Fashioning a Greener Future: Exploring ESG in Textiles

August 9, 2023

Responsible for 20% of industrial water pollution and ranking as the second-largest polluter of clean water globally, the treatment and dyeing of textiles raise significant environmental concerns.

‍In the textiles industry, ESG (Environmental, Social, and Governance) considerations have emerged as a crucial focal point due to their profound impact on the planet, people, and business sustainability. Embracing ESG principles empowers textile companies to drive sustainability, enhance brand reputation, attract responsible investors, and meet the evolving expectations of conscious consumers.

In this blog post we explore ESG in the textiles industry through:

The Fashion Transparency Index’s 2023 Findings
ESG Frameworks: SASB & Textile Exchange
Key ESG Reporting Metrics
EU Circular Economy for Textiles
The Future of ESG Reporting for Textiles

‍

Fashion Transparency Index’s Findings

The Fashion Transparency Index plays a vital role in shedding light on how much information the world's leading fashion brands disclose about their human rights and environmental practices. With 250 major brands evaluated in 2023, the average transparency score stands at 26%, a 2% increase from the previous year. While two brands achieved a transparency score of 80% or higher, there remains concern, as 70 out of 250 brands still score in the 0-10% range.

Supply chain transparency is a critical material ESG topic in the Fashion Transparency Index. While 52% of major fashion brands disclosed their first-tier supplier lists, the overall average score in the Traceability section was only 23%. Alarmingly, nearly half (45%) of the brands provided little to no information, perpetuating exploitative working conditions and environmental harm while impeding accountability efforts.

Waste management also poses challenges, as 88% of major fashion brands do not disclose their annual production volumes, hindering efforts to address overproduction and its environmental impact. To create a sustainable future for the textiles industry, greater transparency and accountability are imperative.

Additionally, 99% of brands fail to disclose any commitment to reducing new item production, aggravating the issue of waste generation.

Frameworks & Standards for Textiles

Today, frameworks like CDP and standards created by Textile Exchange are a vital aspect of ESG reporting for companies aiming to increase transparency.

CDP

CDP is an independent non-profit organisation that operates a global environmental disclosure system for companies, cities, states, and regions to measure and manage their environmental impact related to Climate Change, Water Security and Forests. CDP scores from D- to A based on the transparency in disclosing climate change, deforestation, or water security data. This scoring system provides a clear evaluation of companies' environmental disclosure efforts.

The CDP's relevance to the textiles industry lies in the following aspects:

Climate Impact Assessment:‍

Textile companies can gain insights into their environmental impact, including their carbon footprint and water usage.

‍Risk and Opportunity Identification:

Through the CDP questionnaire, textile companies are prompted to evaluate climate-related risks and opportunities. For instance, they might face risks related to the availability of water resources or shifting consumer preferences towards more sustainable products. Recognising such risks can help companies develop strategies to mitigate them and capitalise on emerging opportunities.

‍Investor and Stakeholder Engagement:

CDP scores and reports are widely used by investors, customers, and other stakeholders to assess a company's environmental performance. Textile companies with strong environmental credentials may attract more environmentally-conscious investors and customers, potentially improving their reputation and financial prospects.

‍Supply Chain Impact:

The textiles industry often relies on complex global supply chains. By disclosing through CDP, textile companies can encourage their suppliers to disclose their environmental data, fostering transparency and accountability throughout the supply chain.

Textile Exchange

Textile Exchange is a global nonprofit organisation dedicated to accelerating sustainable practices in the textile industry. Established in 2002, its mission focuses on responsible management of resources obtained from the earth, plants, and animals – collectively known as Tier 4 in the supply chain, contributing to 24% of the industry's carbon footprint.

Textile Exchange collaborates with various stakeholders, including brands, retailers, manufacturers, suppliers, and NGOs, to promote transparency, knowledge-sharing, and innovation in the industry. The organisation offers a range of tools, resources, and certifications to help companies improve their social and environmental performance. One of Textile Exchange's significant contributions is the development of various industry standards, such as: Responsible Wool Standard (RWS), Global Recycled Standard (GRS), Organic Content Standard (OCS) and more. These standards provide clear guidelines and requirements for sustainable practices, ensuring traceability and authenticity in the supply chain.

The Textile Exchange also developed the Materials Change Index (MCI), a tool developed to assess and track the progress of the textile industry in shifting towards more sustainable materials. The MCI utilises its own set of criteria and metrics to evaluate companies' material sourcing practices, including:

The proportion of preferred fibres used
The overall material mix
The environmental impact of materials

Companies are scored and benchmarked with peers based on the three sections: Strategy and Integration, Materials Portfolio and Materials Circularity and how well these align with the Sustainable Development Goals (SDGs).

To learn more about ESG frameworks, check out Nossa Data’s article on the top ESG/Sustainability frameworks.

Key ESG Reporting Metrics in the Textile Industry

In determining relevant ESG reporting factors in the textile industry, we used an ISS ESG Industry Focus report on the textiles industry, as well as MSCI’s Industry Materiality Mapping Tool. The latter helps users identify ESG risks and opportunities that can have a material impact on a company’s performance across various industries; below are three key ESG reporting metrics consistent across both sources for the textiles industry:

Labour Management:

The labour-intensive textiles industry employs a significant global workforce, predominantly women and low-skilled workers. ESG considerations focus on correcting global supply chain power imbalances and securing fair labour standards.

Raw Material Sourcing:

According to the latest Textile Exchange Preferred Fiber & Materials Market Report, the Global fibre production reached a record 113 million tonnes in 2021. Given the impact on biodiversity and contribution to environmental degradation, raw material sourcing remains a key metric for environmental sustainability.

Substances of Concern:

Wet processing in textiles introduces numerous harmful chemicals into the environment, generating toxic wastewater. Initiatives such as ZHDC Roadmap to Zero aims to phase out harmful substances through sustainable chemistry, promoting industry-wide commitment towards cleaner production practices.

‍

EU Circular Economy for Textiles

With the EU producing 12.6 million tonnes of textile waste annually, the European Commission is driving sustainable change in the textile industry.This new proposal that holds producers accountable for the entire lifecycle of textile products. Aimed at supporting circular practices, the initiative seeks to establish mandatory and harmonised Extended Producer Responsibility (EPR) schemes for textiles across the EU. Producers will bear the costs of managing textile waste, incentivising them to create more eco-friendly products.

By introducing common EU-wide EPR rules, the proposal streamlines the requirement for separate textile collection starting in 2025. Producers' contributions will finance investments in collection, sorting, re-use, and recycling facilities, encouraging sustainable practices and circularity. Social enterprises focused on textile treatment will find enhanced business opportunities, creating a larger market for second-hand textiles.

The proposal also addresses the issue of illegal textile waste exports by providing clear definitions of waste and reusable textiles, curbing the practice of disguising waste for export as reusable. Furthermore, the initiative promotes research and development into innovative technologies, fostering a circular approach to textiles, including fibre-to-fibre recycling. The proposal is now awaiting consideration by the European Parliament and Council, taking a decisive step towards a more sustainable and circular textiles industry in the EU.

With the EU producing 12.6 million tonnes of textile waste annually, the European Commission is driving sustainable change in the textile industry.

‍

The Future of ESG Reporting for Textiles

ESRS

As of 31st July 2023, the European Commission has officially adopted the European Sustainability Reporting Standards (ESRS) as a pivotal component in the Corporate Sustainability Reporting Directive (CSRD). The ESRS serves as a standardised framework to enhance reporting across the European Union, promoting transparency and accountability in ESG practices. There are 12 standards that define both the general requirements that apply to topics subject to the CSRD and topical standards that provide specific ESG reporting metrics covered by the CSRD.

Below we have included a visual outlining the adoption of the ESRS and an overview of the 12 disclosure pillars.

Additionally, with components of the ESRS being focused on upstream and downstream value chain and sustainability due diligence, it drives textile companies to prepare for the upcoming Corporate Sustainability Due Diligence Directive (CSDDD). The primary objective of this directive is to encourage sustainable and responsible corporate conduct, integrating human rights and environmental considerations into companies' operations and governance.

The ESRS also takes into account discussions with the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI). Due to textiles being such a high emitting industry, the GRI are now developing a Textile and Apparel sector standard as part of their GRI Sector Programme. This will encompass organisations whose focus is on textile production, apparel manufacturing, footwear manufacturing and apparel and footwear retail.

Conclusion

The textiles industry is actively embracing ESG reporting to foster sustainability and responsibility. As the second-largest polluter of clean water globally, the textiles industry bears significant ecological consequences. By streamlining ESG data gathering and reporting, such as through ESG reporting software, companies are more efficiently able to monitor progress, set achievable goals, and make data-driven decisions for a greener future. By prioritising ESG principles, the textiles industry can shape a responsible and environmentally conscious future, leading the way towards a more sustainable world.

Sources:

The Conscious Challenge - Water & Clothing

Fashion Transparency Index 2023

CDP - Who We Are

Textile Exchange

2022 MCI Leaderboard Guide

The Commission adopts the European Sustainability Reporting Standards

Sector Standard Project for Textiles and Apparel

The European Sustainability Reporting Standards: a Phase-in Journey to Sustainability Alignment

Preferred Fiber & Materials Market Report

Roadmap to Zero

ISS ESG in Focus: Textiles, Apparels & Furnishings