This report transforms climate risk into financial terms, quantifying the growing financial losses brands will incur unless they act against climate change and its risks.
Drawing on insights from participating brands, the report identifies three primary risks – increasing carbon prices, and higher raw material and energy costs – to quantify how inaction on climate change impacts companies’ operating margins and drives material profit losses.
An Aii report warns climate risks could cut fashion companies’ margins by 34 per cent by 2030 and 67 per cent by 2040.
The Cost of Inaction quantifies financial losses from rising carbon prices and energy and raw material costs, urging early supplier decarbonisation.
It calls for collaborative investment and CFO-led action to protect profitability and long-term competitiveness.
The report highlights that early investment—particularly in supplier decarbonisation—can strengthen business resilience and long-term competitiveness in the fashion industry. It warns that inaction could cut the value of the $1.77 trillion sector by 70 per cent by 2040 under a net-zero scenario. Delayed energy transition may raise costs and risks, while efficiency upgrades and supply chain diversification can reduce climate exposure four- to five-fold.
The Cost of Inaction also identifies investment-ready supplier measures to protect near-term margins including electrification and renewable energy adoption, underscoring the importance of pooling funding and collaborating on investment. The report identifies chief financial officers and finance teams as critical sponsors for mitigating climate risks, outlining how early investment offers a path to financial resilience and long-term competitiveness.
“The fashion industry has long discussed climate risks, but awareness without strong action will not make the industry reach science-based climate targets. This report highlights the financial consequences of that gap. We welcome Aii’s recognition of our financial solutions to accelerate the decarbonisation of our supply chain, and we fully support that meaningful change requires collaboration from all relevant actors across the entire supply chain,” said Ulrika Leverenz, head of H&M Group’s Green Investments.
“Collaborative investment remains a crucial pillar to maintaining business stability in the face of climate change. Mitigating these impacts will take effort from players in the industry ecosystem working together to scale deployment-ready decarbonisation strategies while investing in long-term operation stability,” said Lewis Perkins, president & CEO, Aii.
This report outlines what many industries stand to lose if no action is taken – not just the fashion sector. The Cost of Inaction calls upon executives across industries to acknowledge the risks that come with delaying climate mitigation and take action to improve resilience and safeguard business prosperity.
“The Cost of Inaction puts a clear price tag on the risks and losses of a delayed net zero transition, demonstrating the importance of decarbonisation for long-term value,” said Kristina Elinder Liljas, senior director of Sustainable Finance at Aii. “From boardrooms to CFOs, this report is a call to action to accelerate impact across the entire supply chain through collaboration and co-financing, and leverage resources like Aii’s Fashion Climate Fund.”
Fibre2Fashion News Desk (RR)
