Two decades prior to the Business Roundtable’s awakening to the merits of stakeholder capitalism, I had the good fortune to serve on the executive team at Timberland, a company that was purpose-driven. The company’s mission included “commerce and justice” in equal parts, enabling innovative sustainability action and outcomes. As a result, the company was recognised by entities ranging from Business Ethics magazine to the White House.
And yet, notwithstanding the recognition, I could not tell you how much the company’s carbon footprint grew during my tenure as chief operating officer. Though Timberland’s “scope 1″ (direct emissions) and “scope 2″ (purchased electricity) impact declined by double digits each year, 96 percent of the company’s carbon emissions were in “scope 3″ (upstream and downstream emissions). These emissions came from cattle ranchers in Brazil, sole manufacturers in the Dominican Republic and finished goods factories in China. Notwithstanding the company’s intention to remediate its climate impact, Timberland did not have the tools or know-how to comprehensively measure its environmental impact.
More than a decade has passed since my graduation from Timberland. Much has changed. The company was acquired by VF Corp. Climate change is no longer theoretical; it is contributing to burning homes and flooded subway stations. Consumers and investors are starting to vote their values. And better tools exist to estimate and measure emissions.
As a result, responsible companies are stepping up their commitments to climate action. For example, The Fashion Pact, an industry-led initiative launched in advance of the 2019 G7 Summit, committed 70 companies to protect the oceans, advance biodiversity and achieve carbon neutrality by 2050. At the same time, dozens of fashion firms (including VF Corp) have pledged to deliver Science Based Targets with aggressive scope 1, 2 and 3 goals by 2030 and 2050.
This all sounds promising.
Unfortunately, it looks better on paper than it does in practice. Why? For starters, pledges should not be conflated with progress. Consider past unmet corporate commitments to halt deforestation, reduce plastic usage or reduce corporate carbon emissions. This is, in part, because system incentives continue to prioritise short-term profits ahead of long-term planetary health. After all, investor time horizons are shrinking at the same time as corporate investment horizons are increasing. In addition, most externalities, including carbon emissions, remain unpriced. As a result, companies that pay the true cost of carbon, for example, become the victim of a free rider problem.
Notwithstanding the passage of time, the advent of tools and the supposed business case for sustainability, even those most committed to remediation and action are falling short. According to my analysis, less than half of the signatories to the Fashion Pact even include scope 3 emissions in their target setting. At the same time, many large fashion companies that have signed up to Science Based Targets are already behind their goals and do not have legitimate plans to deliver on their commitments.
After 25 years of trying, it’s time to admit that our voluntary corporate action to address social and environmental challenges is not working. Since the start of the corporate reporting movement, carbon emissions are up 50 percent. At the same time, social justice in overseas factories remains elusive. We need a different approach.
One part of the solution is to change the system rules. That is what the proposed Fashion Sustainability and Social Accountability Act does. The Fashion Act, for short, was put forward this week in New York State by The Act on Fashion Coalition which includes, among other leaders, the New Standard Institute, Stella McCartney, NRDC, Uprose and South Asian Fund for Education Scholarship and Training. The Act mandates basic transparency from both finished goods and raw material suppliers, disclosure of risk mitigation strategies and compliance with targets set in concert with the Science Based Targets Initiative. All brands with revenues of greater than $100 million that transact in New York State are covered by the Act, which effectively means all major fashion brands, from Louis Vuitton to H&M.
Passage of and compliance with the Fashion Act will assure New York’s consumers that the footwear, apparel and accessories that they buy are made with respect for planetary boundaries. It will also serve as a signal to investors that these same companies are actively reducing their carbon footprints and are thus less susceptible to cost increases when carbon is ultimately priced. For workers, the Act represents a step toward levelling the playing field, thereby creating an opportunity for the domestic industry to grow. Finally, it will spur pre-competitive collaboration amongst companies to innovate to lower their collective carbon emissions.
Most often, companies reflexively push back against regulation. In this case, brands might worry about the breadth of their complex supply chains and an absence of direct control over their distant partners (who are the source of their scope 3 emissions). These concerns are reminiscent of the fears expressed by the auto manufacturers when forced to adhere to increased fuel efficiency standards. And yet, upon reflection, I am guessing that most car companies now wished that they had acted faster to develop electric vehicles. So, too, I hope that my fashion colleagues will reflect on the opportunity being presented.
The Fashion Act serves as an invitation to progressive companies to innovate — to lower the true cost of their production. It also serves as a directive to fast fashion companies to remediate social and environmental exploitation in order to sell in New York State. Different from the rhetoric of the Business Roundtable and the well-intentioned voluntary actions of companies such as Stella McCartney, Eileen Fisher, Timberland and Patagonia, the Act will prod the entire fashion industry toward legitimate stewardship. Fashion companies have a history of cultural leadership and engagement. Here is a critical opportunity to extend that legacy.
Kenneth P. Pucker is a senior lecturer at the Tufts Fletcher School and an advisory director at Berkshire Partners. Ken worked at Timberland for 15 years and served as chief operating officer from 2000 to 2007.
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