THE PRODUCTIVITY PARADOX: IS FASHION'S BIGGEST WASTE ALSO A BUSINESS PROBLEM?

Fashion has spent years trying to solve its sustainability challenge. The industry has invested in better materials, traceability, recycling, resale, repair, new technologies and increasingly sophisticated sustainability strategies. All have a role to play. But there is another question that deserves much more attention from the commercial side of the industry: how much of fashion's environmental challenge is connected to the way the industry makes business decisions in the first place?

This is not an argument that sustainability can be reduced to profitability. It cannot. Fashion's environmental and social impact stretches across raw materials, manufacturing, energy, water, chemicals, logistics, product life and end-of-life. But there is a significant area where the commercial and environmental questions meet particularly clearly: what happens when fashion produces, buys, moves or discounts product that does not create the value the business expected?

That is where productivity becomes interesting. Because when a business gets a commercial decision wrong, the consequence is not necessarily confined to the P&L. The product has already consumed materials, manufacturing capacity, energy, labour, transport and working capital. If it then has to be repeatedly moved, heavily discounted or ultimately becomes waste, the business has failed to capture the value it expected, and resources have been used without achieving the intended outcome.

THE PROBLEM STARTS BEFORE THE GARMENT EXISTS

Fashion is unusual because so many commercial decisions have to be made before the customer makes theirs. A buyer decides what the customer might want. A merchandiser decides how much is required. A supplier commits production capacity. Materials are sourced. Product is manufactured. Stock is transported, stored and allocated. Only then does the customer decide whether they actually want it.

That creates an unavoidable risk: fashion has to make decisions based on a forecast of demand rather than demand itself.

When that forecast is wrong, the consequences move through the entire system. Product may be transferred between stores, moved back to a warehouse, pushed through another channel, discounted, sold through an outlet or redirected to another market. Much of that stock will still find a customer, and it is important not to suggest otherwise. But some will not.

The European Environment Agency's latest assessment estimates that around 4–9% of textile products placed on the European market are destroyed before they are ever used for their intended purpose. The EEA is also clear that the available data is scattered and incomplete, so the figure should be treated as an estimate rather than a precise measurement of the industry. That qualification matters. So does the underlying issue.

Why are products being made, bought and brought into the system if there is a meaningful possibility that they will never be used?

INVENTORY IS MORE THAN STOCK

For years, inventory has primarily been discussed as a commercial issue. Too much stock ties up working capital. It requires space. It creates markdown risk. It puts pressure on margin and can make the next buying decision more difficult.

But inventory is also a physical representation of resources that have already been committed.

McKinsey's State of Fashion 2026 analysis found that fashion's days inventory outstanding reached an all-time high in 2024, 14% above the pre-2020 average. Its research identifies inventory, assortment mix and pricing and promotions among the leading areas executives are looking to optimise.

That does not mean every additional day of inventory is inherently bad. Retailers need availability. Brands need depth in key products. Seasonal businesses have to commit ahead of demand. Safety stock can have a legitimate purpose.

The important distinction is between productive inventory and unproductive inventory.

Productive inventory supports availability and generates a return. Unproductive inventory increasingly requires intervention simply to get it out of the business.

That distinction matters commercially. It also matters environmentally, because the resources embodied in the product have already been committed whether or not the product ultimately sells.

THE MARKDOWN IS A SIGNAL, NOT THE SOLUTION

Fashion has become exceptionally good at moving stock. Markdown works. Outlet works. Off-price works. Wholesale can absorb stock. International markets can provide alternative demand.

These are important commercial mechanisms, and none should automatically be considered a failure.

But they can also obscure the original problem.

If a product was planned to sell for £100 and eventually sells for £50, the business has still generated a sale. But the economics of that product have changed significantly. The question is not whether markdown is bad. The question is whether a business is increasingly relying on markdown to correct decisions that could have been better earlier in the process.

That takes us back to the beginning: the quality of the decision about what to make, how much to make, when to make it and where to put it.

Waste management happens at the end of the process. Better decision-making starts at the beginning.

THIS IS WHERE PRODUCTIVITY AND SUSTAINABILITY MEET

Better demand forecasting can reduce the risk of excess stock. Better assortment planning can reduce unnecessary duplication. Better allocation can reduce unnecessary movement around a retail network. Better replenishment can allow businesses to respond more closely to actual demand rather than relying entirely on an early-season forecast.

None of these are fundamentally sustainability initiatives.

They are commercial disciplines.

But they can have environmental consequences because they influence how much product enters the system and how efficiently it moves through it. This is precisely why the argument needs to be made carefully. We are not suggesting that every productivity improvement automatically produces a sustainability benefit, or that commercial efficiency can substitute for wider environmental action.

The opportunity is to understand where the two objectives genuinely align.

THE COST OF COMPLEXITY

There is another issue hiding underneath the inventory debate: complexity.

Fashion has become exceptionally good at adding things. More collections. More drops. More colours. More channels. More markets. More collaborations. More content. More customer propositions.

Some of that creates genuine customer value. Some of it creates unnecessary complexity.

Every additional product creates another forecasting decision. Every additional colour creates another inventory commitment. Every additional channel creates another operational requirement. Every additional market introduces another set of commercial, logistical and regulatory considerations.

Complexity consumes management time, working capital, systems capacity and operational attention. And when complexity creates products that do not sell, it can also contribute to physical waste.

The answer is not necessarily fewer products.

It is better reasons for every product to exist.

THE QUESTION SHOULD MOVE FROM VOLUME TO VALUE

Fashion has historically celebrated volume: more sales, more customers, more stores, more markets, more product and more growth.

Growth remains essential. Fashion businesses need to make money and generate returns. But the more sophisticated question is becoming: how much value are we creating from the resources we are putting into the system?

That changes the metrics. Instead of looking only at sales, businesses should understand full-price sell-through. Instead of looking only at stock levels, they should understand inventory productivity. Instead of simply counting customers, they should understand the economics of acquiring and retaining them. Instead of measuring products launched, they should understand which products actually contribute to the business.

And instead of asking simply how much product was sold, businesses should increasingly understand what happens to the product that does not sell.

These are not sustainability metrics.

They are better business metrics.

But they can tell us something about sustainability too.

RETURNS SHOW WHY THE ISSUE NEEDS NUANCE

Returns are a good example of why this conversation cannot be reduced to simple assumptions.

It would be easy to say that returns are environmentally damaging because they create additional transport. The evidence is more complicated. The EEA estimates that around 20% of clothing bought online in the EU is returned, but it also notes that distribution and retail account for only around 3% of textiles' environmentally harmful emissions. Its conclusion is therefore important: a return can still be environmentally preferable if it results in the product being resold and used rather than becoming waste.

That distinction matters.

Not every inefficiency has the same impact.

The question is not simply whether something moves twice. It is what happens as a result. If a customer returns a garment because it does not fit and another customer subsequently buys it, the product has still performed its intended role. If the return ultimately becomes unsold stock that is repeatedly moved, heavily discounted or destroyed, the picture is very different.

The commercial and sustainability questions converge much more clearly at that point.

REGULATION IS CHANGING THE ECONOMICS

This is no longer entirely theoretical.

Since 19 July 2026, large companies in the EU have been prohibited from destroying unsold clothing, clothing accessories and footwear, under the Ecodesign for Sustainable Products Regulation, subject to specified derogations. The European Commission says the measure is designed to prevent the waste of valuable products and the resources used to make them.

That changes the commercial question.

It is no longer simply:

How do we get rid of this stock?

Increasingly, it becomes:

Why did we create this stock, and what should happen to it now?

That makes inventory quality more than a merchandising issue. It becomes a wider business question involving finance, product, buying, supply chain, operations and increasingly sustainability.

And the direction of travel is broader than the EU. France has this month introduced new environmental fees targeting ultra-fast fashion, with the measures explicitly designed to address the environmental consequences of high-volume, low-cost clothing models.

Whatever an individual business thinks about those policies, the commercial direction is becoming harder to ignore.

The cost of excess, waste and short product lifecycles is increasingly entering the business model.

TECHNOLOGY MAY HELP, BUT IT IS NOT THE STRATEGY

AI and better data could make a meaningful difference. Demand forecasting, allocation, replenishment, pricing and inventory management are all areas where technology can potentially improve decision-making. McKinsey identifies demand planning, inventory allocation and inventory management as significant efficiency opportunities for fashion businesses in 2026.

But technology does not automatically create productivity.

If a business has a flawed buying process, AI can help it make more buying decisions. If the range is unnecessarily complex, technology can help manage the complexity. If the organisation rewards volume, technology can help increase volume.

The technology is therefore not the strategy.

The quality of the decision remains the strategy.

The opportunity is to use technology to make better decisions earlier, when those decisions still have the greatest commercial and resource consequences.

SO WHAT SHOULD FASHION DO?

The answer is not simply to produce less.

That would be too simplistic.

Fashion needs newness. It needs creativity. It needs experimentation. It needs commercial ambition. Customers do not want an industry that stops innovating.

The better objective is to become more precise.

Make what the customer is more likely to want. Buy closer to the confidence level of demand. Build flexibility into the supply chain. Understand which products deserve depth and which do not. Use data to identify demand earlier. Make better decisions about returns. And make sure there is a commercial reason for the complexity being added to the business.

This is not about turning fashion into a perfectly predictable industry. It never will be.

It is about reducing the amount of avoidable uncertainty that gets converted into physical product, inventory and cost.

THE BIGGER QUESTION

Perhaps the most interesting change is not going to come from another sustainability initiative. It may come from changing the definition of what good business looks like.

For too long, excess has sometimes been treated as an unavoidable consequence of creativity, choice and speed. But excess has a cost. Finance sees it in working capital. Merchandising sees it in markdown. Supply chain sees it in additional movement. The customer sees it in discounting. And increasingly, regulators are asking what happens to product that remains unsold.

The environmental consequence is another part of that same story.

That does not mean commercial productivity and sustainability are the same thing. They are not. But where better commercial decisions mean fewer unnecessary resources are committed to products that do not create sufficient value, there is an opportunity for both the business and the wider system.

That is the real productivity paradox.

Fashion does not simply need to become better at selling what it makes.

It needs to become better at deciding what is worth making in the first place.

And perhaps that is one of the most important commercial questions the industry will face over the next decade.