H&M Group and EY warn that failure to finance supply-chain decarbonisation threatens long-term corporate value and operational resilience across the fashion sector
New industry white paper outlines financing models, governance tools and partnerships to accelerate Scope 3 emissions reductions
CFOs and finance leaders are positioned as central actors in embedding climate risk into capital allocation and supply-chain investment decisions
Finance Leaders Move To Address Fashion’s Supply-Chain Emissions
Global fashion brands must rapidly scale financing for supply-chain decarbonisation or risk exposing their businesses to rising climate disruption, regulatory pressure and long-term financial instability, according to a new white paper released by H&M Group and Ernst & Young (EY).
The report, Accelerating Fashion Decarbonisation – An Efficient Approach to Unlocking Corporate Value and Financing the Supply Chain Transition, draws on insights from financial institutions including HSBC and the Apparel Impact Institute (Aii). It lays out how structured financing models, coordinated industry action and stronger governance frameworks can accelerate emissions reductions across fashion’s complex global supply chains.
The message for corporate finance leaders is direct. Climate mitigation is no longer a peripheral sustainability initiative but a central component of corporate risk management and long-term value creation.
“The cost of inaction on climate change is simply too high – for the planet and for our industry,” said Adam Karlsson, CFO of H&M Group. “CFOs have a fiduciary responsibility to safeguard long-term business resilience, not just short-term profitability. As CFOs, our role is not to debate whether sustainability targets should be met, but to ensure how they are delivered. This requires a conversation combining cost efficiency and value creation: reducing risk, strengthening resilience, and safeguarding long-term corporate value.”
Financing The Most Difficult Emissions Challenge
For most fashion companies, the vast majority of emissions sit outside their direct operations. Scope 3 emissions embedded in supplier manufacturing, materials production and logistics account for the largest share of the sector’s climate footprint.
Decarbonising those supply chains requires capital investment in renewable energy, manufacturing efficiency and low-carbon materials. Yet many suppliers, particularly in emerging manufacturing hubs, face limited access to financing.
The white paper argues that fashion brands can play a catalytic role by enabling financing structures that support supplier decarbonisation while delivering measurable financial returns.
Rather than prescribing a single funding model, the framework provides guidance on structuring sustainable finance solutions with varying levels of risk sharing and return profiles. It highlights how capital allocation decisions, governance structures and partnerships can translate corporate climate commitments into deployable investment strategies.
Investments in supply-chain decarbonisation, the report argues, can reduce exposure to climate-related disruption, strengthen operational continuity and enhance long-term competitiveness.
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Collaboration Becomes Central To Industry Transition
The research emphasises that no single company can decarbonise fashion supply chains alone. The scale and geographic complexity of production networks require coordinated action across brands, suppliers, financial institutions, NGOs and governments.
Anna Ryott, Nordic Chief Impact Officer and Partner at Ernst & Young AB, said the industry is beginning to recognise the economic benefits of collective action. “Fashion has a unique opportunity to work together to solve these challenges. We are seeing growing momentum for industry-wide collaboration and an openness to explore new financing models that can help accelerate the green transition,” she said. “Many industry leaders already recognise that supply-chain decarbonisation not only strengthens resilience but also builds long-term confidence, and they understand that this is the moment to act. The case studies in this paper show that the foundations are already in place, and the ongoing initiatives signal that this is the time to strive for greater impact and global collaboration. Fashion brands must be active stewards of their value chains, not just customers of them.”
The white paper highlights case studies and emerging initiatives demonstrating how coordinated investment can accelerate renewable energy adoption and reduce emissions across supplier networks.
CFOs Positioned At The Center Of Climate Finance Decisions
The report also reframes the role of corporate finance leaders in climate strategy. Rather than treating sustainability investments as cost centers, CFOs are increasingly expected to embed climate risk and decarbonisation strategies directly into capital allocation decisions.
Clair Smith, Head of Sustainable Trade Solutions at HSBC, said financial leadership will be critical to scaling supply-chain investment. “Investing in climate mitigation today can help to reduce long-term costs and business risk. CFOs can play a critical role by embedding climate risk into capital allocation decisions and championing collaborative financing models.”
The report positions supply-chain decarbonisation as a financial strategy that strengthens long-term corporate resilience while aligning with global climate targets.
Industry Stakes Extend Beyond Individual Brands
For policymakers and investors, the findings highlight the broader systemic challenge facing the fashion industry as it attempts to align with the Paris Agreement while maintaining global production networks.
H&M Group and EY argue that large-scale collaboration across brands, suppliers, financial institutions and governments will be required to build shared financing structures, industry standards and infrastructure capable of supporting the transition.
By coordinating investment and governance frameworks across the value chain, the industry can accelerate emissions reductions while protecting long-term competitiveness.
For finance leaders, the conclusion is clear. Decarbonising supply chains is no longer a peripheral sustainability objective. It is emerging as a core financial strategy for safeguarding corporate value and maintaining resilient global production systems in an increasingly climate-constrained economy.
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