The relationship between unregulated financial products and the fashion industry’s contribution to global warming.

The introduction of products like buy now, pay later (BNPL), a point-of-sale financing method, changed the purchasing power of many young adults. Alongside the drastic change in marketing on social media, our consumption levels have increased exponentially.

Using these forms of credit, which primarily perform soft financial checks, individuals can overconsume and return without any short-term strain on their current account.

This is exacerbating the problem the fashion industry already causes for the climate. The BBC reports that overall, the fashion industry is responsible for 8–10% of global emissions, more than aviation and shipping combined.

What’s the link between the BNPL and overconsumption?

Findings in a paper published by Lauren Ah Fook and Lisa McNeill, researchers at the University of Otago, New Zealand, demonstrate that “BNPL users have a higher online impulse buying tendency than those who do not use BNPL and a clear link is identified between online impulse buying tendency and sales conversion tool sensitivity, thus promoting overconsumption in this setting.” 

At checkout, an individual can choose the option to purchase goods with a minimum spend of say £50 (depending on the retailer), which in itself promotes overconsumption, and not have that money deducted from their account all at once.

Most BNPL users pay in three instalments in the months following the purchase. This removes the short-term strain on an individual’s bank account.

As individuals aren’t limited by monetary constraints, their propensity to over consume is higher. 

Klarna, the UK’s biggest BNPL provider, states on its website that “58% of instant financing customers have a higher average order value than typical shoppers”. 

This is due to two factors that arise as a result of BNPL: firstly, the reassurance that the customer doesn’t have to pay immediately; and secondly, it’s the minimum spend they have to use the service. 

While many shoppers use BNPL to purchase multiple sizes and return the ones they don’t need, others are encouraged to meet the minimum spend threshold by adding a lot more than planned to their baskets. 

Young adults are buying a lot more than necessary of conspicuous items such as fashion and footwear, which make up 90% of purchases on BNPL platforms, according to the UK government-issued Woodlard review. The Woodlard review oversaw the sector leading up to the anticipated Financial Conduct Authority regulation.

But how does overconsumption harm the climate?

Firstly, the increase in demand as a result of overconsumption will result in an increase in supply. At the moment, most major fast fashion brands will bring out new items for sale every two weeks and this will only get more prominent with the increase in spending. 

Accompanying this will be an increasing use of raw materials to meet this demand. reported that “the Quantis International 2018 report found that the three main drivers of the industry’s global pollution impacts are dyeing and finishing (36%), yarn preparation (28%) and fibre production (15%)”.

An average of 30% of clothing is returned, according to returns logistics company Optoro. Due to the low cost of manufacturing, it’s cheaper for brands to dispose of the clothes in landfills than clean them to be resold.

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Even back in 2016, before the BNPL providers became mainstream, McKinsey published a study that found that “for every five garments produced, the equivalent of three end up in a landfill or incinerated each year”. 

BBC Future reported that globally, by 2030, we are “expected as a whole to be discarding more than 134 million tonnes of textiles a year and as a lot of clothing is synthetic fibres these can take over 100 years to decompose”.

Do they have the potential to be more sustainable? 

As a result of the Woodlard report, the UK government is planning to bring in regulations for the service to reduce consumer harm. In response to this, Alex Marsh, the UK head of Klarna, told the BBC that “now is the time for regulation”.

Using instalments to purchase clothing that’s sustainably made and of lasting quality would be beneficial moving forward. 

Some fast fashion brands are showing a step in the right direction; for example, Zara is charging £1.95 for online returns, which discourages the practice of bulk buying with the purpose of return.

There’s no silver bullet to reduce the fashion industry’s harm to the climate, but if small changes are made to reduce consumption and waste, then the future of the industry can be more sustainable. If we can find ways to reduce overconsumption, then that’s a start at least.