Fashion’s Green Transition Has a Buyer-Supplier Disconnect

At the Cascale annual meeting in Athens on Wednesday, Asif Khan, executive director of supply chain and sustainability at Mondetta, acknowledged the central conflict undercutting fashion’s green ambitions: while sustainability demands a long-term sourcing strategy, brands rely entirely on the ability to pivot at a moment’s notice.

It’s a commercial reality that constrains companies such as his, Khan admitted. Navigating a volatile environment shaped by fast-changing consumer demands, evolving trends and geopolitical instability, brands are unable to offer the multi-year purchasing guarantees that factories need to justify significant capital investments, he said.

To bridge that divide, Mondetta consolidates 80 percent of its orders among a core 20 percent of suppliers, backing them with stronger demand forecasts, co-funded projects and interest-free loans for sustainability upgrades. But such efforts remain an outlier. Market-wide, the structural friction between factory overhead and what brands are actually willing to pay prevents decarbonization efforts from fully scaling.

Suppliers, for the most part, are still expected to shoulder these upfront commitments while running on razor-thin margins, said Krishna Manda, global head of sustainability at Lenzing Group. While low-hanging fixes such as efficiency improvements can be self-funded through short-term debt, major infrastructure upgrades like industrial heat pumps or electric boilers require payback periods of five to 10-plus years. The defining question, then, he said, is how to create the conditions that give value-chain partners the confidence to invest in this transformation.

That tension was a throughline across the second day of the three-day conference. The idea of shared risk, already fraught, has been further heightened by pressures such as tariffs, conflict and regulatory change. Crises, as Isobel Archer, labor rights program manager at the Business and Human Rights Center, noted during a scenario-planning workshop, rarely create new problems. Instead, they typically amplify pressure points already embedded in day-to-day purchasing practices.

“What we see are pressures from external contexts exacerbating already significant power asymmetries between buyers and suppliers in global supply chains,” she said.

Capital investment aside, even fundamental ground rules collapse under strain. Orders are delayed, paused, or canceled; payment terms are renegotiated; discounts are demanded; and lead times are shortened—often unilaterally by brands, Archer added.

To be sure, C-suite executives’ language around sustainability has shifted over the past couple of years amid growing turmoil and upheaval, Anna Ryott, Nordic chief impact officer at EY, said on a panel moderated by Kurt Kipka, chief impact officer at the Apparel Impact Institute (Aii). But while the narrative is increasingly about protecting and creating value, as well as building resilience, she said, a key challenge is that sustainability is still framed as a cost or an investment.

“We need to highlight the cost of inaction across every part of the business, including supply chain decarbonization,” she said, citing a joint paper by H&M Group and EY, with insights from HSBC and Aii, that found that financing supply chain decarbonisation is essential to protect long-term corporate value. “When you make that visible, it sends a powerful signal to CEOs and CFOs: delaying action only postpones a far more brutal cost later.”

Hampus Starre Friberg, head of sustainability strategy and controlling at H&M Group, agreed. The Swedish retailer, he said, doesn’t have separate business and sustainability strategies. There’s just one encompassing both.

“We don’t look at the cost versus a business-as-usual case, but rather how we create value through the work we’re doing in sustainability—connected to supply chain resilience, energy security, and ultimately our competitiveness as a brand,” he said. He pointed to H&M’s internal green financing models—which previously helped Indian textile manufacturer Arvind replace its coal boilers with a biogas system—as well as its participation in broader joint efforts like the Future Supplier Initiative.

Matthew Guenther, vice president of sustainability at TAL Apparel, told Manda that, as a privately held manufacturer, the Hong Kong-based garment giant has historically been able to take a more protracted view, funding foundational emissions-reduction projects on its own balance sheet while leveraging zero-CapEx power purchase agreements for rooftop solar and converting boilers to local biomass across its facilities in Ethiopia, Thailand and Vietnam.

But even that approach has hit a ceiling. The next phase of decarbonization—replacing boilers with electric models, for example—would drastically drive up operating costs, making it untenable without co-investment or long-term purchasing guarantees from brand partners.

That funding gap has pushed financial institutions to introduce new tools to reallocate risk and unlock longer-term liquidity. One such tool is sustainable supply-chain finance, explained Clare Woodman, global head of sustainable trade solutions at HSBC Bank. Under these programs, banks use a brand buyer’s credit strength to pay factory invoices upon shipment rather than leaving suppliers waiting 60 to 90 days. Suppliers that meet verified sustainability KPIs also qualify for lower interest rates, freeing up cash flow for high-cost decarbonization projects.

Because suppliers and manufacturers hold the emissions and ultimately deliver physical change, however, driving investment at scale still hinges on strong buyer signals, Woodman said.

“Buyers need to provide a level of comfort,” she added. “While we appreciate you can’t offer 100 percent certainty, you can give appropriate buying signals and confidence. Where suppliers are truly strategic—for a specific brand or as a collective—there is a conversation to be had about what level of support a brand could offer to make the investment case much more appealing to those manufacturers.”

Even so, individual supplier support will only go so far, Priyanka Khanna, innovation director of scaling at Fashion for Good, said on Manda’s panel, where she made the case for moving beyond facility-by-facility fixes toward a cluster-based approach that pools demand across multiple facilities and the brands sourcing from them.

“At a cluster level, because we are looking at product and geography, the interventions needed are very similar, whether they involve utilities, energy or some of the bigger machinery and processes,” she said. “For example, solutions that can be brought in at a textile-park or cluster level become much more feasible. A very small example: ordering one quaternary-stand technology system for a single facility versus placing an order for 10 to 15 machines across an entire cluster would bring down the price as well.”

Clusters can also enable blended-finance structures that combine commercial loans, development-bank guarantees and brand co-investment, spreading risk across multiple stakeholders. Yet brands are often wary of funding shared infrastructure, Khanna said.

“So how do we create more buy-in that they’re able to contribute directly to a cluster, not just to the suppliers that work for them?” she said.