Fashion looks to reduce emissions, but producers pay the costs

As the fashion industry seeks to cut its carbon footprint, big brands are demanding hard-pressed producers shoulder the cost of measuring and reducing emissions, while the retail giants protect their much-higher profit margins, industry experts said.

The textile sector produces between 2% and 8% of global greenhouse gases, the United Nations says. That is leading consumer countries, including the European Union, to bring in stricter rules on reporting and reducing emissions.

As the manufacture and transport ‌of goods is the ⁠most polluting ⁠part of the supply chain, the onus is on producers to make changes.

"The pressure on suppliers has intensified sharply over the past two years, with brands extending their own compliance requirements down the supply chain, often with little lead time and no additional support," said Mohiuddin Rubel, director at Dhaka-based textile maker Denim Expert Ltd.

For textile suppliers operating on razor-thin profit margins, just tracking and reporting emissions is an expensive business, even before they attempt to make improvements.

But much of the money in fashion is made by the brands.

Swiss NGO Public Eye said in a December 2024 report that eight listed Bangladeshi apparel manufacturers averaged 3% net margins, compared with 15% ⁠for Spain-based ‌Inditex, the world's largest fashion group.

"There is a massive difference in profit margins between brands and suppliers," Rubel said. "While suppliers often have to work with diminishing margins of just about two to 4%, retailers have kept their bigger margins ⁠intact."

Adrian Grzesiczek, general manager at textile manufacturer Shinta Woo Sung Indonesia, said brands were less willing to help producers reduce their emissions.

"Brands seem to be walking away from investment in supplier decarbonisation," he said.

STREAMLINE REPORTING
The cost of reporting emissions is largely due to the hotchpotch of platforms that each charge thousands of dollars to check and audit reports. A manufacturer supplying several brands might share the same environmental data through a number of inhouse and external portals, paying to do so each time.

Rubel said a credible energy audit for a mid-sized factory in Bangladesh, one of the world's biggest textile producers, could cost between $3,000 and $8,000, while annual reporting on a sustainability platform costs $5,000 to $15,000.

The Apparel Impact Institute, which ‌works on decarbonising fashion, this month launched an Energy and Carbon Benchmark in an attempt to make it easier for brands and suppliers to compare factory environmental performance.

Kurt Kipka, the U.S.-based non-profit's chief impact officer, said the tool helps brands and manufacturers track and improve their energy use ⁠and emissions, building on existing reporting approaches and using data they already collect.

Grzesiczek said the tool was one step towards easing the burden on suppliers and improve their bottom lines.

"Having a standard format for tracking and measurement is an absolute must, so this benchmarking initiative is a huge step in the right direction," he said.

But to really cut emissions reporting costs, brands should commit to a single, interoperable standard for disclosing information, Rubel said, while smaller manufacturers with limited resources need simplified metrics, more time and technical assistance to meet rising transparency demands.

When brands compare suppliers using decarbonisation scorecards, they may find it commercially easier to favour larger and higher-performing factories rather than invest in upgrading smaller ones, Rubel said.

"But decarbonisation should be a shared project rather than a compliance hurdle that separates suppliers into winners and losers," he said.