Footwear Industry ESG Thematic Report, 2023

Environmental, Social and Governance (ESG) in Footwear Industry

ESG, also called Environmental, Social, and Governance, refers to a set of criteria that investors consider when searching and filtering companies that are "socially responsible." ESG encompasses sustainable and responsible financial practices.

As part of the footwear industry, design, manufacturing, wholesale, and retailing take place. To source and manufacture, the sector uses large, global supply chains primarily in developing countries in Asia, Africa, and Central America. Therefore, its impact on the environment will ultimately be greater and cannot be ignored. During the first and last step in the manufacturing life cycle of a shoe, many chemicals, toxins, and fossil fuels are produced and leaked into the environment. Shoes as a product and shoe manufacturing pose many threats to our planet's wellbeing. A wide range of health problems can be caused by these chemicals, which are causing harm to wildlife as well as humans. Moreover, shoe manufacturing contributes to climate change and global warming by producing large amounts of carbon dioxide.

The Covid-19 pandemic had a major impact on the industry, which has caused market players to reevaluate standard operating procedures in place, from manufacturing to retail, to adapt to new post-pandemic lifestyles (for example, working from home), retail preferences (for example, digital-first mindsets) and travel patterns.

ESG-based impact of the Footwear Sector on the planet

It is estimated that one shoe produces 30 pounds of carbon dioxide, and that 25 billion shoes are produced every year. Globally, there are now about seven billion people, which means that each of us buys about three pairs of shoes every year. Approximately 95 percent of the 20 billion pairs of shoes produced annually end up in landfills. In the footwear industry, labor costs, land resources, material supplies, environmental protection, and sales markets all play a significant role.

Aside from the environmental impact of footwear manufacturing, its transportation produces carbon dioxide as well. Since most footwear manufacturers build factories in third world countries to take advantage of cheaper labor, transportation is an integral part of the marketing aspect of the shoe industry. To deliver the goods to retailers, ships, planes, and trucks are needed because these factories are located far away, and it eventually impacts the environment, cost, and quality too.

ESG Trends

In line to the negative impacts of the footwear industry on environment and sustainability, globally new trends have been developed to minimize those impacts. Sustainable footwear is a trend that is becoming a rage in the global market with a significant growth in the use of sustainable materials in the product. This positively contributes to the United Nations’ Sustainable Development Goal (UN SDG) 12 – Responsible production and consumption. This trend has compelled brands to transition to sustainable footwear.

Companies and customers prefer leather alternatives due to the increase in environmental and social concerns, as well as animal welfare concerns. Therefore, vegan, and sustainable shoes are rapidly growing in popularity. Since vegan or eco-friendly materials are used in making vegan or eco-friendly footwear, animal cruelty-free footwear is also on trend. In contrast to traditional leather, vegan leather uses fibers from mushrooms, apples, and even cactus. Eco-friendly soles are manufactured using biodegradable, green and recycled particles also forbid the use of chemicals in the manufacturing process.

Sustainability challenges for the footwear industry

There are challenges for the industry to be sustainable, although sustainable footwear is generally made from inseparable and decomposable materials, yet sometimes it uses harmful chemicals in its production process. Sustainable footwear tends to be more expensive to produce due to the need for the materials. However, it is expected that technological advancements in the recycling of fabrics will reduce the cost of obtaining raw materials in a few years. Earlier in 2019, a top footwear brand introduced a fully recyclable sneaker line with a carbon-neutral style. This product was aimed at Millennials and GenZ who prioritize sustainability more than previous generations. Leading firms in this market can come up with similar solutions to reduce product end-of-life waste from the industry which is one of the major challenges in the ESG space for the industry. 

The road ahead for footwear industry

Global footwear market size is estimated at USD 373.19 billion in 2021, with a compound annual growth rate of 4.3% projected from 2022 to 2030. The market is growing due to the increasing sales facilitated by e-commerce, extensive advertising expenditures by footwear brands, and growing demand for athletic footwear. As a result of lifestyle-related health issues, including stress and obesity, more people are engaging in sports and fitness activities, increasing demand for comfortable and stylish footwear. Consumers began to prioritize comfort well before 2020.

For years, fashion footwear has been losing market share to athleisure-oriented and more comfortable footwear. In the industry, sustainability benefits consumers, manufacturers, and the environment. With consumer awareness growing, the demand for environmentally sustainable products is increasing with each passing day. Shoe fashion is being replaced with sustainable alternatives made in environmentally friendly ways, and this trend is likely to continue in the future.

Key Companies in this theme

    • Nike, Inc.

    • Adidas AG

    • PUMA

    • Geox S.p.A

    • Timberland

    • Skechers U.S.A, Inc

    • Crocs Retail, LLC

Scope of the Footwear Industry ESG Thematic Report:

    • Macro-economic and ESG-variable analysis of the industry, including regulatory, policy, and innovation landscape

    • Key insights on infrastructure developments and ESG issues affecting the theme

    • Identify key initiatives and challenges within the industry

    • Identify ESG leaders within the industry

    • Understand key initiatives and the impact of companies within the sector to fuel an informed decision-making process

    • Analysis of industry activities based on multi-media sources, including significant controversies and market sentiment

Key Benefits of the Footwear Industry ESG Thematic Report:

    • Developing a comprehensive understanding of macro-economic, Policies & Regulations and innovations affecting the footwear industry, globally

    • Key insights into Infrastructure developments and ESG issues affecting the theme

    • Identifying ESG risks and opportunities to business among leading players in the industry

    • Obtaining a clear and relevant understanding of company actions, progress, and impact and find opportunities for investment