Putnam Perspectives

The youngest generations of consumers are faced with a sustainability conflict. They have embraced “fast fashion” — clothing that is trendy, extremely inexpensive due to low-quality material and low-wage labor, and designed to be thrown away relatively quickly. These same consumers also care deeply about the environment, and fast fashion has some inherent sustainability challenges. What is the solution to this disconnect?

If consumers hold tight to their fashion choices, then companies have an opportunity to change their approaches to produce fashion in more sustainable ways. Fortunately, many companies in the fashion industry are beginning to demonstrate deeper commitments to sustainability, due in large part to consumer demands. This includes the current fast-fashion leaders as well as innovative newer companies that are working to create a better system.

Creativity from fashion innovators

Consumers who are disposing of clothing at high rates may not realize that only 13% of clothing materials are ultimately recycled. To provide consumers with more environmentally friendly choices, many fashion businesses are demonstrating impressive creativity and innovation. Allbirds, a footwear maker, is one example. In addition to its use of sustainable materials for its shoes, the company is committed to going carbon neutral for its entire supply chain. Also, the company’s innovative packaging features 90% post-consumer recycled cardboard. For customer returns that can’t be resold, Allbirds donates the products to Soles4Souls, a charity that distributes them to people in need.

The pros and cons of clothing rentals: an emerging industry

Clothing rental platforms such as The RealReal, Rent the Runway, and Le Tote are disrupting the fashion industry. Their business models are based on recirculating highquality designer clothing back into the consumer market. This provides consumers with access to the latest trends while also reducing consumption. This approach has sustainability benefits, but it also relies on some less sustainable processes that are often overlooked. One example is the cost of re-shipping and re-packaging clothes, and washing items after every use. Rent the Runway, for example, created the nation’s largest dry-cleaning facility to support its operations.

Traditional retailers step up

Start-ups are not the only businesses offering solutions. Traditional retailers Macy’s and J.C. Penney, for example, have introduced ThredUp departments in their stores. ThredUp is the largest online thrift store, selling high-quality secondhand clothing for up to 90% off retail prices. As of August 2019, ThredUp had redistributed 65 million garments.

Levi Strauss, another more traditional clothing retailer, has differentiated itself with a sustainable approach to apparel. The company has been a recognized leader in responsible supply chain practices for more than 25 years. It has done impressive work on product life-cycle assessments — calculating the resource use and impact of a single item of clothing over its entire life cycle. The company purposely designs products that are durable and built to last, a notable contrast to the fast-fashion approach. Levi Strauss also provides education to consumers on how to extend the life span of clothing. In all of its U.S. stores, the company collects denim from any brand, in any condition, to be recycled.

As of 9/30/19, Levi Strauss represented 0.74% of Putnam Sustainable Leaders Fund assets and was not held in Putnam Sustainable Future Fund. H&M, Inditex, J.C. Penney, Le Tote, Macy’s, and The RealReal were not held in either fund.