The Economic Impact of Climate Change: What does this mean for the fashion industry today?

By Camilla Rydzek

Right now the fashion industry is grappling with rising consumer demand for transparency. In other words it’s finally embracing “sustainability” — the umbrella term for all social, environmental and economic initiatives business are undertaking to improve the planet and people’s lives. Still, however, the majority of these efforts are aimed at quelling outside pressures and few fashion players see sustainability as an inherently vital component of the industry’s future survival — or, in other words, a business imperative. 

According to a new report by WWF, 2020 is the year that the global economy needs to come to terms with the fact that we are not only in the middle of an environmental crisis, but also heading into an economic one. As it outlines, the continued degradation of natural systems will have an adverse effect on the world economy and consequently diminish the prosperity of the fashion sector. 

This Global Futures report has estimated that under a Business As Usual scenario, the loss of global GDP growth by 2050 could reach US$ 479 billion annually (or 0,67%). In the next 30 years, the accumulated cost of not tackling these issues would reach $9.87 trillion. The UK specifically would be hit hard, with a £16bn annual loss in GDP, due to the loss of coastal infrastructure and agricultural land through flooding and erosion. It closely follows the USA and Japan who will be hit even harder. 

The report uses an innovative economic model to arrive to the above conclusions. It identified six natural ‘ecosystem services’ that provide key benefits across 140 regions or countries. These benefits include crop pollination, protection of coasts from flooding and erosion, supply of water, timber production, marine fisheries and carbon storage. It then identified that these services are provided by natural infrastructures including forests, wetlands, coral reefs and fish stocks. Using academic literature and available evidence, it was then able to analyse how different scenarios of environmental development over the next 30 years would influence the availability of these ecosystem services and consequently affect economic factors such as GDP. 

In a hypothetical best-case scenario, Global Conservation incorporates the most comprehensive and extensive protection measures. This includes seeing international coordination on climate change and land use, transformational policies to protect nature and biodiversity, while also providing benefits to people through ecosystem services. If these steps are followed, the report predicts that the annual global GDP would be 0.02% higher in the same time period, generating an annual net gain of US$ 490 billion per year compared to the Business As Usual scenario. 

As the report highlights, the above estimates are conservative, and only take into account the impacts that can be measured with data available today – the actual effect will most likely be much more severe. The projections of GDP impacts do not take into account climate change and water scarcity – instead the aim was to focus on areas associated with specific natural assets. Furthermore, the model does not take into account the theory of the “tipping point” – that threshold of climate change impacts that will cause irreversible changes.

When putting the report’s findings into the context of fashion, it spells out a future of disruption for global supply chains. Fashion is dependent on the availability of raw materials as well as an international supply chain in countries from Bangladesh to China and Turkey. Both of these factors are at risk according to WWF’s predicted model. By 2050, the global price of cotton could increase by 6%, while industries such as fashion also face an increased risk of reduced margins and the need for infrastructure repair. 

Cotton is today the most important natural fiber used in fashion, making up 33% of global textile production. As the global population will grow to 9.8 billion by 2050, and fashion consumption is estimated to increase by 63% to 102 million tons by 2030, the availability of key raw materials such as cotton will be vital to support future demand. 

So what can fashion do? WWF suggests a range of environmental protection activities applicable to the fashion industry, such as engaging in better land-use, and championing sustainable management in production processes. Another emphasis is put on consumption – a topic that has largely been disregarded by fashion brands today. 26% of the global carbon budget will be used up solely by the fashion industry by 2050. The sector therefore has the incentive and the possibility of impact to prevent its own demise.

The conclusion of this report deeply resonates – today’s ambitions fall short of what is needed. As the Pulse of the Fashion industry 2019 update outlined, sustainability efforts have actually decreased by 1/3. The conclusion can therefore be drawn that the full environmental and economic impacts of fashion continuing to pursue a Business As Usual scenario, have not yet been fully understood by business leaders. Yes, a Fashion Pact has been formed — alongside many other initiatives— but only a very small fraction of these truly hold brands accountable for their commitments. 

More comprehensive efforts need to be put into action, and perhaps the term “conservation” is a good place to start. Fashion needs to not only decrease negative impact but also aim to conserve the natural resources it exploits — which will require a complete and radical change in the way that it operates today.