The Garment Industry’s Resource Appetite and Levi Strauss’ Leadership
Levi Strauss is a pioneer in institutionalizing sustainability to insulate its supply chain from the impacts of climate change.
One would be surprised to associate jeans with global warming. However, the garment industry is a resource-intensive sector that accounts for 10% of global carbon emissions, making it the second largest polluting industry behind the oil industry. [1][2] Given its resource reliance, climate change’s effects on resource availability is poised to introduce severe shocks into the garment industry’s supply chain, affecting its ability to meet customer demand. A few companies, however, are taking proactive stances to reduce their raw material footprint, thereby re-introducing stability into their supply chains. One such company is Levi Strauss, which made a high-profile commitment in 2008 to reduce their climate footprint by five percent annually up to 2020.
Climate change will adversely affect the garment industry’s access to its required raw materials, including cotton and water. First, climate change affects the yields on cotton crops, pushing up the price of cotton. One study projects yields on US crops, such as cotton, will decrease by 30-82% at the end of the century, depending on the degree of temperature increase. [3] Another study projects a price increase of 135% assuming a 5°C temperature increase. [4] If the trend continues, cotton will be too expensive or scarce for the industry to maintain its current ~7% margin profile. [5]
Second, cotton products need significant amounts of water. More than 100 gallons of water is required to cultivate a single pound of raw cotton. [6] In 2009, Levi’s estimated that a pair of blue jeans consumes 919 gallons of water during its life cycle, from production to wash cycles. [7] On the other hand, access to water will shrink significantly. By 2030, demand may outstrip water supply by 40%. According to some projections, by 2090, 30% of the earth’s surface could be in severe drought, up from 1-2% today. [8] As water supply shrinks, not only will crop yields continue to decline, but garment manufacturers, such as Levi’s, will lack access to the water required to cultivate cotton and manufacture jeans.
While the garment industry is only now taking action in response to climate change, Levi’s has been leading the charge. Since 2007, they have introduced sustainability goals at each step of their supply chain, with an overarching goal of sourcing sustainable cotton and reduce water consumption across the supply chain.
The “Better Cotton Initiative” (BCI) is one of their higher-profile efforts to change how cotton is grown, from improving labor standards to decreasing the environmental impact of cotton farming. BCI works directly with farmers to improve yields while reducing water usage. Techniques cover a wide range of agricultural practices, including efficient irrigation. BCI then certifies farms that meet its strict standards. Farms that adhere to BCI standards use 23% less water than their non-BCI counterparts. [9] In a particularly successful deployment, BCI helped over 75,000 cotton farmers in Pakistan reduce their water consumption by 39%. [10]
Levi Strauss sourced 12 percent of their total cotton in 2015 from BCI-certified farms, up 5% from 2014. [11] Their goal is to source 100% sustainable cotton by 2020. Given the projected decrease in cotton yields and water availability, Levi Strauss’ investment in programs like the BCI will help them insulate their supply chain while reducing their impact on the environment.
Levi Strauss’ other high-profile effort is the “Water + Production” program, which aims to reduce water usage in the manufacturing process. Levi Strauss pioneered methods to reduce water usage in certain stages of the production cycle, aiming to cut down on the 919 gallons of water required during the lifecycle of a pair of jeans. Since rolling out these methods in 2011, they have saved over one billion gallons of water and reintroduced 30 million gallons of water back into the ecosystem. They project they can save up to 96% of water in the finishing process for certain style of jeans. Levi’s hopes to increase the percentage of products using these water saving techniques, to 80% in 2020 from 25% today. [12]
Levi Strauss’ sustainability programs are a classic example of incentives aligning, as climate change will not only increase their raw material and production costs, but these programs introduce an opportunity for them to improve their production costs today and align with changing customer preferences in terms of sustainable manufacturing practices. However, they can, and should, set loftier goals. They can achieve those via a tighter supply chain integration – for example, via vertical integration or strict standard enforcement. Their collaboration with BCI is a first step, but those standards are not quantitative and are easy to skirt. They could also work with local governments to tighten environmental regulations that target water usage and water-system pollution. These efforts, and others, could further differentiate Levi Strauss beyond what they are doing today to fight climate change.
[1] “Fast Fashion Is The Second Dirtiest Industry In The World, Next To Big Oil,” EcoWatch.com, 8/17/2015. http://www.ecowatch.com/fast-fashion-is-the-second-dirtiest-industry-in-the-world-next-to-big–1882083445.html, accessed 11/3/2016.
[2] “Fasion CEOs are Banding Together to Fight Climate Change,” Fortune, 12/3/2015. http://fortune.com/2015/12/03/fashion-climate-change/, accessed 11/3/2016.
[3] Wolfram Schlenker and Michael J. Roberts. “Nonlinear temperature effects indicate severe damages to U.S. crop yields under climate change,” PANS 106, no. 37 (2009). Via https://www.researchgate.net/profile/Michael_Roberts20/publication/26777210_Nonlinear_Temperature_Effects_Indicate_Severe_Damages_to_US_Crop_Yields_under_Climate_Change/links/00463528c5f9134e1a000000.pdf. Accessed 11/3/2016.
[4] M. Mutuc, D. Hudson and J. Reeves. “The Effects of Uniform Climate Change on International Cotton Prices and Production” in The International Association of Agricultural Economists (IAAE) Triennial Conference, Foz do Iguaçu, Brazil, 18-24 August, 2012.
[5] “Retail Apparel Industry Profitability,” http://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=1301. Accessed 11/4/2016
[6] Jan Lee. “The Apparel Industry’s Answer to Global Water Shortages,” TriplePundit, 3/12/2015. http://www.triplepundit.com/special/sustainable-fashion-2014/apparel-industrys-answer-global-water-shortages/, accessed 11/3/2016.
[7] Leslie Kaufman. “Stone-Washed Blue Jeans (Minus the Washed),” New York Times, 11/1/2011. http://www.nytimes.com/2011/11/02/science/earth/levi-strauss-tries-to-minimize-water-use.html, accessed 11/3/2016.
[8] “Floods and Droughts,” Intergovernmental Panel on Climate Change website, http://www.ipcc.ch/publications_and_data/ar4/wg2/en/ch3s3-4-3.html, accessed 11/3/2016
[9] “LEVI STRAUSS & CO. REACHES 1 BILLION LITERS OF WATER SAVED THROUGH SUSTAINABILITY INITIATIVES; RELEASES NEW ENVIRONMENTAL IMPACT STUDY ON APPAREL,” Levi Strauss press release. Accessed 11/4/2016
[10] https://www.worldwildlife.org/industries/cotton. Accessed 11/4/2016
[11] http://levistrauss.com/sustainability/planet/water/. Accessed 11/4/2016
[12] http://levistrauss.com/sustainability/products/waterless/. Accessed 11/4/2016
Very interesting post, Shezaad… and truly troubling to know how much water and resources go into making a single pair of jeans!
It is certainly a positive effort that Levis is making to tackle climate change. However, during this transition or as they vertically integrate, they must also make an active effort to implement strict measures across the supply chain in order to be consistent. I also think what could differentiate Levis further would be to make an effort to educate consumers about what is behind their purchases, so that we will be more responsible shoppers as well and share responsibility for the negative effect on the environment.
What an interesting post, Shezaad! I had no idea what a “dirty” industry fast fashion was and how much water goes into the production of an article of clothing we all wear so regularly. I agree with your point on Levi’s incentives aligning in regards to its efforts to combat climate change. It is certainly convenient that these measures will actually reduce costs, as well as buy goodwill with the consumer. I would love to hear your thoughts on Levi’s initiative to buy 100% of its cotton from BCI-certified farms by 2020. In 2014, it had increased its percentage purchased to 12%, but I wonder what your thoughts are on whether there will even be enough BCI certified farms to meet the demand this 100% goal would require.
Great post, Shezaad. This is a mind-blowing fact…”In 2009, Levi’s estimated that a pair of blue jeans consumes 919 gallons of water during its life cycle, from production to wash cycles.”
It’s really interesting that Levi’s is doing so much to improve their carbon footprint. I wonder how much they communicate these efforts to their customers? Not because that’s the only reason to implement sustainability initiatives, but because I think there’s an opportunity here for them to be fully consistent with their sustainability commitment. In contrast to fast fashion, do they strive for wear-forever, high-quality products? They could implement customer facing sustainability programs like
– Bring in an old pair of jeans to get a discount on your next Levi’s purchase
– Recycled denim product line