The Economics Behind Fashion: Pursuit Of Sustainability

The manufacturing process in the fashion world today is broken, toxic, and terribly inefficient. Fast fashion is accelerating the problem even more. It’s established in the marketplace and centered around disposable clothing encouraging us to buy it, use it and throw it away after a short time. Only 25 percent is recycled. Because of the linear approach and outdated resource consumption, the fashion industry is considered one of the most polluting industries in the world.

People have been buying a lot of fast fashion garments that have a life cycle of a month or even less. The worst part being that they are using these garments a few times and throwing them away because of terrible quality and new fashion trends that they would want to keep up with. Everyone wants diversity in their wardrobe with the everchanging fashion trends. Studies have shown that and consumers who have knowledge about how the fashion industry works, support ethical and sustainable business practices. It has also indicated that one out of five people are actually willing to pay more for such products. However, due to the lack of perfect knowledge, people end up buying fast fashion items as they do not know the consequences of their actions and prefer more affordable and inexpensive options over organic products.

It’s time to see the world of fashion through a different lens where we can transform waste in to golden opportunities, where goods are recycled, revamped, and reused. Some industry leaders have already started to revolutionize the fashion industry, with innovative ideas to create prosperity through sustainability. Recognizing the needs to replace the linear business model with a circular one where the same materials are fed into the system again to be re-used — generating new results and customer value.

Environmental Impacts

Regarding fashion’s footprint: clothing production comes with a significant impact on the environment as well as on the societies. Clothing production has more than doubled since 2000, as such, 100 billion garments are annually manufactured. But, more than 30% of clothing goes to landfill at the end of its lifecycle, as an average consumer buys 60% more items of clothing and keeps them for half in comparison to 15 years ago. The fashion industry annually produces 92 million tons of solid waste, which is 4% of the global amount. Every year, an estimated 60 billion square meters of textiles become cutting room floor waste, equivalent to 15% of all textiles produced. Fashion supply chain stages are extremely critical to tackle sustainability issues. 

Cotton is the most dominant source for natural fibers used in clothing; for example, 77% of natural fiber production comes from cotton. Water is a ubiquitous natural resource. According to the World Economic Forum’s Global Risk Report in 2016, less than only 1.2% of all water on

Earth is actually available for human use. 93 billion cubic meters of water is annually used in textiles production, which is equivalent to 4% of the global freshwater withdrawal. Yet, the water consumption by the global fashion industry is expected to grow up by 50% by 2030.   

Societal Impacts

According to David Smith, the systematic disinvestment in manufacturing that occurred in the late 1970s and early 1980s was presumed, remotely, to be a byproduct of “capital flight” from North America to foreign countries and regions, especially East Asia, where people worked for lesser wages. The newly industrialized countries such as South Korea, Japan, Taiwan, Singapore, Hong Kong also partook in this trend. When the communist regimes adopted large-scale liberalization policies, their relationship with Western capitalist countries also modernized and improved. This process of relocation of the production processes of specific industries has been termed as Global Restructuring. A new international division of labor in which a global assembly line driven by the relentless search for cheap labor emerged in the 1970s and 1980s. This view is consistent with the deindustrialization of wealthy core countries like the United States via a capital flight to relatively low wage countries.

The U.S. Department of labor, reportedly, found evidence of forced child labor in the fashion industry, especially in South Asian countries, in 2018.

The nonprofit organization, Remake, published a report stating that roughly 75 million people are making clothes today, and 80% of those employed are young women aged 18 to 24.

Clothing workers in Bangladesh, mainly women, have a monthly salary of about $96. The Government’s Wage Committee recommends that garment workers need 3.5 times as much as the latter to live a “decent life with basic facilities and amenities”.

The rapid consumption of clothing and the demand for short-term delivery puts pressure on production resources, usually causing the supply chain to place profits before human welfare.

Fashion Circular Economy

What can be learnt about sustainability and circular economy from an industry that has significant problems in terms of environmental and social issues?

Fashion supply chains are long, complex, fragmented, and globally dispersed. Today’s biggest challenge is the lost connection between product and production.Significant challenges are faced by the fashion industry in terms of supply chain sustainability. Sustainability risks are often occurring at the lower tier, in other terms upstream suppliers’ level in supply chains, for example, raw material processing and production. Fashion supply chains are formed by small and medium-sized suppliers that are not financially and technically capable of

taking radical approaches toward sustainability. Global companies have struggled to manage their sustainability-related risks in their supply chains.

In a world of increasing demand for clothing, consumers only want to wear new clothes a few times and want new clothes. The entire business model is built on the premise of “fast fashion”, which provides consumers with cheap and fast clothes through a short fashion cycle. This linear purchase, wearing and quick discarding of fashion models will have a negative impact on people and the resources of the planet.

The play of Economics

According to data from the Ellen McArthur Foundation, in the past 15 years, due to the growth of the global middle-class population and the growth of per capita sales in developed economies, clothing production has almost doubled. By 2050, world GDP is expected to grow by 400%, which means that the demand for clothing will be even higher.

A report found that by 2030, solving the environmental and social problems caused by the fashion industry will bring an overall benefit of $192 billion to the global economy. The annual value of clothing discarded prematurely is more than $400 billion, according to a study published in the World Resources Institute.

In this sense, the circular economy has become an alternative economic paradigm, with a focus on innovative technologies, green industrial capabilities, and environmental policy interventions. It is anticipated that the circular economy will become a restorative and regenerative industrial system by design.

Ellen MacArthur Foundation sets four fundamental steps to transform the textile and clothing industry into circularity: first, eliminate substances of concern and microfiber release; second, increase clothing utilization; third, radically improve recycling; and fourth, make effective use of resources by turning them into renewable resources.

It is evident that there exist some very encouraging and cogent initiatives and practices to endorse and foster economies designed on the principles of circular economy.

Implication of the Coronavirus  

The fashion industry has taken a massive hit because of the Covid-19 pandemic. Attributable to shutdowns in China, the world’s biggest garment producer, the supply chain has been scattered completely. Industry experts have predicted significant losses for fashion brands around the globe. Brand executives have been focusing on crisis management in regards to the current lockdown situation.

Some countries are not dealing with it very well. For instance, by canceling orders in places like Bangladesh, factories have been shut down and workers been sent home without pay. During the protests in Dhaka, many of the workers had two major concerns, loss of livelihood and starvation. This hasn’t been great for the PR image of a lot of companies, many of which said that they have been outsourcing in countries such as Bangladesh, Cambodia, and Myanmar because they wanted to uplift the poor out and eradicate unemployment by creating jobs. But, as soon as the pandemic struck, they cut their losses and bolted. 

84% of Bangladesh’s export earnings comes from garments from the ready-made garment industry and they’re losing millions by the minute. They believe that they’re going to lose one-third of their annual income due to the shutdown and cancellation of orders. Some brands have stopped accepting the products that were already finished and ready to be shipped. The manufactured garments are sitting on the docks in containers while the workers have not been paid in more than 4 months. The workers are supposed to be paid monthly at a rate of $96, as that is the base national wage. 

Other brands have been doing really well like Brooks Brothers switched over from making ties to making masks and Louie Vuitton or LVMH started producing hand sanitizer in their perfume factories. Some have been doing damage control like the closure of stores, and laying-off employees, all the while hoping that this is just a temporary situation and that they’ll be able to reopen in the future.

Lastly, some are just holding tight and have been carrying on at a slow pace while keeping people on the payroll and trying their best to weather through it. There are a lot of different approaches to it.


The fashion industry needs to embrace radical transformations across supply chain stages. Radical material innovation and sustainable design principles, combined with process innovation, cleaner production strategies and supply chain transparency, create essential building blocks of sustainable, and responsible fashion.

What is really changing is that contemporary consumers are becoming more aware and fashion companies are more exposed to questions and demands, in terms of more ethically and environmentally sound practices, transparency, and responsible corporate actions for sustainable fashion. And the response the fashion industry presents is encouraging.

It is difficult to scale up such game changing practices, but the industry is showing that this change is coming. Inclusive dialogues, multi-stakeholder engagement, and science are needed to spread environmental and social sustainability across fashion supply chains in a true manner.

The simple truth, after all, is that moving toward a circular economy is not an option — it’s essential for our new way of living.


Robinson, D. (1961). The Economics of Fashion Demand. The Quarterly Journal of Economics, 75(3), 376-398. Retrieved from

Segura, A. (2019). Circular Fashion in Economy. The Fashion Retailer. Retrieved from

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