Should sustainability projects of large companies such as H&M and Adidas be funded with taxpayers’ money?
The only way to reduce the fashion industry’s waste is to change its supply chain from linear ‘take, make, waste’ to circular. That is why 12 important players of the fashion and textile industry, among them H&M and Adidas, have come together to start a groundbreaking new project the “New Cotton Project” which will last over 3 years. In this project, Finnish biotechnology group Infinited Fiber Company will collect, sort, and regernate textile waste to manufacture a cellulose-based textile fibre, which then will be spun into yarns or even fabrics. The new fibre can be made from fashion waste such as denim, T-shirts, sweaters, bed linens and non-woven materials. Other positive aspects of this new fibre are that it is cost competitive, has an attractive touch, has a better colour uptake than other fibres, and can be used over and over again. What is really surprising about the project is, that H&M and Adidas will work together in a joint venture. Both companies will provide customer feedback to the fibre manufacturing plant and also collect used garments to either resell or add them to the closed loop garment process, depending on the quality of the garment.
To support this project, the EU has generously allocated €6M from its research and innovation fund. This fund, which is allocated to EU companies which collaborate across countries and areas, and make breakthrough discoveries, is a part of the EU budget. It is money which the EU has received from member state contributions, import duties on goods entering from outside the EU, and a percentage of each member state's national VAT rate.
Although we applaud the new innovation of Infinited Fibre Company and the collaboration of different companies of the fashion sector to combat fashion waste, we also ask ourselves why large companies such as Adidas with a turnover of around 12.3 billion euros in 2019 are not able to fund this project on their own. As EU research funding is limited, would it be not better to give this money to smaller innovative companies, who have less access to money? Other EU companies such as Siemens and Safran also enjoy access to EU funding in research and innovation. Both companies argue that this money is essential for their business models to work as it makes them stay competitive on a global scale, helps them to support long-term projects and to take risks. Additionally, EU funding gives them access to the best minds and reinforces cross border and industry collaborations, which is key to stay successful in a global market.
Nevertheless, we think that EU grants should be more available to small and medium sized businesses to foster sustainable innovation from the bottom up, especially as large EU corporations already enjoy other benefits like tax breaks for sustainable innovations, or government subsidies and bailouts in tough times such as during the COVID-19 pandemic. We can also speak from personal experience: for 4 years now, we have been working on a very sustainable project which has primarily been funded with a personal investment. It has been very hard to access funds which would have been beneficial to our project and a key to a faster turnaround of the project. Also, it has not always been easy to meet the high minimum order quantities of sustainable suppliers. Sustainable suppliers are sometimes still very new on the market and therefore can have very high order volumes which can be a challenge for small and medium sized businesses. Therefore, to make SMEs ready to face the present and global challenges and assist them in their sustainable transition or sustainable projects, it is essential to understand the nature of their external threats and also make access to funds easier. Especially since according to the OECD report from 2017, small and medium sized companies still account for around 99% of all companies worldwide.
In the end, the most important goal should be to encourage companies large or small to invest in a sustainable supply chain. However, we believe that more can be done to assist smaller businesses as well in this transition.
For more information on H & M’s and Adidas circular model: https://www.forbes.com/sites/brookerobertsislam/2020/11/24/hm-and-adidas-join-industry-consortium-partners-delivering-a-blueprint-for-circular-fashion/?sh=50bb4d96615d
For more information on the Infinite Fibre: https://sourcingjournal.com/denim/denim-innovations/sustainable-fiber-startup-investment-147677/
Why are EU funds important for larger companies: https://www.businesseurope.eu/video-gallery/why-are-eu-funds-important-large-companies
For more information on the importance of small companies in a sustainable world: https://sustainabilityknowledgegroup.com/the-importance-of-smes-role-in-sustainability/