Clothes are being utilised less than ever before. Here Stewart Investors look at Lenzing, a company helping retail giants like H&M extend the lifecycle of fast fashion.
A big emerging waste issue is clothing. With the rise of fast fashion, companies like Zara and H&M, we’ve seen a doubling of clothing production in the last 15 years and a 36% decrease in clothing utilisation. We buy more, we use it less and then we just throw it away. Clothing is just not being recycled.
This creates issues for the fast fashion companies. It’s an externality to their business that will be potentially internalised at some point due to regulation. We don’t invest in fast fashion companies because we don’t follow whether Zara or H&M is going to be more popular next year or whether people are going to buy Prada more handbags or not. That’s not our domain expertise.
But it has helped us come across companies like Lenzing, a fascinating company from a sustainable development perspective. They make clothing fibres out of timber, meaning products made from Lenzing fabrics are 100% biodegradable. Lenzing either grow their own or source 100% sustainable timber and their manufacturing is closed loop – there is zero discharge to the environment. The water is treated to the highest standard and returned to the environment.
Lenzing worked with H&M to develop a sustainable line of fashion and raise consumers awareness. You can take clothes back to H&M and they work with Lenzing to recycle those clothes into a new product. Lenzing, despite being a commodity company, are working to integrate themselves up the supply chain to work with the end brands that are using their products.
Our investment in Lenzing is an interesting insight into our process. We don’t own them right now because they are a little expensive, which demonstrates our valuation discipline. As long-term investors, we are patient.
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