The report, titled ‘The Cost of Inaction – The Financial Risks of Delaying Decarbonization in the Apparel Industry,’ examines how escalating expenses related to carbon pricing, raw materials, and energy are expected to affect operating margins if companies delay efforts to reduce emissions.
Based on data from ten major apparel brands, the report identifies three primary factors contributing to this projected decline. These include increases in carbon prices, higher costs for raw materials, and greater energy expenses.
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The report also notes that early investment in decarbonisation measures, especially at the supplier level, can help reduce financial exposure in the long term.
Aii president and CEO Lewis Perkins said: “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.”
Key findings from the report:
- Under a net-zero scenario, doing nothing could cut the $1.77tn fashion industry’s value by 70% by 2040 for a typical conventional player.
- Delaying the energy transition can raise costs and compound risks, including fossil-fuel price swings (especially coal) and raw-material pressures.
- Incremental actions can deliver near-term savings, boost resilience, and fund bigger decarbonisation later.
- Strengthening supply chains and relying less on climate-sensitive inputs can reduce 2040 risk exposure by roughly four to five times.
The Cost of Inaction report also highlights supplier-level measures such as electrification and the adoption of renewable energy as options that are ready for investment and could help protect short-term profit margins. It notes the potential benefits of collective funding and collaborative investment approaches.
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By GlobalDataThe analysis also points to the role of chief financial officers (CFOs) and finance teams in managing climate-related risks, indicating that early investment may contribute to greater financial stability and long-term competitiveness.
Recommendations:
The report urges business leaders in various sectors to recognise the financial risks associated with postponing climate mitigation and to take steps to strengthen resilience and protect long-term business performance.
Aii sustainable finance senior director Kristina Elinder Liljas said: “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.
“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.”
