“Impact of sustainability on financial performance concerning fashion – textile industry”

The fashion – textile industry is the one that generates most environmental harm and at the same time one of the most profitable ones. Both luxury and fast fashion brands make extremely high profits, industry keeps growing but there are changes in consumer behaviour not to be ignored. I will identify current trends in the sector, changes in consumer behaviour and new technologies implemented to manufacture textiles aimed at decreasing harmful effects of the processes. Currently, we can observe the arrival of such sustainable fibres as orange, milk or apple leather. I will present the concept of sustainability linking it to three pillars of sustainability (environmental, social and economic) and the fast fashion problem. It is crucial to emphasize that making extremely high profits fast fashion companies have ignored working conditions in their Asian factories for years. They benefit from flexible regulations, use prohibited in Europe chemicals to conserve textiles and leather. The business is based on quick response to satisfy or even anticipate consumer needs at the lowest price. By revenue, Zara, H&M, Marks &Spencer are leaders in fast fashion industry. However, consumer behaviour keeps changing. It especially concerns youngest generations, bearing in mind the way, the location where clothes are produced and the quality of materials. KPMG survey on sustainable fashion global perspectives confirms the statement. To satisfy customer needs, companies try to be green, but it is often just the greenwashing phenomenon. An example of brand trying to be greener to remain a market leader and gain competitive advantage is H&M which launched Conscious line made from customers' recycled clothes. Apart from big players in the industry, we can observe an increase in SMEs offering eco-friendly, recyclable solutions like Aroma30, a small fashion firm from Rome. Its designer Michela Fasanella stands on the assumption that sustainability is a great, futuristic opportunity especially in relation to fresh market which starts to care about the issue. I analysed McKinsey report regarding future perspectives of fashion – textile industry which also / affirms the importance of sustainability. In my research, I will present sustainable textile companies such as Pattern, Aquafil and Lenzing. Analysing financial documents: balance sheet and income statement, I will establish their financial health and calculate inter alia: liquidity ratios to check their ability to pay off short term debts in the near future and have enough money to finance current business operations. Next, I will calculate financial leverage and coverage ratios to establish the level of debt dependency on shareholders and ability to cover interest charges. Then I will focus on activity ratios to show firms' ability to cover current liabilities with current assets. Lastly, I will count profitability using mainly: ROI, ROA, ROE. My analysis is based on financial figures for the financial years 2017, 2018 and 2019 to identify the trend and future prospects. Additionally, I will provide information about new technologies used and possible waste management solutions offered by the companies. In conclusion, basing on results of financial analysis, I will assess profitability of sustainable textile companies and referring to sources, establish their development prospects. I believe my research will highlight the increasing importance of sustainability, awareness of generated environmental impact and future direction in the textile industry.