Climate-related risks could reduce operating profits in the global fashion industry by up to 34% by 2030 and as much as 67% by 2040 if urgent action is not taken, according to a new report by the Apparel Impact Institute (Aii).
The report, titled The Cost of Inaction, shifts the climate debate from corporate responsibility to financial urgency, translating climate risks into measurable financial losses. Drawing on strategic insights from ten leading global apparel brands, the study quantifies how delayed climate action could significantly erode margins and long-term enterprise value.
Rising costs and carbon exposure
The report identifies three primary risk drivers affecting profitability:
• Increasing carbon prices
• Higher raw material costs
• Escalating energy expenses
Together, these pressures are expected to materially impact operating margins across the sector. Under a delayed net-zero transition scenario, the value of the $1.77 trillion global fashion industry could decline by up to 70% by 2040, the report warns.
Early investment as competitive advantage
Aii highlights that proactive investment—particularly in supplier decarbonization—can strengthen resilience and improve long-term competitiveness. Measures such as electrification, renewable energy adoption, and supply chain diversification could reduce climate exposure four- to five-fold.
The report also underscores the need for pooled financing and cross-industry collaboration to scale decarbonization efforts efficiently. Chief financial officers and finance teams are identified as key decision-makers in driving climate-related investments.
Ulrika Leverenz, Head of Green Investments at H&M Group, welcomed the report, stating that meaningful climate action requires collaboration across the entire supply chain. She emphasized that awareness alone is insufficient to meet science-based climate targets.
Lewis Perkins, President and CEO of Aii, said collaborative investment remains critical to maintaining business stability amid climate change. He noted that scaling deployment-ready decarbonization strategies is essential for safeguarding long-term operational resilience.
Kristina Elinder Liljas, Senior Director of Sustainable Finance at Aii, described the report as a “clear price tag” on the risks of delaying the net-zero transition, calling on executives and finance leaders to accelerate climate investment through collaboration and co-financing mechanisms such as Aii’s Fashion Climate Fund.
A call to action
Beyond fashion, the report signals broader implications for other industries facing climate-related disruptions. The Cost of Inaction urges corporate leaders to recognize the financial risks of delay and prioritize decarbonization to protect long-term business value and industry stability.
