honesty important when dealing with a business or buying from a brand.

Source: Cohn & Wolfe. 2013. From Transparency to Full Disclosure

84% of the world’s most influential shoppers – the millennials – believe it is their duty to improve the world.

Source: World Economic Forum. 2013. Engaging Tomorrow’s Consumer

78% growth in 2012 salesof organic cotton

69% growth in 2012 salesof organic cotton

Source: Textile Exchange. 2013. Organic Cotton Market Report

8 © 2014 Deloitte

Use sustainabilityIncrease customer engagement and brand identification

60% of respondents in a global survey among executives asserted that they see customer engagement as very important to their strategy.

60% of the respondents believed that a strategy of creating deeper customer engagement will have a strong positive impact on their company’s future growth.

Source: Economist Intelligence Unit. Beyond Loyalty. Meeting the Challenge of Customer engagement

“The recession was starting to hit

hard. It was an important shift. People

were investing in more expensive

products that would last a long time,

rather than disposables. We wanted to

engage with these people – these were

our people. Engaging around quality

products is a great way to lower the

impact of our products.”

Rick Ridgeway, VP Environmental Affair, Patagonia

“I think material re-capture enhances

the brand because it speaks to the

long-term quality. Many consumers

feel good about the program because it

speaks to the long term value of the

product.”Chip Bergh, CEO, Levi Strauss & Co.

9 © 2014 Deloitte

Discard sustainabilityInternalize product value

25.000 tons of clothes were in 2012 handed in for recycling in Denmark. Mostly to thrift shops. This equals an average of 7 pairs of jeans per person.

Source: Statistics Denmark

3650 litres of water

3 kg of chemicals

400 MJ energy

13 m2 land

Source: Deloitte. 2013. Fashioning Sustainability

$1.9 billionwas in 2009 the value of global used clothes exports from the OECD countries.

Source: UN Comtrade Data. 2011

4.200 tons in 2013

10 © 2014 Deloitte

Sustainable fashion:Understanding the business case

Design

SourcingM

anufacture

Distribution

Ret

ail

Use

Discard

Attract and retain future

talent

Increase resilience against

externality risks

Mitigate supply chain risks

Lower your costs

Benefit from emerging market

opportunities

Increase customer

engagement,and position

brand

Internalize product value

Value chain

© 2014 Deloitte

Bahare Haghshenas

Manager

Deloitte Sustainability

Tlf.: 31 31 04 31

bahahag@deloitte.dk

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