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Higher costs stifling the growth of sustainable fashion

The global fashion industry is struggling to balance the demands for sustainable products, affordable pricing and profitability, industry experts said during a panel discussion at the Fashion Summit 2018 event held in Hong Kong.

Sustainable goods, which have a reduced impact on the planet, are typically made at a higher cost. But retailers are finding it challenging to convince consumers to pay more for them, according to Ronnie Tham, director of global sourcing at Walmart Inc.

"Our customers, especially those in the U.S., are not necessarily willing to pay more for sustainable products," Tham said during the panel session. "More needs to be done by brands, retailers and governments on how we find solutions that will help to ensure that sustainable products, especially apparel, are made affordable for customers."

The executive's concern was underlined by a global sustainable consumption survey that auditor KPMG conducted from June to July, collecting responses from 5,269 consumers in Hong Kong, Shanghai, London, New York and Tokyo. The results showed that 78% of the participants across the markets are concerned about environmental pollution and waste, but only 13% are willing to pay a higher price for sustainable fashion.

KPMG partner Pat-nie Woo, who presented the survey results to the panel audience, added: "Sixty percent of the respondents prefer sustainable fashion only if its price is the same as normal fashion."

The results varied across different demographics. "The younger you are, the more supportive of sustainable fashion you are," Woo said. "Higher household income groups and more frequent shoppers also had higher support for sustainable fashion across all cities."

Many manufacturers consider sustainable fashion to be a burden, said Delman Lee, president and chief technology officer of Hong Kong-based TAL Apparel Ltd., adding: "A lot of it is related to standards and initiatives from brands and retailers — it's always top-down from the brand side."

Lee called for the industry to change that mindset. "Think about innovation and business value," the executive told the audience at the event, adding that manufacturers can take the initiative to approach sustainability from the beginning of the production cycle.

But from the bottom end of the supply chain, manufacturers may find it difficult to transfer to buyers some of the costs incurred from incorporating sustainable practices into the production process, according to Shirley Chan, vice chairman of Hong Kong-listed apparel maker and retailer YGM Trading Ltd.

"The buyers are actually in control of a lot of things," Chan said during the panel discussion. "They give you all these requirements, in addition to the effort we already put into compliance as a sustainable manufacturer. We do plead our buyers to pay [more] for sustainability, but a lot of times they won't give any price increase."

However, the push toward sustainability also has the potential to bring quick financial returns to manufacturers, according to Susanna Wilson, global head of sustainable networks and entrepreneurship at HSBC.

"If fashion companies make the most of some of the efficiencies in savings, they can actually increase their profitability by 1% to 2%," Wilson told the panel audience.

The bank executive added that financial institutions are taking an interest in supporting a shift to sustainability in global supply chains, and their investments could potentially impact the fashion industry's embrace of sustainable products.

"HSBC has made a commitment to provide US$100 billion of financing by 2025 in different ways, with the supply chain being one aspect," Wilson said.

The bank is looking to provide encouragement and enablement of sustainability through working capital or capital expenditure solutions along the supply chain, with Wilson noting that the sustainability shift can only be achieved through collaboration among all areas of the fashion and apparel industry.