The Apparel industry includes the manufacture of clothing and accessories. It does not include footwear and has a market value of $45.9 billion. The Retail industry consists of the Retail Specialty sector, which is focused on a single product, such as car dealerships, auto parts, home improvement, office supplies, books, garden centers, etc; and the discount store, such as Wal-Mart or Target, which offers a diversified product line. The market cap for the Retail industry is $138.1 billion (New York Times 2011).
Physical Exposure Risk. The Apparel and Retail industries are at risk of supply chain disruptions and regular operations due to climate change impacts:
- Climate change can affect the availability and costs of raw materials;
- Changes in precipitation can affect production of water-intensive goods;
- More frequent severe storms can disrupt shipping and production at facilities located in storm-prone areas and can damage physical stores;
- Hotter temperatures may require more energy to run air conditioning (Llewellyn 2007).
Policy & Regulatory Risk. The Apparel and Retail industries will be affected indirectly by policies. Production input prices will increase as other sectors, such as the chemicals industry, come under regulation. Energy costs will become more expensive. Any policies and regulations regarding property, such as energy efficiency standards, will have a major impact given that these sectors have large real estate carbon footprints. Changes in insurance policy will also be important (Ceres 2008).
Reputational Risk. Some segments of these industries cater specifically to consumers who care about the climate change-related actions of a company, but there is not yet widespread demand for such products. However, opinion can shift quickly and it would behoove the industry to be prepared (Carbon Trust 2004).
Competitive Risk. The Apparel and Retail industries are intensely competitive and a detriment of any kind, whether it is an upstream or downstream problem, can have a serious impact on the viability of a company. As such, these companies have to constantly stay atop of potential problems and anticipate trends. A 2008 Ceres report calls out these industries for not doing enough on climate change. The report cites the need for these industries to maximize energy efficiency in their operations, engage suppliers on emerging climate change standards, and to market climate-friendly products (Ceres 2008).