The clothing industry is a curious beast when it comes to sustainability. On one hand, the interests of many apparel companies seem diametrically opposed to those of the planet, with an obvious incentive to get people to buy needlessly huge quantities of shirts and skirts. As the New York Times fashion director Vanessa Friedman put it, “sustainable fashion . . . is an oxymoron”.
On the other hand, companies in the space have been putting increasing weight on their sustainability credentials in marketing claims — seemingly reasoning that this will help drive sales.
The Norwegian regulatory intervention that we highlight today should be taken seriously by companies well beyond the Nordic nation, and beyond the clothing sector. It shows the real legal dangers that are now emerging for companies that make overheated claims about their sustainability record.
Tonje Drevland, the lawyer leading on this case for the Norwegian Consumer Agency, told me that European regulators were getting particularly interested in the “carbon-neutral” claims made by an increasing amount of companies. Some executives, I suggested, might respond to this growing crackdown with complaints that they are being punished for trying to do the right thing.
But companies making unsubstantiated green claims are “not trying to do the right thing,” Drevland responded. “They’re trying to sell, and we have to remember that.” Don’t say you weren’t warned. (Simon Mundy)
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Norway’s outsized impact on the sustainable clothing movement
Over the past decade, some of the world’s biggest clothing companies have been working to establish sustainability standards for their sector through the 280-business-strong Sustainable Apparel Coalition.
But now a decision by officials in Norway has thrown that initiative into crisis, highlighting the growing risks — both reputational and legal — facing companies making green claims.
Earlier this month, the Norwegian Consumer Agency wrote to Norrøna, an outdoor clothing company based just outside Oslo, accusing it of illegal marketing. On its website, Norrøna had claimed its cotton T-shirts were far more environmentally friendly than the market average, citing a reduced impact in four categories, including fossil fuel and water consumption. As evidence, it cited a strong score from the Higg Index — a rating system developed by the SAC, whose members range from Walmart to Patagonia.
But the NCA concluded that the Higg Index methodology was too flimsy to support Norrøna’s claims. It also wrote to H&M, the world’s second-largest clothing retailer, warning it to abandon plans to publish Higg Index scores in its marketing. A third threatening letter went to the SAC industry group itself, warning that it could be held accountable as an accessory to illegal marketing using the index it developed.
Norrøna said that “as a small company we can’t afford to do all assessments ourselves”, but added that it was committed to complying with all applicable laws and “communicating the best possible information” to customers. H&M said it was now removing Higg Index information from all its websites, “a process that takes some days”.
With just 5mn inhabitants, Norway is a small part of the global clothing market. But the message from its consumer agency has had a chilling effect on the SAC, which this week said it was suspending its “consumer-facing transparency programme”, and has asked members to remove Higg Index scores from their websites and marketing materials.
Amina Razvi, the SAC’s chief executive, told Moral Money that the body would commission an independent third-party review of the Higg Index, which will remain available for businesses to use for internal assessment purposes.
The NCA’s intervention pointed to multiple alleged shortcomings in the system. For one thing, it said, scores were often based on “global averaging” for broad categories, rather than rigorous analysis of the supply chains behind specific products. Some data used were outdated or not relevant. And some important metrics were left out, it said, such as the methane emissions from the manure used as fertiliser for Norrøna’s organic cotton.
Razvi conceded that the Higg data had room for improvement, but maintained that the industry-led initiative had played a valuable role by paving the way for regulated standards in this space. “The SAC was born because there wasn’t a harmonised standard that existed,” she said.
Authorities are now moving in that direction, notably in the European Union, which is preparing new sustainability regulations for the clothing industry, and plans to unveil rules for “green claims” later this year.
Razvi said her members would support efforts to get reliable sustainability information to consumers. “If you put trusted, credible, standardised data in the hands of decision makers, whether it’s companies, or governments, consumers, that is a lever for change,” she said.
Not everyone buys this argument. Analysts at Morgan Stanley told me that their recent research showed no evidence that sustainability issues are having a meaningful effect on consumer preferences, either at the higher or lower price ranges of the clothing market. “Based on our research, I’m sceptical that this makes much difference to consumers,” said Edouard Aubin, head of luxury goods research at Morgan Stanley. “If you ask people whether they care about the environment, they overwhelmingly say they do. But there’s very little proof that it’s really changed their buying habits.”
Some companies might then look at the news from Norway and decide that sharing details of their environmental profile is simply not worth the risk. When I spoke to Tonje Drevland, the lawyer in charge of this case at the NCA, she said that would be the wrong lesson for businesses to draw. “It’s as simple as this: don’t oversell,” she said. “You can say a lot to consumers. But you need to have evidence for it.”
Companies that continue to make unsubstantiated claims will face increasingly tough treatment from regulators beyond Norway, she warned, citing recent conversations with counterparts elsewhere in Europe. “There are more and more claims, and we have to make sure the claims are viable — because consumers can’t do it for themselves.” (Simon Mundy)
Energy debate heats up in Japan
When the three major power utility companies in Japan — Tokyo Electric Power Company (Tepco), Chubu Electric Power Company and Electric Power Development (J-Power) — held their annual shareholder meetings yesterday, shareholders at all three rejected climate resolutions that asked for more disclosure or tougher targets on carbon emissions.
Tepco announced that the climate resolution submitted by the Australia-based NGO Market Forces and Japan’s Kiko Network obtained just 9.55 per cent of shareholders’ support. While J-Power’s preliminary disclosure showed that 26 per cent of shareholders supported a proposal to set “credible targets” for cutting emissions and report annually on their progress. Shareholder proposals need a two-thirds majority to pass. The proposal was submitted by UK-based Man Group, France’s Amundi and HSBC Asset Management. Chubu has not disclosed the details of its vote yet.
The results might be disappointing for climate activists. But the meetings have ignited a new series of discussions on Japan’s energy policy, as the Tokyo area remains under blackout alert due to a power supply crunch caused by the most intense June heatwave in almost 150 years.
At Tepco’s shareholder meeting, attendees walked through a dimmed entrance and into the main room where the temperature was set at a balmy 28C (82F). These measures were put in place to save energy, chair Yoshimitsu Kobayashi explained to the audience, according to Nikkei reporter Ryo Mukano who covered the meeting.
The room was not the only place the temperature was hotter than usual. Investors had heated questions about Tepco’s directions on the investment in renewable energy and the revival of nuclear energy, Mukano said. Some even booed and jeered the board members — behaviour that is rare in Japan, where people tend to avoid confrontation.
The current energy crunch is, in large part, due to a March earthquake that knocked off some power plants. But Japan’s energy policy has been in limbo since the 2011 Fukushima disaster paused action at most of the country’s nuclear plants, which supported about 30 per cent of its electric supply at the time. The war in Ukraine — coupled with a weak yen, which has made foreign resources more expensive — has also forced the government to reassess its energy policy.
Public opposition against the nuclear option is still strong in Japan. For most voters, neither energy policy nor climate change policy is at the top of the agenda ahead of the upper house election in July. But if the heat continues (and it’s only June, so it’s nearly certain there are more heatwaves to come this summer) and the public is asked to reduce their energy usage repeatedly, the situation might change.
The debate at Tepco emphasised that Japan needs a pathway to achieve a stable energy supply for the future while still engaging in the global efforts to reduce emissions. The world’s third-largest economy cannot sustain its economic prosperity for the long term by just dimming lights or working in warm offices. (Tamami Shimizuishi, Nikkei)
The tea industry might not be the first business sector people think about when it comes to ESG concerns, but plantations have faced accusations of human rights abuses. Now, the FT’s Behind the Money podcast gives listeners an insider perspective on violence at a tea plantation in an interview with one of its workers. Listen to the episode here.
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