Clothing Firms Face Environmental Scrutiny Costs, Moody’s Says

Global clothing makers face new profitability pressures as they adapt to growing customer scrutiny of their environmental and social practices, according to Moody’s Investors Service.

Fast fashion and discount brands are the most at risk from increased competition as sustainable processes assume greater importance for buyers of their apparel, the ratings firm said in a report Wednesday.

Large international brands such as Hennes & Mauritz AB, Nike Inc. and Adidas AG, and luxury companies such as Ralph Lauren, will tend to fare better, Moody’s said. Even so, the greater scrutiny of sustainable practices will create challenges for the credit quality of many global apparel firms, and transform the way they do business.

“Changing behavior among environmentally conscious and socially aware consumers will put more competitive pressure on global fashion brands to adapt to sustainability measures,” said Guillaume Leglise, an analyst at the credit rating firm. “Longer term, environmental and social factors will put the apparel industry’s profitability at risk.”

Another challenge facing apparel companies stems from regulation related to data protection, Moody’s said. “Brands using online and data analytics are vulnerable to data protection risks, cyberattacks and non-compliance fines, all of which can tarnish their reputations,” the report said.

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