2019 Update Pulse of the Fashion Industry

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2019 Update Pulse of the Fashion Industry PULSE OF THE FASHION INDUSTRY 2019 UPDATE 2019 UPDATE Publisher Acknowledgments Global Fashion Agenda, Boston Consulting The authors would like to thank all of those Group, and Sustainable Apparel Coalition who contributed to this update. Special thanks go to Global Fashion Agenda’s Authors Strategic and Associate Partners, as well as Morten Lehmann, Gizem Arici, Sebastian the industry experts and the broader fashion Boger, Catharina Martinez-Pardo, Felix community who have contributed their time, Krueger, Margret Schneider, Baptiste insight and expertise to this update and/or Carrière-Pradal, and Dana Schou took part in the Pulse survey and interviews. Copywriter Global Fashion Agenda team Thomas Tochtermann, Jonas Eder-Hansen, Christine Hall Alice Roberta Taylor, Anne-Lieke van Cover Leeuwen and Eva Kruse Good for You Boston Consulting Group team Dr Javier F. Seara, Christine Barton, Pascal Art direction Enohnyaket, Kelli Gould, Imogen Price, Mario Thomas Blankschøn Simon, and Sarah Willersdorf Graphic design Sustainable Apparel Coalition team Daniel Siim, IDna Group Alexandra Rosas and Veronique Tjon 2019 Copyright © Global Fashion Agenda, Boston Consulting Group, Inc. and Sustainable Apparel Coalition All rights reserved. Reproduction is strictly prohibited without prior written permission from the publishers. Every effort has been made to trace the copyright holders for this publication. Should any copyright holders have been inadvertently overlooked, Global Fashion Agenda, Boston Consulting Group and Sustainable Apparel Coalition will make the necessary changes. CONTENT INTRODUCTION TAKING THE PULSE THE PULSE CURVE CONSUMER OF THE FASHION AND THE ROADMAP SENTIMENT INDUSTRY TO SCALE P. 01 P. 03 P. 07 P. 11 PRIORITIES TO DRIVE ENDNOTES APPENDIX GET IN TOUCH FUNDAMENTAL CHANGE P. 15 P. 19 P. 20 P. 25 PULSE OF THE FASHION INDUSTRY 2019 UPDATE CONTENT The 2019 Pulse Score1 shows that the fash- widen. About 40% of the industry have PULSE OF THE ion industry has improved its social and not yet reached beyond Phase One of the environmental performance in the past Pulse Curve.2 As a result, if the industry year, but at a slower rate than the previous does not implement changes at a fast- FASHION INDUSTRY year. Despite this improvement, the fash- er rate, it will not be able to achieve the United Nations Sustainable Development ion industry is still far from sustainable. Goals3 or meet the Paris Agreement.4 Furthermore, the findings demonstrate 2019 UPDATE Global Fashion Agenda, Boston Consult- that fashion companies are not imple- ing Group and Sustainable Apparel Coali- menting sustainable solutions fast enough tion call upon industry leaders to increase to counterbalance negative environmental their pace towards a deeper and more and social impacts of the rapidly growing systemic change. Companies must push fashion industry. If the Pulse Score stays harder, with more focused and coordinat- on its current trajectory, the gap between ed efforts, to overcome technological and industry output and the Pulse Score will economic limitations that hinder progress. Ø+5% p.a. EXHIBIT 1 Growth rate projected to increase by 10% (+81%) Industry trajectory over past 3 years and projection $3.3T Gap between industry growth and Pulse Score improvements increasing Risk that the gap will widen if industry does +4-5% not increase the speed of finding, developing $1.9T $1.8T and implementing measures to improve their $1.7T environmental and social sustainability practices Growth rate decreased by ⅓ +4pt ? +6pt 42pt 38pt 32pt Apparel/Footwear Industry Size Pulse Score 2017 2018 2019 2020* 2021* 2022* 2023* 2024* 2025* 2026* 2027* 2028* 2029* 2030* *Note: Numbers for years marked with an asterisk mark are projections. Industry size and growth rates for apparel and footwear RSP value in USD based on fixed 2018 exchange rates. Growth rates until 2023 based on Euromonitor data, growth rates between 2023 and 2030 extrapolated based on Euromonitor data at CAGR 5%. Source: BCG analysis: Euromonitor; GFA: CEO Agenda 2018 1/25 PULSE OF THE FASHION INDUSTRY 2019 UPDATE CONTENT Pulse Score growth slowed by Pulse Curve was achieved by firms adopt- This awareness is beginning to have a one third in 2019 ing sustainability strategy development greater effect on consumer purchas- The 2019 Pulse Score increased four +4pt ing decisions, with more than a third of and governance, setting targets, imple- points from last year, from 38 to 42 (out menting best practices and aligning their survey respondents reporting they have improvement already switched from their preferred of 100), compared to six points in 2018, association affiliations. These important brand to another for reasons related to which means that the speed of measura- since past year preparatory changes will take time—typ- responsible practices. More than half of ble progress has decreased by a third. but measureable ically around two years—to translate into the respondents said they anticipate that trackable success further along the Pulse their next purchase decision will be based Although the continued progress is Curve. Meanwhile, frontrunners displayed on these practices. For the first time, this encouraging, its decreasing speed is progress lower measurable progress, as their work data confirms that most consumers in- concerning. In the last two years alone decreased by ⅓ in scaling up solutions and bringing prov- clude sustainability considerations in their the apparel and footwear industry grew en initiatives deeper into the value chain decision-making framework. These results between 4 to 5%, in line with projections Without growth in environmental and so- does not necessarily immediately trans- indicate a shift in importance of these through 2023 that show annual growth of considerations and represent a strong cial practices through scaling up existing late into Pulse Score gains. In addition, approximately 5%. This is largely driven signal to the industry.10 This clear trend sustainable practices, adopting more effi- tackling issues which require innovation by increasing demand in Asia-Pacific and cient business models and implementing will continue to grow. It is just a matter of 5 or changes in business models require developing countries. By 2030 the global transformative changes, the gap between time before responsible practices become collaborative action. pivotal to decision-making factors when apparel and footwear industry is expected the growth of the industry and the Pulse to grow to 102 million tonnes in volume purchasing a product. Score will widen further. This could have a 6 Consumers more aware of sustainability, and USD3.3 trillion in value. Moreover, the dire effect on the long-term environmen- an increasingly important driver in pur- However, consumer considerations of Sustainable Development Goals estimat- tal, social and financial prosperity of the chasing decisions sustainable practices are not yet pow- ed that global carbon emissions need to industry and planet.8 erful enough to be the most important be reduced by 45% from 2010 levels by As news outlets and social media shine a driver of purchasing behaviour. Quality 2030 if global warming is to be limited to light on social and environmental respon- The majority of improvements came and aesthetics still dominate decision a 1.5°C increase and net zero carbon emis- sibility in the fashion industry, consumer from two segments: small-size players making.11 Nevertheless, for 7% of consum- 7 concern is growing. Mentions of sustain- sions are to be reached around 2050. in the mid-price segment, and medium ers sustainability is the most important ability in social media increased a third Even under optimistic assumptions, the and large-size players in the entry-price decision-making criteria. Yet, the industry industry’s existing solutions and speed segment. Efforts spreading among the faster than overall social media growth cannot wait for the consumer to lead this of progress will not deliver the impact smaller companies in the entry-price between 2015 and 2018. Awareness is movement—it is up to fashion leaders to needed to transform the industry. Fashion segment are encouraging to see. This highest among younger people, especially take bolder moves today to transition to a needs deeper, more systemic change. movement along the initial phases of the Millennials.9 sustainable industry. 2/25 PULSE OF THE FASHION INDUSTRY 2019 UPDATE CONTENT TAKING THE PULSE OF THE FASHION INDUSTRY EXHIBIT 2 Evolution of industry-wide Pulse Score Speed of measurable progress slowed vs. last year 2019 vs. 2018 +4pt 2018 vs. 2017 +6pt 42pt This section takes an in-depth 38pt look at the Pulse Score results to examine the main drivers of progress and road- 32pt blocks the industry faced during the past year. In the past year the Pulse Score of the fashion industry increased from 38 to 42 (out of 100), showing progress toward advanced social and environmental performance with companies historically performing lower than average repre- senting the main driver of progress. This four-point improvement represents a slower rate of measurable progress than previous years and indicates the increas- ingly difficult challenges companies face in advancing their Pulse Scores. 3/25 EXHIBIT 3 PRE-PHASE PHASE ONE PHASE TWO PHASE THREE PHASE FOUR Pulse Score improvements by Taking Uncoordinated Actions Building the Foundation Implementing the Core Expanding to Scale Unlocking the Next Level performance quartile along the Pulse Curve 1st quartile: Top Performers 3rd quartile with biggest upward 42 development during the last year 2nd quartile 65 (+1) 3rd quartile 47 >70 (+4) 60-69 43 (+11) 50-59 4th quartile: 40-49 Bottom Performers 30-39 16 20-29 (+4)* <20 *Note: Pulse Score 2019 (vs. 2018) Pulse Scores by performance quartile at this level already have high scores and, es, capabilities, funding and advanced Players in the third performance quartile To provide an overview of the industry’s historically, have made strong progress. technologies in the aforementioned areas saw the largest year-on-year improve- progress companies are ranked in perfor- Their ongoing work toward advancing and are not yet fully established.
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