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The Fashion Reset: Investing for Impact in a $2.4 Trillion Industry

The Fashion Reset: Investing for Impact in a $2.4 Trillion Industry
Anouk Coxon, Samie Li Shang Ly, Cameron Welsh

Introduction 

This is the voice of Anouk Coxon as she reflects on the sustainability issues of the fashion industry. 

About six months ago, four close friends and I had an unexpected stroke of luck — we won the New York Mega Millions lottery. After taxes, we were left with a shared total of $50 million. Naturally, the follow-up question was: What could we do with this kind of money? What should we do with it?

We are a diverse group with unique experiences, ranging from fashion design and global retail to supply chain operations and sustainable investing. My journey in the industry spans more than two decades, having witnessed how trends evolve, how markets shift, and how globalization has impacted every layer of apparel production. We had all been grappling with the troubling realities behind fast fashion for some time—mounting textile waste, underpaid labor, environmental degradation, and greenwashing campaigns. In our work, we had seen what innovation could be achieved but also how rarely it gets scaled in a meaningful, measurable way.

This windfall offered us a rare opportunity: not just to build something profitable but to do it differently—to reimagine the fashion system from the ground up with sustainability and ethics at its core.

With this in mind, we turned our attention to the wider landscape. The fashion industry, though vibrant and culturally significant, is also fraught with systemic problems. It contributes disproportionately to pollution and climate change and depends on opaque supply chains that are often linked to human rights abuses. We knew the solutions would have to be both visionary and grounded in operational feasibility.

The challenges are stark. Just last year, nations, including the United States, Canada, and the Netherlands, formally accused China of committing genocide in the Xinjiang region. As a response, sanctions were introduced against companies sourcing materials from the area—a region responsible for more than 20% of the world’s cotton supply (BBC, 2021). Around the same time, over 50 investors coordinated by the Interfaith Center on Corporate Responsibility began reaching out to more than 40 companies—including H&M, VF Corporation, and Zara—demanding greater transparency and accountability across their supply chains (Reuters, 2021).

The State of Fashion Today

The global clothing and textile industry contributes $2.4 trillion to manufacturing and employs 86 million people, mostly women. However, with 80 billion garments produced annually and a massive reliance on resource-intensive processes, it stands as the second-largest polluter after oil (UN Alliance for Sustainable Fashion, n.d.).

Examples include:

  • Cotton requires up to 20,000 liters of water per kilogram. (Watch how cotton is made)
  • Greenpeace (2020) found hazardous chemicals in 63% of garments tested across 20 major brands.
  • The industry accounts for 10% of global GHG emissions and 20% of industrial wastewater pollution.

Sustainability efforts have been slow to catch up. Transparency, emissions, material sourcing, and waste management remain material issues across top brands such as Nike, H&M, LVMH, and Zara (Kent, 2021).


Why change is hard

Despite mounting evidence of the environmental and social harm caused by fast fashion, the industry continues to grow at a rapid pace. Several key challenges explain why sustainability is still lagging:

1. Consumer Habits and Price Expectations
Consumers have become accustomed to extremely low prices and rapid trend cycles. Fast fashion thrives on this demand, offering new styles every week at rock-bottom prices. A 2022 McKinsey study found that 60% of global consumers consider price a top purchasing factor, even when sustainability concerns are present.

2. Complex Global Supply Chains
Most clothing is produced in developing countries with weak labor protections. These fragmented, opaque supply chains make traceability and accountability difficult. Brands often outsource production across multiple tiers, making it challenging to enforce ESG standards consistently.

3. Greenwashing and Lack of Regulation
Many brands market products as “eco-friendly” or “sustainable” without third-party verification. According to the Changing Markets Foundation (2021), 60% of environmental claims in fashion were found to be misleading or unsubstantiated.

4. High Upfront Costs of Innovation
Switching to sustainable materials, AI technology, or green infrastructure (like LEED-certified buildings) involves high initial costs. Smaller brands struggle with financing these transitions, while larger players often resist them due to profit margin risks.

5. Lack of Incentives or Standards
Globally, there are few regulatory frameworks requiring sustainable practices in fashion. Voluntary initiatives such as the UN’s Sustainable Development Goals (SDGs) or PRI are often inconsistently adopted, and enforcement is rare.

6. Volume-Driven Business Models
Fast fashion profits are rooted in mass production and overconsumption. With 80 billion garments produced each year, even minor reductions in volume would challenge core business models like those of H&M or Shein.

Together, these challenges create a system where short-term gains often outweigh long-term sustainability, both economically and operationally. For true change to happen, any new investment must address these systemic barriers while offering scalable and competitive alternatives.

Overarching Case Question:

How can a $50 million investment reshape the fashion industry to be both financially viable and environmentally regenerative?

Think about long-term profitability, how to integrate sustainability into every step of the supply chain, and how to respond to consumer and regulatory pressures—all while staying competitive.

Guiding Questions 

  1. What unmet consumer needs or market gaps could this investment address in sustainable fashion?
    • Which group (Gen Z, Millennials, Gen X, and Boomers) is most likely to support a new sustainable fashion brand? What do they care about most—price, ethics, or resale value?
  2. Should we invest in AI, circular logistics, facility innovation, or sustainable materials to create long-term impacts?
    • You will need to consider scalability, cost, environmental footprint, and alignment with consumer behavior.
  3. How do sourcing decisions influence emissions, ethics, costs, and brand image?
    • Consider shipping lead times, renewable energy projections, labor cost index, and political risk. Which region supports the most ethical and efficient production model?
  4. What is the optimal balance between financial return and ESG performance in this sector?
    • Use examples from major companies like Zalando or ThredUp (mentioned in the case) that have implemented profit-generating sustainability measures.
  5. How could we measure success—through carbon reduction, circularity, market penetration, or ROI?
    • Refer to the metrics provided in the materials innovation, supply chain, and circular logistics sections. Suggest at least 2 KPIs per initiative.

Key Questions for Student Teams to Solve (Must Answer):

  1. Which innovation should the group prioritize: Tech systems, material innovation, or manufacturing redesign—and why?
  2. What sourcing model (offshore, nearshore, hybrid) should be implemented for speed, cost, and ESG alignment?
  3. How can a circular economy model (e.g., resale, repair, recycling) be financially and logistically viable?


EXHIBIT

1. Tech Systems Design
Should the team build an AI-powered product recommendation engine to reduce overproduction and inventory waste?

  • Return rates are 20–30% in online fashion
  • Zalando credits 15–20% profit growth to AI integration

2. Supply Chain Engineering
Compare emissions, labor cost, and risk for sourcing in Vietnam, Bangladesh, and Mexico

  • Mexico = 5–10 day shipping vs. China = 60 days
  • Bangladesh 2041 energy mix = 40% renewable
  • Sources: McKinsey CPO Survey, World Bank LPI

3. Materials Innovation
Evaluate recycled polyester, bamboo, and mycelium leather for sustainability and scalability

  • Cotton: 20,000 L/kg water
  • Bamboo: ~300 L/kg water
  • Mycelium adopted by Adidas and Stella McCartney

4. Facility Design
Build a LEED-certified factory in North America or retrofit abroad?

  • LEED Gold: $150-250/sq. ft.
  • Energy savings: 25%
  • Mexico's solar capacity supports 70–90% factory use

5. Circular Logistics
Build a reverse logistics system for garment reuse and resale

  • $70–140B in excess fashion waste (2023)
  • ThredUp/Vinted: Profitable resale models
  • Tools: Ellen MacArthur Foundation, TerraCycle
  • How ThredUp Works | Vinted Explained


Global & Cultural Insight Highlights

  • North America: High awareness, high waste. Gen Z drives resale and transparency demand.

  • Europe: Strong regulation (e.g., France’s anti-waste law); circularity expectations.

  • China: Booming fashion market, but less consumer pressure on ethics.

  • India/Bangladesh: Low-cost production, yet high reputational risk.

  • Mexico: Regional proximity to US; solar infrastructure growing rapidly.

Breaking News 

  • EU Carbon Tariff Surprise: The EU just passed strict carbon import taxes. Teams must adapt by shifting to low-emission suppliers or pay a 25% import fee.

  • Gen Z Social Media Backlash: A viral post criticizes mycelium leather as overhyped. The team must respond with marketing or pivot strategy.

  • AI Algorithm Scandal: A leading fashion AI platform is found to have biased recommendations, raising concerns over ethics and consumer trust.

Investment Decision Matrix

Investment Area Capital Need Time to ROI Carbon Impact Consumer Appeal Risk Scalability
AI Tech Systems Medium 2 years Medium High Low High
Materials Innovation High 3-5 years High Medium Medium Medium
LEED Facility Design Very High 5-7 years Very High Low High Low
Circular Logistics Medium 3 years High High Medium High


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