What is the potential long-term environmental and financial fallout from the Coronavirus outbreak?
By Laura Gibson, a sustainability consultant, Masters student at Cambridge University and researcher for Black Neon Digital
We have reached the end of fashion month and it remains to be seen how seriously the Coronavirus (COVID-19) outbreak will negatively affect both the economy and the environment in the long-term. Recent tensions at the Turkish border and the widening spread of COVID-19 have caused some concern that these short-term (albeit severe) issues, are taking attention away from the long-term threat of climate change. Frans Timmermans, a European commission vice president who leads the commission’s European Green Deal, believes that the need to enshrine the 2050 climate-neutrality target into law is highlighted by these current crises.
With some politicians arguing that the commission should be focusing on issues closer to home such as at the EU borders, Timmermans was quoted in The Guardian saying that the climate law was “so important” because “it allows you to focus on other things without losing track of what you need to do to reach climate neutrality.” On 28 November 2019 the European Parliament declared a climate emergency and on 4 March 2020 proposed the first European Climate Law. The story so far:
In 2015 during COP21 in Paris, the landmark Paris Agreement was reached by global leaders to combat climate change by, amongst other things, limiting global temperature increases from pre-industrial levels to “well below” 2 degrees Celsius. A specific aim was to keep any temperature increase to below 1.5 degrees.
A landmark report released by the UN Intergovernmental Panel on Climate Change (IPCC) in 2018 suggested that failing to achieve the 1.5 degrees target, even by just half a degree, would significantly worsen the risks of drought, floods, extreme heat and poverty for millions globally.
In 2019, European leaders agreed to reduce greenhouse gas emissions to net zero by 2050, aiming to transform the European economy from today’s carbon heavy industrial standards to meet the Paris Agreement pledge.
The proposed European Law would make this commitment legally binding, effectively meaning that all EU legislation must align with net-zero emissions within 30 years.
There are calls that this commitment is too herculean a task to achieve, and many calls that it doesn’t go nearly far enough to meet the 1.5 degrees Paris Agreement.
While the financial fallout of the virus outbreak could be on a similar scale to the global financial crisis, we are in a much different position to that of 2008.
Current concerns are deemed to be centred on health security rather than financial system stability and thus “limits the scope for monetary policy to play a primary role in mitigation” according to Creon Butler, Director Global Economy & Finance Programme, Chatham House.
One of the crucial roles for the finance community is safeguarding the most vulnerable sectors through targeted economic interventions in the case of a prolonged downturn. With its reliance on global supply chains and international markets, the fashion industry looks particularly vulnerable to the immediate effects of COVID-19.
The impacts on the Autumn/Winter 2020 season are already being felt: During Milan Fashion Week, Armani presented an online only show and the National Chamber of Italian Fashion cancelled both a market day for emerging designers and a closing awards event. You can read our recent analysis on this here.
Key cities such as Milan and Wuhan are now in lockdown which is placing growing pressure on international production lines leading brands to look into the possibilities of reshoring production. The UK clothing manufacturing sector remains open for business however this sector is at capacity and lacking support regarding workers visas post Brexit and in recruiting more staff.
Looking to future management of similar crises, Butler points to economic authorities ensuring that lessons are learned and guaranteeing that international supply chains are more robust to issues of this kind. Abandoning the current cross border-supply chain system would cause a similar ‘all eggs in one basket’ situation that has been highlighted by the recent Chinese factory shut down. However, reshoring selected production could bring long-term environmental and economic benefits.
Butler’s recommendation for active scenario planning and risk mitigation are likely beyond the means of many UK based SMEs but this could sow the seeds of increased brand supply chain collaboration and a more agile system.
Some commentators are suggesting that this could become a decisive moment in the shift towards more sustainable practises across the fashion industry. Including a wider acceptance of more flexible remote working, a review global shipping practises and travel for fashion weeks (following on from the carbon footprint data presented by the recent Zero to Market report) and the rise of digitised materials and products. It remains to be seen whether the negative impacts of COVID-19 can be transformed into long term opportunities for both the environment and a more sustainable fashion industry.