Two interesting ESG items from the fashion world popped up recently.
The BBC reported that the UK’s competition oversight agency the Competition and Markets Authority (CMA)is investigating Asos, Boohoo and Asda over claims about the sustainability of their products.
Concerns include the use of vague language which may suggest collections are greener than they actually are…
An initial review in January identified concerns about potentially misleading claims, including companies making broad statements about the use of recycled materials in new clothing with little or no information about the basis for those claims.
Other concerns which will be investigated include whether:
- statements used by businesses are too broad and vague, and may create the impression that collections – such as the “Responsible edit” from Asos, Boohoo’s “Ready for the Future” range and “George for Good” at Asda – are more environmentally sustainable than they actually are
- the criteria used to decide which products to include in these collections may be lower than customers might reasonably expect from their descriptions – for example, some products may contain as little as 20% recycled fabric
- some items have been included in these collections when they do not meet the criteria
- there is a lack of information provided to customers about the products included, such as what the fabric is made from
- any statements made by the companies about fabric accreditation schemes and standards are potentially misleading, such as a lack of clarity over whether the accreditation applies to particular products or to the firm’s wider practices
Obviously, greenwashing is not just about ESG investment strategies – it also applies to product labels and advertising. Regulators globally are take more interest and action on the matter, so care is warranted when making any statements or implications about sustainability attributes of products. If you think no one will call you on it, you are wrong.
Private luxury brand Chanel missed its interim target for renewable energy use, achieving only 92% rather than 97% of its 2021 energy use. For most companies, this might be little more than a small hit on its reputation and possibly credibility, but there is more on the line for Chanel.
This is relevant to investors as the company raised 600 million euros ($613 million) in 2020 through a [sustainability-linked] bond and tied its interest payments, called coupons, to successfully meeting climate targets.
“Conditions in certain markets, including South Korea, have meant that it has taken more time than expected to find the right solution to shift to renewable electricity,” the company said. “We remain confident of achieving our objective of 100% by 2025.” While missing the interim target doesn’t lead to a financial penalty, failing to meet the 2025 target would mean the company will have to pay millions of dollars more to its bondholders…
The company is targeting a 10% reduction in Scope 3 emissions, relative to a 2018 baseline, but it’s currently off track with 2021 emissions being higher than 2018 emissions.
I’ve blogged previously about the growing risk of climate assumptions not materializing, and the EU’s unexpected renewed reliance on fossil fuels adds even more weight to those risks. Companies that issued SLBs with renewable energy use targets should be keenly aware of the impact recent geopolitical shifts could have on their ability to meet their SLB targets and avoid paying financial penalties for the miss.