Textile, fashion and luxury sectors face a turning point

The ecological transition is no longer considered an option, as climate change-related natural disasters are increasingly frequent all over the world. The fashion industry has been committed to this fight for over a decade, but the challenge remains huge and progress seems to be slowing down, within a global context dominated by geopolitical tensions and a tough economic juncture. The third edition of the Venice Sustainable Fashion Forum, whose theme was ‘Leading re-generation’, which took place on October 24-25 in Venice, was an opportunity to take stock of the situation. It seems the time has come for the fashion industry, in Italy and Europe, to make crucial choices, balancing the progress achieved, the resources available, bureaucratic obstacles, and the goals to be achieved.

That the time for action is now was the opinion of consulting company The European House – Ambrosetti (TEHA), one of the event’s organisers alongside Sistema Moda Italia (SMI), the manufacturers’ association representing Italy’s textile and apparel sectors, and the local branch of Italian industrialists’ association Confindustria. TEHA has published a study featuring forecasts up to 2030, the deadline set by the European Union (EU) to reduce carbon emissions by 55% compared to 1990, with a view to achieving carbon neutrality by 2050. The study also took into account the new and revised green legislation package, called ‘Fit for 55’, adopted by the EU in 2023.

Over the past six years, the European fashion industry has reduced its carbon intensity, an indicator measuring the ratio of a company’s entire CO2 emissions to its total revenue, by 9.7% per year. According to TEHA’s calculations, at this rate the industry will not manage to reach the targets set by ‘Fit for 55’ by 2030, but by 2038. In other words, eight years too late. “The problem is that this delay will translate into a significant cost to the sector, given the socio-economic impact of climate change,” said Carlo Cici, partner and head of sustainability at TEHA, and one of the study’s authors, speaking to FashionNetwork.com.

“This impact is currently estimated at €50 billion per year for the fashion industry in Europe, which is therefore faced with two choices. Either it invests to catch up, making its companies more energy efficient, among other things, with an estimated additional cost of €24.7 billion by 2030, or it will have to reduce output to limit emissions, something that will cost the industry much more, in the region of €157 billion. We’ve outlined these two extreme scenarios. Most likely, [the fashion industry] will have to strike a balance between these extremes,” said Cici.

Of the 100 fashion companies [in Europe] employing more than 250 people and generating a revenue of over €45 million, 28 still do not formally measure their environmental performance, the study found. But, out of those 100 companies, 34 are decarbonising at twice the speed set by the EU. While some investments may seem relatively affordable for major luxury groups, they are unsustainable for SMEs, which in Italy, Europe’s leading luxury goods producer, account for more than 90% of the sector. The study delved into the financial statements of 2,686 companies, and its conclusions were unambiguous: “In order to support the additional investments needed to decarbonise, SMEs risk having to give up 5.8% of their margins, which on average range between 7% and 11%, notably around 7% for smaller companies,” said the study.

However, it is difficult for businesses to plan investment without a clear picture of upcoming regulations. “In 2022, we committed to extending producer responsibility for products at the end of their useful life in our sectors, effectively laying the foundations for a new recycling industry. But 2025 is about to begin, and we are still waiting for the legislation to implement these measures. The industry was quick off the mark, it’s the bureaucracy that’s lagging behind,” said Sergio Tamborini, president of SMI.
 

Tamborini noted how “the urgency felt 10 years ago is waning. Nowadays, sustainability is a matter of regulations and protocols. But the ecological transition cannot just be a bureaucratic effort. In Europe, multiple regulations and certifications have been imposed on manufacturers to ensure they produce responsibly. At the same time, products made under conditions that are entirely at odds with the requirements imposed on European producers are entering our market. Let’s start by enforcing the laws we already have, without adding further complications to the [European] entrepreneurs’ job.”

“Perhaps too many regulations have been imposed. Too many, and too quickly. We want to reduce bureaucracy, which means less regulation on the one hand, but better regulation on the other,” said Dirk Vantyghem, managing director of Euratex. “Initially, we had to focus on the ecological shift. Now, we need to understand how to put the legislative framework into practice while preserving the industry’s health. It’s like a complex jigsaw, each piece involving lengthy negotiations and processes, that needs to be assembled in the next few years. But once completed, this jigsaw will support the entire textile industry,” he added.

“We need to reconcile sustainability and industrial manufacturing. The important thing is to design [EU] regulations so as not to hinder manufacturing and competitiveness,” said Barbara Cimmino, vice-president of Euratex, who underlined how the industry is currently uneasy, having put the brakes on investment while awaiting a legislative framework that is “clear, defined and complete.” It is obvious that companies must have a clear outlook in order to be able to invest, while consumers, for their part, do not seem to have modified their purchasing behaviour in the face of the climate emergency.

“Contrary to what the media is telling us, [consumers] aren’t behaving more responsibly than in the past. This is what emerged from our survey of 26,000 consumers around the world. We are all concerned, but it’s clear that, with less money in our wallets, we won’t pay more for a product that can be bought cheaply,” said Cici.

“Reversing this high consumption trajectory will be really complex. It’s true that the new generations have a different ethos and principles, but if we look more closely at their profiles, we notice a marked difference between an elite that is aware of the problems associated with global warming, and a much larger cohort of hard-core hyper-consumerists. We mustn’t put the blame on fast fashion, but steer it toward circularity,” said Cimmino, who is also the co-founder of lingerie chain Yamamay.
 
In 2022, the European Commission published its strategy for a sustainable textile industry, part of a broader package of measures comprising 16 new legislative initiatives, between directives and regulations. “Regulations are applied directly by the EU member states. However, directives need to undergo a much longer legislative process because each nation must create its own laws for them, often introducing significant changes. Hence the issue of harmonisation at European market level,” added Cimmino.

The costs and effort required of the fashion industry to adapt to the new rules are primarily incumbent on manufacturing companies, like weavers, raw material producers, and manufacturers. “A dangerous game, because these are often the less robust companies, and they have to shoulder responsibilities they aren’t always able to bear,” said Tamborini.

“Nowadays, we’re being asked to make efforts that exceed our capabilities. We’re able to invest only if we have enough resources,” said Bruno Conterno, CEO of footwear producer and distributor Nice Footwear. “To bolster our growth, we opted for a stock market listing in 2021. After two years, we de-listed because the stock market was too unstable for our business model. We doubled our revenue and EBITDA, but our market value halved! Entrepreneurs must understand who the right financial partners for their project are. The problem is also that investors do not believe in SMEs and their capabilities,” he added.

It is hard to attract investors in the Italian textile sector, which is mostly made up of tiny, chiefly artisanal companies. The typically Italian notion of “small is beautiful” is no longer viable in the industry. “Today, it has become a limit. We need to change our cultural model. Artisans think six months ahead at most, and with this outlook they struggle to plan the investments needed for their ecological transition. SMEs need to organise themselves into consortia so as to rely on sector leaders,” said Conterno.

Beste, a Tuscan specialist in textiles and garment finishing, did exactly this in 2023, when it joined Italian high-end production consortium Holding Moda. “It was a necessary, fundamental step. We often feel abandoned, politicians have little or no knowledge of the textile industry’s reality. And we have to fend for ourselves,” said the CEO of Prato-based Beste. “Joining [Holding Moda] has opened up greater opportunities for us, including with banks, where we are now received with deference. We have new resources and vision. For example, we are in the process of re-introducing Italy-sourced cotton, something that is of great interest to our luxury clients,” he added.

To accelerate the industry’s ecological transition, the private and public sectors must work more closely together, and aid to business must diversify. This was the opinion of Annalisa Areni, head of client strategy at Italian bank Unicredit: “The role of banks has changed significantly. It’s no longer just a question of financing business, we need to shepherd companies towards growth, make them understand which path to take and which elements to improve. Ensuring they have alternative financing is crucial, for example industry-specific mini-bonds. But a bank alone cannot help every SME. It needs to work in partnership with the public sector, for example via tax exemptions,” she added, underlining that, right now, “there’s a reluctance to invest, as at any time of uncertainty.”

Another stumbling block is how viable the newly emerging business model is, and whether it can safeguard jobs. These various constraints were all taken into account in the five proposals put forward by TEHA to speed up the transition. In its report, TEHA advocated for a swift definition of the legislative framework, for simplifying the financial tools available to SMEs, for encouraging aggregation within the market to increase competitiveness, and for drawing up nationwide industrial plans for the fashion industry, “because that is the scale at which we can really act.” Added to this is the need to boost skills, as well as the industry’s R&D efforts.

“We have every opportunity to confront this green revolution. We still need to be aware, at the very least, of the costs of taking action as opposed to those of not acting. Over the next ten years, the investment needed to combat climate change will be substantial. But the longer we wait, the more we will pay. It’s non-negotiable,” concluded Cici.