H&M Group and EY are using fashion’s high-emission supply chains to show how targeted decarbonisation can unlock business value, not just meet sustainability targets. Their new framework links supplier investment, shared financing and risk reduction in a model that can be applied across global production networks.
Turning Carbon Reduction Into a Balance Sheet Question
The fashion sector carries a heavy emissions footprint, with studies frequently placing its share of global greenhouse gases in the low single digits and concentrated in complex, multi-tier supply bases. For large brands, more than 95 percent of climate impact typically sits in Scope 3 activities such as material production, manufacturing and logistics, where visibility is limited and commercial leverage is often fragmented.
H&M Group, working with EY and drawing on analysis from HSBC and the Apparel Impact Institute, has reframed this problem as a capital allocation challenge rather than a cost of doing good. Their joint paper, ‘Accelerating Fashion Decarbonisation – An Efficient Approach to Unlocking Corporate Value and Financing the Supply Chain Transition‘, argues that emissions reduction programs should be evaluated through the same lens as any long-term investment in resilience, continuity and margin protection.
The work highlights a structural barrier that extends far beyond fashion: suppliers are being asked to finance upgrades to energy systems, equipment and processes while operating on thin margins and short contract horizons. Energy efficiency projects may pay back quickly, yet many facilities lack access to affordable capital or confidence that volumes will remain in place long enough to justify the spend. Larger steps, such as switching from fossil-based power to renewables, require longer payback periods and more patient funding.
The analysis points to climate risk as a hard financial exposure rather than a theoretical future issue. Since 1980, climate-related disasters have imposed an estimated 3 trillion dollars in losses on the global economy, disrupting production, transport and market access. The paper positions investment in mitigation and adaptation across the supply base as a direct hedge against that volatility, supporting business continuity and preserving enterprise value.
Shared Financing and Collaboration as Operating Design
The proposed answer is not a single program but a financing and governance architecture that links brands, suppliers, financial institutions and specialist NGOs. The whitepaper calls for sector-level platforms where supplier decarbonisation projects can be aggregated into standardised models, allowing co-investment at scale and creating repeatable structures for due diligence, measurement and reporting.
HSBC’s contribution underlines the role of sustainable trade finance in this shift, with instruments that reward measurable carbon reductions or verified improvement plans through better terms. Industry estimates from the Apparel Impact Institute and Fashion for Good place the total investment required to bring fashion to net zero by mid-century at just over 1 trillion dollars. Without blended models that distribute that burden along the chain, the report suggests the transition will stall at pilot level.
The collaboration also stresses that brands must move from transactional purchasing to active stewardship of their production networks. That includes committing to co-finance decarbonisation at key suppliers, aligning contract tenures with investment horizons and integrating climate risk into standard sourcing and portfolio reviews. The goal is to turn emissions performance, energy mix and physical climate exposure into regular inputs to network design decisions alongside cost and service.
The paper frames cross-brand collaboration as a practical necessity. Shared standards for data, baselines and project validation reduce duplication and allow multiple buyers to support the same facility upgrades. Joint infrastructure, such as renewable energy projects in manufacturing clusters, can only be justified if several anchor customers underwrite demand. Industry reports in other high-emission sectors, such as chemicals and metals, point to similar pooled approaches as a way to unlock large-scale green power and process investments.
The Real Test Sits In Procurement and Planning Choices
The most underappreciated implication of this work lies in how it recasts procurement and planning decisions. If climate risk and emissions intensity are treated as core financial variables, then allocation, contracting and inventory strategies begin to shift: preferred suppliers increasingly become those that combine cost competitiveness with credible decarbonisation pathways and lower exposure to climate disruption. That change will likely create a divergence between networks that internalise these factors early and those that continue to manage them at the margins of ESG reporting.
FAQs
Q: Who is responsible for supply chain decarbonisation?
A: Both brands and suppliers share responsibility, but brands increasingly co-finance sustainability investments.
Q: What is Scope 3 in supply chains?
A: Scope 3 emissions are indirect emissions from suppliers, logistics and product lifecycle activities.
Q: How can companies finance supplier decarbonisation?
A: Through blended finance, sustainability-linked loans and co-investment platforms.
