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Climate ambition is going up, but so are emissions

This category assesses whether fashion brands are setting climate and energy targets that are in line with keeping global warming below 1.5°C and if they are providing sufficient transparency regarding their baseline and progress toward those targets.

Strong GHG emissions reduction targets remain a key first step to sector decarbonisation. The UN Emissions Gap Report 2020 identified the need for an absolute emissions cut, across all sectors and industries, of 55% by 2030 against a 2018 baseline.[1] This is the criteria applied in this scorecard. This cut will be achieved in the fashion industry by working to rapidly phase out coal and other fossil fuels in manufacturing, and transitioning brands’ own operations and supply chains to renewable energy. This shift will be signaled by a clear commitment from brands to achieve 100% renewable energy across their own operations and supply chains by 2030.

To provide full transparency, brands must share in-depth reporting on their emissions, electricity use and sourcing, and energy use throughout the value chain, as well as publishing detailed supplier lists from Tier 1 to Tier 4.

Key Findings

Climate ambition is growing, but too slow to reach into supply chains. The average grade for companies in this category increased from D+ in the 2021 Scorecard to in 2023. This reflects an increased ambition toward 1.5°C-aligned targets as well as the new focus in the UN Fashion Charter to phase out coal. However, change is not coming fast enough; emissions from the sector are still going up. The top scoring brand in this area, H&M, was awarded a grade of B for showing leadership in setting ambitious climate targets and a 100% renewable energy goal across its entire value chain. Only one brand, Columbia, received F in this category, while Prada, SHEIN, Amer Sports, and MEC all scored poorly for their missing or inadequate climate targets and lack of transparency.

Supply chain emissions reduction targets still too little too late

The last 18 months have seen positive movement in the industry as the updated UN Fashion Charter set more ambitious targets for its 130+ signatory companies in November 2021.[3] The UN Fashion Charter took an important step forward by calling for a deeper and more systemic change to the industry and committing companies to set more ambitious supply chain targets. However, the target emissions cut of 50% or equivalent called for by it is still short of the 55% needed.

Scope 1 & 2 Scope 3
Emissions created in a company’s own operations, including for electricity, heating, cooling, lighting, company cars etc. across stores, warehouses, and offices that the brand owns. Emissions created outside of a company’s direct control, including everything that goes into making, transporting, and using its products. Key categories within Scope 3 include Category 1, which covers product manufacturing and purchased services, and Category 4,[4] which covers the shipping of products from the supplier to the company.

With up to 97% of emissions tallied in Scope 3 (across the value chain,[5] including at fabric mills, farms, and factories),[6] Scope 3 targets are the most important measure of climate ambition. Since the release of the 2021 Scorecard, some progress has been made by companies in increasing ambition, with eight brands setting targets for the first time (Capri Holdings, Columbia, Prada, SHEIN, and Fast Retailing) or increasing their supply chain emissions reduction target (H&M, Kering, and PVH).

In 2021, only four companies (ASICS, Levi’s, Mammut, and REI) had set Scope 3 targets meeting the 55% reduction goal. In 2023, this has risen to five companies with the addition of H&M. Further, the proportion of brands setting targets across their supply chain that are close to 1.5°C alignment has risen from 15% to 28%. This trend of increasing commitments is promising, but overall supply chain ambition, even among UN Fashion Charter signatories, is still falling far short of the needs of the moment.

Alignment of Scope 3 targets of brands with 1.5°C

In addition, seven brands still have intensity-based targets rather than absolute reduction targets.[11] The following brands provided data on the equivalent projected absolute emissions reduction that their intensity target would result in, meaning the actual change in their expected emissions. In all cases, they fall short of the emissions reduction needed to align with a 1.5°C target. In the last year, athleisure brand lululemon effectively reduced its Scope 3 emissions target by excluding an additional 30% of its supply chain emissions but did not state why this was done. The company has an intensity-based Scope 3 emissions reduction target of 60% by 2030, but it is unclear what the equivalent absolute reduction of its total Scope 3 emissions will be.[12]

Table 2. Intensity-based and absolute GHG reduction targets of brands

Renewable energy commitments still not reaching supply chain

In the last 18 months many more brands have made commitments to 100% renewable energy in their own operations, in part as a result of the UN Fashion Charter including this target in its renewed commitments. The proportion of companies scored in this report who committed to reach 100% renewable energy in their own operations rose from 48% in 2021 to 79% in 2023. However, the vast majority of companies are still heavily reliant on low-value unbundled renewable energy credits to achieve this goal.[15]For brands to be considered leaders in renewable energy, they need to ensure that the energy they acquire is new and additional to the grid and supports the energy transition.

A more meaningful commitment to renewable energy would be for brands to commit to transition their entire supply chain to renewable energy. With a few notable exceptions, fashion companies are still failing to take responsibility for their supply chain energy footprint. In the last 18 months, only H&M has taken the essential step of committing to transition to 100% renewable energy in their supply chain, joining Kering, Allbirds, ASICS, and PUMA as the leading brands in this category. Renewable energy is essential to achieving the scale of emissions cuts needed in fashion supply chains.

Five brands have committed to supply chain renewable energy targets:

  • Allbirds has committed to achieving 100% renewable energy for Tier 1 suppliers.
  • ASICS states it will achieve 85% renewable electricity in Tier 1 by 2030.
  • H&M has committed to transition its supply chain to renewable energy by 2030.
  • Kering has committed to transition its supply chain to renewable energy by 2030.
  • PUMA has committed to source 25% renewable energy with core suppliers.

Ongoing lack of transparency in the supply chain leaves brands unaccountable to targets

Supply chain transparency is key to ensuring accountability to targets, and while regular reporting on full Scope 3 GHG emissions is now common, with the notable exceptions of Allbirds, Capri Holdings, Columbia, MEC, Patagonia, Primark, SHEIN, and Under Armour, only two companies – PUMA and Nike – are showing leadership by providing transparency into the renewable energy used in their supply chains.

UN Fashion Charter signals progress toward thermal coal phase-out

Companies also have an important role to play in advancing the phase-out of thermal coal (coal burned for heat or steam) in their manufacturing processes. Stand.earth did see signs of progress in this area in 2022, including a renewed commitment to coal phase-out among UN Fashion Charter members. Still, only just over half of companies scored have made a commitment to end coal use by 2030 – all UN Fashion Charter signatories – and only a handful (adidas, American Eagle Outfitters, H&M, lululemon, PUMA) have publicly set nearer-term interim targets to begin phasing out coal.

Emissions headed in the wrong direction

Despite 37 out of 43 companies assessed now having committed to reduce their supply chain emissions through engagement in the UN Fashion Charter, Science-Based Targets, climate policies, or statements on their websites, there is an implementation gap. If we account for an emissions dip in 2020 as a result of the COVID-19 pandemic and consider emissions change between 2019 and 2021, of 29 companies which reported data, only 13 showed decreases in their production emissions (defined here as Scope 3 Category 1, purchased goods and services). Further, 14 companies logged increasing emissions over this period. The total emissions change over this period was an increase of 20.65%, showing a dangerous level of growth at a time when the industry needs to be bringing its emissions under control. Even excluding retail giants Amazon and Walmart,[17] the total emissions increased by 3.46% when it needs to decline rapidly.[18]

The sector’s continued emissions growth clearly indicates a failure by the majority of brands to act fast enough to prioritise phasing out coal and other fossil fuels and transition to renewable energy sources. It is encouraging to see a correlation developing between brands which had the commitment to increase the use of renewable energy in the supply chain since the emissions period, and decreasing emissions (ASICS, PUMA, Kering). Levi’s, which has an ambitious scope 3 emissions target of 40% reduction by 2025 – five years earlier than the other brands in the scorecard – also reported one of the biggest actual emissions reductions, indicating that its earlier efforts are paying off. 

Overall, while there are signs of progress and ambition is creeping up, the pace of change remains slow. Of particular concern is the slow progress of brands to commit to 100% renewable energy in the supply chain, while evidence of actual emissions increases reveals a disconnect between commitments and real emissions reductions. Time is of the essence; brands have a clear responsibility to cut their emissions rapidly and be transparent about their progress; and should take action now to set stronger climate and energy targets that reach into the greatest source of their emissions – their supply chains.

Footnotes

  1. “Emissions Gap Report 2020.”
  2. “Emissions Gap Report 2020.”
  3.  “Fashion Industry Charter for Climate Action.”
  4. According to the definition given in the Greenhouse Gas Protocol, Scope 3 Category 4 includes emissions from transportation and distribution of products purchased. Emissions may arise from the following transportation and distribution activities throughout the value chain: air transport, rail transport, road transport, marine transport, and storage of purchased products in warehouses, distribution centers, and retail facilities.
  5. This includes both upstream and downstream emissions.
  6. “Climate Sustainability in Retail: Who Will Pay?,” May 4, 2022, https://www.mckinsey.com/industries/retail/our-insights/climate-sustainability-in-retail-who-will-pay.
  7.  “Fashion Industry Charter for Climate Action.”
  8. According to the definition given in the Greenhouse Gas Protocol, Scope 3 Category 4 includes emissions from transportation and distribution of products purchased. Emissions may arise from the following transportation and distribution activities throughout the value chain: air transport, rail transport, road transport, marine transport, and storage of purchased products in warehouses, distribution centers, and retail facilities.
  9. This includes both upstream and downstream emissions.
  10. “Climate Sustainability in Retail: Who Will Pay?,” May 4, 2022, https://www.mckinsey.com/industries/retail/our-insights/climate-sustainability-in-retail-who-will-pay.
  11. Intensity-based targets measure a brand’s emissions against some kind of economic output, e.g. per item produced, which, while it can help incentivise making products that are more energy efficient or have a lower impact individually, can still result in emissions growing overall if the company makes more products.
  12. “lululemon CDP,” 2022.
  13. Intensity-based targets measure a brand’s emissions against some kind of economic output, e.g. per item produced, which, while it can help incentivise making products that are more energy efficient or have a lower impact individually, can still result in emissions growing overall if the company makes more products.
  14. “lululemon CDP,” 2022.
  15. Unbundled renewable energy credits are generally the easiest way to offset energy use, but are often considered to have low additionality, meaning that they are unlikely to result in new renewable energy being added to the grid, and therefore are not effective for driving an energy transition.“Additionality and Renewable Energy Certificates: Understanding the Value of REC Claims” (Center for Resource Solutions, March 7, 2016), https://resource-solutions.org/wp-content/uploads/2016/03/RECs-and-Additionality.pdf.
  16. Unbundled renewable energy credits are generally the easiest way to offset energy use, but are often considered to have low additionality, meaning that they are unlikely to result in new renewable energy being added to the grid, and therefore are not effective for driving an energy transition.“Additionality and Renewable Energy Certificates: Understanding the Value of REC Claims” (Center for Resource Solutions, March 7, 2016), https://resource-solutions.org/wp-content/uploads/2016/03/RECs-and-Additionality.pdf.
  17. Walmart and Amazon experienced dramatic emissions growth during the pandemic including in sectors outside of apparel and footwear.
  18. Sources: 2020, 2021, 2022 corporate CDP reports and annual reports. Companies that did not continuously and/or consistently report their emissions data are not listed here.
  19. Walmart and Amazon experienced dramatic emissions growth during the pandemic including in sectors outside of apparel and footwear.
  20. Sources: 2020, 2021, 2022 corporate CDP reports and annual reports. Companies that did not continuously and/or consistently report their emissions data are not listed here.