With rapid climate change negatively impacting the globe as we know it, the new climate economy (both as an aspirational ideology as well as a project) has emerged as a tool aimed to allow corporations to redeem their carbon footprint by looking ahead with their sustainability goggles on.
COP26 demonstrated promising proposals from governments globally, and while having world leaders and governments on the planet’s side will aid in combatting climate change, the real gamechanger to paving the way for a greener planet is corporations, not politicians.
In our Luxury Change series, allow us to shed light onto on what to expect from the world of luxury from a legislative, consumer, and ecology perspective in 2022.
Let’s look at the legislation
While voluntary adaptation to suit customer demand has been rewarding for some brands, there needs to be a push beyond that. We have seen numerous legislation come into force over the years championing transparency, sustainability, and accountability in multiple sectors. In France, for example, an end-to-end supply chain accountability legislation emerged in 2019, the Droit de Vigilance, which required large companies operating in France to monitor and remediate human rights and environmental risk across their global operations. An EU supply chain law also comes into force in 2022, echoing the fact that voluntary action and due diligence has not forced companies to respect humanitarian and environmental impacts.
In the USA however, there has been little progress on the environmental front. The SEC has promised for over a year to use its powers to force companies to disclose their effect on the environment in their public filings, but this hasn’t happened yet. Following on from this, companies will be required to think about what information can be used to measure climate risk, how it can be quantified and what disclosure standards will be used, etc.
This year, corporations will be forced to undertake actual measurable efforts towards improving their environmental and workforce bearings. Where historically these bearings would have affected the companies reputationally, it will now affect them legally.
Examples of this are the Garment Worker Protection Act in California, which puts responsibility on suppliers and brands for wage-related problems. In 2022, the United Nations will also pass its Global Pact for the Environment, and while not legally binding, it will offer guidance as to the right of every person to live in an ecologically sound environment.
The New Climate Economy is the Global Commission on the Economy and Climate’s new flagship project set up to help governments, businesses and society make better decisions on how to achieve economic prosperity while also addressing climate change. It provides authoritative evidence on the relationship between actions that can strengthen economic performance, and those which can reduce the risk of dangerous climate change.
Laws aside, the average consumer is now becoming more susceptible to changing practices. They want to know their garments haven’t been created in a sweatshop where the person making them is barely being paid, and that they’re being sourced sustainably. Each person is attempting to monitor their own environmental and humanitarian impact, and so naturally will look to the corporations they consume from to ensure they’re following suit and reflecting their practices. They want to trust brands. This does not only apply to Gen Z and the younger generation, but in older generations too. It should no longer be just a corporate social responsibility issue for brands – climate change has heavily surpassed that. It’s an existential risk for not only business existence, but the planet’s existence as we know it.
The New York Fashion Act is expected to take the luxury retail world by storm by holding apparel and footwear brands legally accountable for disclosure on environmental and social impacts. The Act aims to target global apparel and footwear companies, with more than $100 million in revenues, doing business in New York. Specifically, it will require corporations to map, at the very least, 50% of their supply chain, from raw material origination, to manufacturing, to shipping, disclosing where in the chain the most social and environmental effects emanate. This will range from fair wages, to greenhouse emissions and is meant as a catch-all for most major fashion houses, holding them accountable for their role in climate change. If companies refuse to comply with this law, they would be fined up to 2% of their annual revenues, where such funds would be used towards environmental justice projects.
Companies will now need to consider due diligence and disclosure processes without it becoming too expensive. They should be pushing past vanilla compliance and be reactive to the global state of affairs. Even with this in mind however, if all sustainability buttons were to be pushed, the luxury industry still wouldn’t be deemed completely sustainable by 2030 as it just can’t keep up. More needs to be done.
What are some of the other key look-outs to avoid being targeted by the regulators in 2022? Read this article featured in The Collective by Lewis Silkin’s Business in 2022 Report, to find out more.