Interview with Rogier Van Mazijk & Catharina Martinez Pardo
Rogier Van Mazijk & Catharina Martinez Pardo
Finance Director & Principal Fashion for Good & BCG respectively
A Call for Transformation
Innovations emerging in the fashion industry in response to sustainability pressures present unprecedented investment opportunities, which Boston Consulting Group (BCG) and Fashion for Good estimate at $20 billion to $30 billion annually, according to their new report. In conversation with Richa Bansal, Fashion for Good's Finance Director Rogier Van Mazijk and BCG Principal Catharina Martinez Pardo throw light on the findings.
The clock is ticking for Planet Earth and the imperative on the integrated textile value chain to check its carbon footprint, nay, cut it down to its basic minimum gets all the more urgent. But this demands disruptive innovations in the form of new materials, processes, technologies, and business models, and very deep pockets to fund them all. And it was with this need in mind that the Netherlands headquartered Fashion for Good along with the Boston Consulting Group came up with the report Financing the Transformation in The Fashion Industry: Unlocking Investment to Scale Innovation which highlights the investment opportunities that could future-proof the industry.
The report estimates the financing opportunity to develop and scale innovations to transform the fashion industry at $20 billion to $30 billion annually. The growing innovation pipeline proves that such solutions can be found, but the pace of development is too slow, and the most significant innovations needed are not yet available at scale. Too many innovators still experience the financing gap, in which brands, investors, supply chain partners, philanthropy and regulators fail to provide them with the support they need. The report was launched at the World Economic Forum (WEF) at Davos this January where some key stakeholders discussed how a perfect storm of innovation and opportunity is forming in fashion-companies and investors that can capitalise on sustainability and impact-driven innovation will transform the industry and ultimately win. Fashion for Good's Finance Director Rogier van Mazijk and BCG Principal Catharina Martinez Pardo talk about the business of sustainability.
How did this idea come about-a study on the opportunities in financing to transform the fashion industry? And how was the figure $20-$30 billion arrived at?
Mazijk: We have been experiencing the large demand for more financing since the inception of Fashion for Good (March 2017) and its Accelerator and Scaling Programmes. We see many, very promising, innovators struggling to get the financing they need in order to grow and scale. This is important as unlocking the potential of innovation is crucial in this time of critical pressure on current (unsustainable) operations in the fashion supply chain. The $20 billion to $30 billion per annum figure was arrived at through triangulation of top-down and bottom-up analyses. For the bottom-up analysis, we were able to leverage Fashion for Good's 2000+ innovator database and a large number of case studies that we have tracked over the last few years.
Pardo: Sustainability rises to the top of the fashion industry's agenda-and the question of how the fashion ecosystem will transform to achieve a sustainable operating model becomes pivotal. Progress to date falls short-and succeeding in the next decades will require disruptive innovation in the form of new materials, processes, technologies, and business models. We are seeing the need for innovation in our daily work with leading fashion brands and manufacturers and also in the research we are continuously conducting.
Winning in the next decades will require disruptive innovation toward sustainability-but innovation needs to accelerate to reach a step change transformation. One of the main reasons why innovation is not accelerating fast enough is the lack of capital. Only a fraction of all available capital has been invested in fashion and textile tech, leaving many innovators stuck in the financing gap. In the report we quantified the financing need and found that in order to achieve a step change in sustainability by 2030 deploying $20 billion to $30 billion in financing per year to develop and scale disruptive innovations and business models is needed.
To calculate the financing needed to scale innovations, we analysed a comprehensive set of factors, triangulating across multiple top-down and bottom-up methods. These methods take into account the fashion industry's share of the global UN SDG investment needed to reach the 2030 goals, and benchmarking against R&D spending in other industries and calculate a bottom up view of financing needs across the innovation pipeline.
Does this study look at developing and scaling innovations only in terms of sustainability / circularity? Which are the other prime areas where innovation is being looked at?
Mazijk: Most innovations in the fashion space have an element of sustainability. Especially when it comes to "hard technology" (new raw materials, dyeing / finishing processes, end of use solutions) it is unlikely that innovation gets adopted at scale if it is less sustainable than the status quo.
That said, there are fields of innovation that are less directly focused on sustainability, which are primarily found in technologies to increase sales (mostly focused on e-commerce). Even some of those, for example fitting optimisation, which may primarily be focused on increasing e-commerce sales, could have sustainability benefits (e.g. decreasing returns).
Pardo: In this study, we mainly focus on innovations that have an impact on the social and environmental performance of companies. These innovators have identified many impactful venture opportunities and have started developing solutions to address these key possibilities along the entire fashion value chain.
Analysing these innovators and especially their financing need closely, we found that in fashion, nearly half of the financing opportunity lies at the beginning and the end of the value chain, where raw materials and end-of use solutions have the highest impact potential.
This interview was first published in the February 2020 edition of the print magazine.
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