Mary-Lynn Cesar, Kapitall: New technology is leading to more sustainable clothing companies. Will this become an industry standard?
DuPont (DD) released its third quarter earnings on Tuesday. Increased operating earnings year-over-year in nearly every segment helped the chemical giant rebound from its second quarter decline, with a profit of $0.45 a share.
[Read more on Sustainability from Kapitall: Is Your Portfolio Melting the Polar Ice Caps]
In the company's Industrial Biosciences' unit, high sales of renewably sourced fiber Sorona drove the segment's operating profit up 12.5% from the third quarter of 2012. Made with "rapidly renewable" materials, Sorona is a biopolymer used to create sustainable carpeting and apparel.
By substituting corn-derived glucose for the petrochemical ingredient used in petroleum-based materials, Sorona production consumes 30% less energy and reduces greenhouse gas emissions by 63%, in comparison to production of an equivalent amount of nylon.
The fiber blends easily with others, and its composition allows apparel manufacturers to dye fabric blends at lower temperatures. This drives down energy consumption even more – lowering the dyeing process's environmental impact.
Making green look good
Just as Sorona enables manufacturers to create sustainable garments, Nike's (NKE) MAKING app aims to help clothing designers integrate sustainability into their work. Launched this summer in the Apple Store, MAKING collects Nike's own ratings for a material's Chemistry, Energy/Greenhouse Gas Intensity, Water/Land Intensity, and Physical Waste.
It then combines them to provide a holistic sustainability score for consumers and designers alike. Developed over the course of seven years of research, Nike hopes that the new app will help designers make "better choices" with regards to their supply chains.
Nike is one of many prominent brands to have publicly expressed a desire to reduce their environmental impact. A look at Google trends for "sustainable brands" over the last 9 years shows that the term is rising in worldwide search interest.
With that in mind, we decided to look for some textile and apparel stocks with a commitment to the environment.
To create the list below, we began with a universe comprised of textile and apparel stocks. We then narrowed down that group with the help of CSRHub, a database for corporate social responsibility that awards companies scores in different categories.
We only included companies with environmental scores above 50. Scores on CSRHub are converted into a rating from 0-100, with 100 being the most positive.
Finally, we looked for companies with encouraging accounts receivable trends as indicated by faster growth in revenue than accounts receivable year-over-year, as well as accounts receivable comprising a smaller portion of current assets over the same time period.
Accounts receivable is the portion of revenue not yet received, and since there is no guarantee that a company will actually get the money, the smaller the portion of revenue attributable to receivables, the healthier the company's revenue.
We were left with three apparel stocks on our list.For an interactive version of this chart, click on the image below. Do you think these environmentally conscious companies are promising investments? Use this list as a starting point for your own analysis.