The 3-part plan luxury brand Sheep uses to reduce waste and carbon emissions - and get customers to 'adopt' a sheep with every purchase

• Luxury brand Sheep is known for its environmentally-conscious investment strategies.
• The brand uses net-negative farms in New Zealand to source wool.
• Sheep's founder discusses building an intricate supply chain.

Edzard van der Wyck, cofounder of the fashion brand Sheep, wanted his brand to show the fashion industry its "bad behavior."

One of the top producers of CO2 emissions according to the Ellen MacArthur Foundation, the global textile industry emits 1.2 billion metric tonnes (1.3 billion tons) of CO2 equivalent per year - close to the level of emissions from the automotive industry.

The main goal of Sheep, which Van der Wyck launched with his friend Michael Wessely in November 2019, was to build a business model that could reduce waste and carbon emissions, in addition to making cute clothes. He did this by creating an intricate supply chain and a plan to invest in social and environmental causes.

The supply chain was slightly disrupted during the pandemic, but sales steadily increased he said. If the intricate supply chain isn't attainable, Sheep's investing strategy could be a good idea for small businesses looking to have a more sustainable impact.

Sheep gives 5% of its revenue to environmental projects

Most of the brand's carbon is offset by its biodiverse investing. The company dedicates 5% of its revenue to environmental projects, meaning every sweater it sells takes out a minimum of 320 kilograms of CO2 from the atmosphere, van der Wyck said.

Steve Norcini, senior portfolio manager at Wilmington Trust told Insider the interest in environmental, social, and corporate governance (ESG) investing has been increasing over the last several years and that the pandemic, in addition to the presidential election, was a "tipping point" for many.

"It's possible that someday all investment strategies will incorporate ESG in some way," Norcini told Insider.

As part of its ESG strategy, Sheep gives 5% of its revenue to projects such as protecting engendered species and tree planting and agricultural projects, specifically soil regeneration, to help revive land that has been overfarmed.

The company also donates to what it calls "emergency projects" such as helping to curb Amazon deforestation and has started to take on projects dedicated to climate justice, inspired by the Black Lives Matter movement.

Andrew Lee, head of sustainable and impact investing at UBS Global Wealth Management told Insider the pandemic also showed the importance of how companies operate and the relevance of ESG factors in investment analysis.

"The pandemic highlighted the interconnectedness between the environment, our health, markets, and the economy," he said.

If the 31 million small businesses in the US offset the same amount of carbon as Sheep does per sweater, 9.9 million metric tons of carbon could be taken from the atmosphere. That's just a start, of course, to the 100 gigatons the Intergovernmental Panel on Climate Change recommends pulling from the atmosphere to undo decades of greenhouse gas emission.

Inside the company's intricate supply chain model

Though based in London, Sheep sources from farms in New Zealand. Cashmere is popular, but it's not quite sustainable, van der Wyck said, since it causes overgrazing in Mongolia. "Wool is far better at doing things such as temperature regulating and not retaining odor," he said.

Sweaters are a timeless piece of a capsule wardrobe, "it's something that hasn't necessarily gone out of style," van der Wyck said. The sweaters go for around $200 and were designed to be comfortable and not cause overheating.

Sheep sought out farms that use "regenerative farming techniques," meaning the farmers manage their lands to make them as bio-diverse as possible. Rich biodiversity on a farm can contribute to natural carbon mitigation, van der Wyck said.

"It's making sure that you have a rich cocktail of vegetation and flora and fauna, you want to make sure that soil rests because then it can absorb more carbon and you make sure that you're moving stock around," he continued. "So moving sheep around a lot, actually can have a positive impact on the environment."

The brand sources makes yarn on an Italian mill, uses a manufacturer in Spain. To transport the items throughout the world, Sheep uses ships. Water transportation, van der Wyck said, has a very small carbon footprint and in total, the entire journey for Sheep produces about 500 grams (1.1 pounds) of CO2, according to van der Wyck.

Allowing customers to adopt a sheep creates emotional buy-in

Each Sheep sweater has a digital tag that allows the buyers to scan and adopt their own sheep.

"People start to create a connection with the sweater through having this emotional involvement with the sweater," he said.

Customers can see the exact location of their sheep via their phones, and even know when its lambs are born. The digital tags are inspired by the ones farmers use to track their respective flocks, and the brand will send emails with updates on how the sheep is doing, as well as updates about the farmers.

Van der Wyck believes consumer attitudes are starting to pivot away from fast fashion. The pandemic, if anything, has made people more aware of their impact their behaviors have on the planet.

"A lot of people had absolutely no idea how bad the fashion industry was," he said. "It's encouraging to see our message finally getting out there."