Support For SMEs’ Contributions to Tackling the Nature and Biodiversity Crisis in the Fashion and Textile Industries

Against the backdrop of an urgent need for change of the fashion and textile industry towards more sustainability, this new research report, written by Andrea Werner and Mila Burcikova, explores how nature positive action can be embedded in UK Textile and Fashion SMEs. It examines what financial and other support is required to achieve this, and how SMEs can develop their environmental reporting to aid investors and other stakeholders in making decisions.

The main focus of this report is on innovative SMEs that seek to transform value chains towards more sustainability, with some attention also given to SME adopters of nature-positive practice (e.g. retailers, brands) and their sourcing practices. Particular attention is given to SMEs that source natural fibres from regenerative sources for products and brands, connecting different actors (e.g. farmers, manufacturers, brands) along the way. The report draws on a rich qualitative dataset consisting of 28 semi-structured interviews with businesses, financiers and intermediaries, as well as on relevant academic and grey literature.

Examining the investor and financial support side, the report finds that impact investors have a primary interest in investing in scalable solutions (with strong IP), which in the fashion/textile space tends to be tech (e.g. for data gathering / measuring in supply chain) as well as new innovative materials/processes including dyes. Such impact funding is increasingly provided by family offices of large apparel brands/manufacturers. The impact investors interviewed held that start-up firms should not be burdened with intensive metrics reporting when they start out but metrics should organically develop as the company grows and matures. For start-up impact investors, climate is the primary interest, although they recognise that climate can also act as proxy for broader nature-related approaches and measures. At the same time, a number of ventures that seek to transform value chains by sourcing natural fibres for products and brands, are not suitable for traditional (start-up) impact investment, as scalability is challenging or limited. Therefore, provision of grant funding and other sources of private and public finance remain important, although impact investing may have a role in enabling the development of nature impact bonds that benefit farmers engaging in regenerative/agroecological practices.

In relation to SME nature-related reporting, innovative SMEs emphasise the full traceability of their value chain and engage in strong narrative reporting setting out how their business venture follows a more nature-positive approach than the conventional mainstream approaches. Certifications, standards and partnerships are seen as important to substantiate sustainability commitments, although some certifications are considered onerous and costly for SMEs. Innovative nature-positive SMEs report on a range of nature positive indicators including land use, carbon, water use, chemical use reduction, biodegradability potential, animal welfare, soil health, biodiversity as well as some social indicators. SMEs recognise the need for the use of technology to help report on biodiversity measures but also state that the relatively high cost of many such technologies is a barrier to adoption.

The report’s concluding section emphasises that SMEs have the capacity to develop / contribute to nature-positive fibre and fabric supply chains for the fashion and textile industry, both in the UK and globally. In particular, there is an opportunity to (re-) build nature positive value chains for natural fibre production in the UK, which comes with economic opportunities for skills-development and jobs. Growing interest in provenance should encourage more nature-positive re-shoring, although (re-)building such value chains will require R&D and infrastructure funding. To enable such rebuilding of these value chains, policy makers and other intermediaries need to recognise that smaller scale ventures have an important role to play in the UK’s Net Zero and National Biodiversity Strategies, in addition to recognising the nature-positive potential of regenerative/agroecological farming not just in relation to food but also in relation to fibre.

The report contains three case studies that highlight UK SMEs that provide natural fibres from regenerative sources for products and brands.