The fast fashion industry is well known for scandals ranging from poor working conditions to environmental damage, but sales are rarely impacted. However, with new legislation in the European Union and growing consumer scrutiny, fast fashion may be facing a reckoning. Poor treatment of factory employees in Asia has made headlines for years, but recently the power dynamic between fast fashion companies and workers is shifting as workers gain more leverage. Factories are also struggling to hire new workers, increasing the likelihood of improvements to wages and working conditions to attract employees. Fast fashion companies will need to acknowledge this changing tide and be proactive in addressing sustainability and working conditions.
1. Ignore ESG at your own risk. Despite a wave of companies distancing themselves from environment, social, and governance (ESG) issues, they are becoming increasingly difficult to ignore. UPS, for example, recently agreed to a new contract with its unionised employees that caused them to warn their shareholders that share prices would likely drop as a result. The wildfires raging through North America and Europe have also caused significant economic damage, with tour operations losing tens of millions of euros as holiday destinations are burned down. Despite moving away from the term ESG, the issues that ESG strategies address are unavoidable and becoming more and more pressing.
2. International perspectives on boards. The last several years have seen growing geopolitical unrest due to events such as America’s withdrawal from Afghanistan, Russia’s invasion of Ukraine, and the COVID-19 pandemic. Robert Rock, chairman of MLR Media, argues that modern boards cannot effectively address these geopolitical risks without a diverse and international group of board members. Foreign opinions of America have fallen, with many believing that America is no longer a leader in the world of international relations. Americans have responded to an increasingly globalised world by turning inwards and focusing on what is going on within their own borders. To combat this, international voices on boards help maintain crucial global perspectives.
3. Is your company ready for biodiversity reporting? The Taskforce on Nature-related Financial Disclosures (TNFD) is expected to announce final recommendations in September of this year. There are steps companies can take now to avoid being caught flat-footed. Key aspects to understand are the LEAP approach, ties between the TNFD and Taskforce on Climate-related Financial Disclosures (TCFD), value chain impacts, stakeholder engagement, and target setting. Boards should go through the final draft of the TNFD ahead of the official release and identify gaps in the organisation. A board member should also be assigned with preparing for the upcoming disclosures. TCFD disclosures can also be analysed to find overlaps with TNFD reporting. Find more detailed information here.
4. Green, social, sustainability, and transition bonds soar. Green, social, sustainability, sustainability linked and transition (GSS+) bonds are jumping in value despite significant economic factors. Sustainable finance was an almost $5 trillion market by the end of the first half of 2023. Most GSS+ deals were conducted in euros, showing the European Union is leading the way in green bonds and other sustainable investments. GSS+ volume in the United States almost halved in the last year. Transition bonds are showing the least growth, dropping from $2 billion in 2022 to about $770 million this year. The anti-ESG movement in the United States is a likely cause for the drop in GSS+ volume.
5. Insights from S&P 500’s 2023 Director and Diversity report. Board composition is top of mind in S&P 500 boardrooms, with more than half of surveyed boards identifying it as their top focus. 38% of nominating and governance committees prioritised financial expertise when recruiting new members. A quarter of respondents shared they were targeting people with CEO or COO experience, while one in five prioritise recruiting women and minorities. Two-thirds of 2023’s class of new board members are women, visible minorities, or members of the LGBTQ+ community, but this is down from 72% in 2021 and 2022. The average age of new directors has gone up, with fewer younger members being nominated. Find the full breakdown and statistical analysis here.
Ira Srivastava is Competent Boards’ Program Coordinator. Follow Competent Boards on LinkedIn.Back To News & Views