Why Every Apparel Company Should Measure Their Greenhouse Gas Emissions
The apparel industry faces as many high materiality ESG issues as any other industry – greenhouse gas (GHG) emissions, raw materials, water, biodiversity, DEI, supply chain sustainability, among other ESG topics are critical. One ESG issue that rises to prominence for apparel is emissions. Key players in the industry are collaborating and innovating to reduce emissions. With implications for every player in the apparel value chain, the timing is crucial for apparel companies to act now to cut emissions. In this article we explore the urgency to measure, manage, and reduce GHG emissions, what tools apparel companies need to accurately measure emissions, plus we share strategies that apparel companies can implement to improve their overall ESG performance.
Why now is crucial timing for apparel companies to address greenhouse gas emissions
The impacts of climate change are becoming more pressing for every type of business. With over 10% of global GHG emissions attributable to the apparel sector, no company is immune to the pressures from consumers, investors, customers, and regulators for enhanced sustainability across the product lifecycle. Research from the World Resources and Apparel Impact Institutes shows that over 100 apparel companies currently have set science-based targets (SBTs) for climate or have commitments to set them. This research finds a significant increase from 2017 which identified only 12 apparel companies with climate targets. While the increase in target setting is promising, a closer look at 30 of the apparel companies with SBTs reveals that nearly all of the emissions for these companies are comprised of scope 3 emissions, e.g., attributable to upstream business activities like materials purchase, fabric production, and garment manufacturing.
H&M’s 2021 sustainability report echoes the same with scope 1 and 2 emissions of 5,078 tons (0.64% of total) and scope 3 emissions of 7,742,000 tons (99.4% of total). With a scope 3 emissions reduction target of 56% by 2030 from its 2019 baseline, H&M is looking at its suppliers as critical partners in helping to achieve its emissions reduction goal. For apparel companies to deliver on GHG emissions reduction targets and move the needle on ESG impact, they need to engage companies where GHG emissions occur across the value chain and as a starting point, those companies will need to know their own emissions footprint.
The impact of the SEC climate ruling on apparel companies
Further compounding ESG pressures on apparel companies is the U.S. Securities and Exchange Commission (SEC) climate ruling, which is expected to be finalized in early 2023. The SEC climate proposal stipulates that publicly traded companies disclose any climate-related risks, how those risks financially impact the company, the impact of climate-related events like severe weather, and GHG emissions. Emissions disclosure will be based on the GHG Protocol, a globally recognized emissions accounting standard companies can use to outline the sources of their emissions.
The SEC climate proposal would require companies to report on scope 1 and 2 regulations beginning in 2024 and then phase in scope 3 over time. While the legislation will mostly impact public companies, private players in the apparel sector that have relationships with a public company, whether as customers, suppliers, investees, borrowers, or otherwise will be affected. In addition, once investors start receiving climate-related information from public companies, they may press private companies to provide similar GHG emissions disclosures.
How apparel companies win by knowing their emissions baseline
With industry leaders like Nike,Apple, and REI already ahead of the curve on voluntarily reporting on emissions, the broader industry dataset on GHG performance is becoming more robust. Accordingly, companies that do measure and manage their GHG emissions benefit greatly from visibility into their own emissions data and how they compare to peers and competitors.
From an internal perspective, apparel companies that know their GHG emissions baseline can use that data to inform decisions related to improving energy efficiency and process innovation. Armed with more data, companies find themselves positioned to set science-based targets and explore paths to reduce emissions. Comparisons can be made among apparel companies in a much more data-driven way, so the leaders on GHG performance are more easily identified – and the laggards as well.
From an external perspective, apparel companies that know their GHG emissions baseline can use that data to comply with regulations, avoid penalties, and improve standing with their customers. Target, Walmart, and other retailers now require suppliers to report on emissions and other relevant ESG metrics around risk and labor via the Higg Index and CDP. With 85% of American consumers thinking about sustainability more than ever, suppliers and brands that show a commitment to reducing carbon emissions benefit from reputational uplift and greater customer loyalty. Product level emissions data is also now being used to evaluate suppliers and materials, and publicly with consumers who want their products to be sustainable; notably, Allbirds’ has pioneered including an emissions footprint on every pair of shoes.
Tackling emissions measurement can seem difficult, but it doesn’t have to be with the right tools. Increased scrutiny over the environmental footprint of apparel brands will only continue to grow and software can ease the burden for apparel companies lacking the resources or knowledge to address hard-to-quantify emissions. Good.Lab’s GHG Emissions Calculator simplifies emissions measurement with easy-to-use software tool delivered alongside a knowledgeable expert to guide your team through specific emissions factors calculations and data collection to meet any emissions reporting requirements with assurance-ready data.
Improving ESG performance never goes out of style. Emissions is a key part of that strategy, however, companies also need to explore other avenues to make cost-effective progress on sustainability such as by adopting a product circularity strategy, searching for ways to improve employee and supplier well-being, or enhancing transparency. You can read more about transforming your apparel company into a top ESG performer in our recent article, How Apparel Companies Win by Shifting their Focus from Success on the Catwalk to ESG Leadership.
How apparel companies can reduce greenhouse gas emissions with Good.Lab
Apparel companies that need assistance measuring and producing an audit-ready report of their GHG emissions benefit from Good.Lab’s easy-to-use emissions software and ESG experts. Our approach not only can help your company measure actual performance on GHG emissions and other ESG metrics, but help you benchmark ESG performance against competitors and set realistic, yet achievable goals to help your company create long-term value. If you’re interested in learning more about our approach to GHG emissions measurement, let’s talk about transforming your company into a climate leader.
Disclaimer: Good.Lab does not provide tax, legal, or accounting advice through this website. Our goal is to provide timely, research-informed material prepared by subject-matter experts and is for informational purposes only. All external references are linked directly in the text to trusted third-party sources.
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