Fast fashion has revolutionised clothing consumption with unprecedented speed by offering trendy styles at remarkably low prices. Nevertheless, this phenomenon masks deeper issues, making it one of the most pervasive and problematic sectors of the apparel industry.
According to Britannica, fast fashion brands encourage consumers to purchase more clothing by relentlessly introducing new trends at affordable prices. It is noted that the brand factor has fuelled the industry’s rapid growth in both volume and profitability. Moreover, research conducted by CoherentMI pointed out that, in 2023, the fast fashion market in the United States alone was valued at US$41.15 billion and is going to reach US$59.85 billion by 2030.
The fast fashion business has provided jobs to over 300 million people who are employed throughout the value chain of the global apparel sector which is worth US$1.3 trillion as estimated by The Ellen MacArthur Foundation. Textile Exchange revealed that worldwide fibre production has increased from 116 million tonnes in 2022 to 124 million tonnes in 2023. Since 2000, the volume of fast fashion business has more than doubled. If the current trends continue, it may reach 160 million tonnes by 2030.
Fashion and environment
The problem of environmental damage can be found in the water absorption that this sector utilises more than any other industry, as it contributes to about 10% of global carbon emissions. The United Nations Environment Programme (UNEP) states that this level of carbon emissions is higher than the carbon emissions from all international travel and maritime shipping combined. Moreover, the United Nations Framework Convention on Climate Change (UNFCCC) makes it clear that the level of carbon emissions from the textile industry alone is predicted to increase by 60% in 2030.
Domestically, the National Waste Management Information System reported in 2022 that Indonesia’s textile waste has contributed to 2.8% of the total waste. The Ministry of Environment and Forestry provided data in 2021 about how Indonesia contributes 2.3 million tons of clothing waste, which is equivalent to 12% of household waste. Unfortunately, only 0.3 million tons of the total clothing waste can be recycled.
Meanwhile, the issue of the apparel industry from the perspective of labour is about the exploitation of garment workers. On the global stage, it is starkly evident in Bangladesh, a country that is significantly dependent on the garment industry. The Clean Clothes Campaign claims that the Rana Plaza factory collapse in Bangladesh in 2013 was the deadliest catastrophe in the country’s garment sector, with 1,134 people killed and almost 2,600 injured. This tragic accident led to the inspection of 1,106 factories that supply fast fashion businesses, and, surprisingly, 80,000 safety-related violations were found.
The dawn of sustainable fashion
As fast fashion’s negative consequences become increasingly evident, the world is beginning to shift towards sustainable fashion, often referred to as slow fashion. The new concepts of the apparel industry involve three fundamental values which are the use of environmentally friendly materials, ethical production processes, and responsible consumption practices. To support these new values, sustainable finance may serve as a solution and driving force for sustainable fashion. This proposal aligns with the Sustainable Finance Roadmap Phase II (2021-2025) initiated by the Indonesia Financial Services Authority (IFSA). One of the key priorities of initiation includes the implementation of environmental, social, and governance (ESG) aspects in the financial services industry.
A regulation was issued by IFSA back in 2017, known as Financial Services Authority Regulation No. 51 of 2017 on the Implementation of Sustainable Finance for Financial Services Institutions, Issuers, and Public Companies, which requires financial services institutions, issuers, and public companies to implement sustainable finance in their business activities. It is crucial to acknowledge that sustainable finance is defined as comprehensive support from the financial services sector to foster sustainable economic growth by aligning economic, social, and environmental interests.
The scope of sustainable finance implementation includes the use of principles such as responsible investment, sustainable business strategy and practices, and social and environmental risk management. One of the financial services institutions that can play a role in advancing sustainable finance and promoting sustainable fashion is venture capital companies. This is particularly relevant because one of their advantages lies in their ability to engage in the management of the companies they fund, aiding in product, idea, and business development.
In 2023, IFSA published Regulation No. 25 of 2023 on Venture Capital and Sharia Venture Capital Companies which categorises companies based on their business activities into Venture Capital Corporations (VCC) and Venture Debt Corporations (VDC). Put in the context, financing for the sustainable fashion sector can be done through VCCs, which focus on capital investment activities and/or investment through the purchase of convertible bonds for conventional venture capital or convertible sukuk for sharia venture capital, as well as venture fund management. In addition, VCCs can also provide financing by purchasing debt securities or sukuk issued by business partners at the early or development stages for conventional or Sharia venture capital.
A positive track of efforts
Although the unscrupulous environmental and social impacts of fast fashion are severe, we are on a positive track of efforts. It is recognised that fast fashion has been responsible for tremendous detrimental impacts such as the overconsumption of water, carbon emissions, and the mistreatment of garment labours. Indonesia has its share of fashion pollution in the form of fabric waste, and the concentration of such waste outpaces the capacity of recovery systems. Yet, on the bright side, the movement towards a more sustainable type of fashion is gaining traction. This shift seeks to emphasise the use of sustainable materials, the adoption of socially responsible production methods, and responsible consumption patterns.
The second phase of Indonesia’s Sustainable Finance Roadmap supports the implementation of ESG principles in the financial services industry. Venture capital companies are well-positioned to accelerate this transition by investing in sustainable fashion entrepreneurs and their responsible innovations. By harnessing the power and strategies of sustainable finance and endorsing these initiatives, Indonesia’s garment and textile industry has regained its great potential to be at the forefront of the sustainable fashion movement.
The author of this article, Alya Nabila, currently works as a Legal Analyst in legal consultancy and regulation harmonisation for Financing Institutions, Venture Capital Companies, Microfinance Institutions, and Other Financial Services Institutions. She is also currently undergoing Executive Education at Oxford University on Sustainable Finance.
Disclaimer: The opinions expressed in this article are those of the author and do not necessarily reflect the views of ‘Indonesia Expat’.