Supply Chains Hold Key to Ambitious Fashion Carbon Targets
Written by Liam Salter. Liam is Global CEO of Reset Carbon, a Hong Kong-based carbon consultancy. Liam will be presenting at the Global Sourcing Expo in Melbourne on the 21st November.
The climate crisis is fundamentally a supply chain crisis. Approximately 50% of global greenhouse gas emissions come from the “big eight” supply chains: food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services, and freight. In Australia, with mandatory climate reporting beginning in 2025, the significance of supply chain emissions will become increasingly clear as major companies are required to disclose their climate-related financial risks. This includes “Scope 3” emissions—indirect emissions outside their direct operational control, including those arising from supply chains.
For a typical fashion retailer, Scope 3 emissions account for roughly 96% of their total carbon footprint. These stem primarily from their supply chains. The fashion industry contributes approximately 2-5% of global greenhouse gas emissions and has historically been proactive in addressing these issues, partly due to scrutiny over social and environmental practices. Currently, more than 500 companies in the fashion sector have made net-zero commitments, with their carbon reduction targets independently validated by the Science Based Targets Initiative (SBTi).
However, many of these businesses now risk missing their targets. According to Remake’s 2024 Fashion Accountability Report, only 6% of fashion brands studied have set credible short and long-term net-zero targets and can demonstrate actual emissions reductions. Alarmingly, a significant number of brands have reported increases in emissions since their baseline year.
The challenges are not primarily financial. Few brands have fully assessed the costs of implementing their carbon targets. In fact, data from market surveys indicate that solutions such as improving manufacturing energy efficiency, investing in renewable energy, and utilising recycled raw materials are unlikely to incur prohibitive costs and may even result in savings. Some retail businesses have already capitalised on this.
So, what’s the hold-up?
One major obstacle is data. To effectively reduce emissions, brands must understand their sources, which requires mapping and tracking their supplier base. In fashion, a large portion of emissions comes from second-tier suppliers, which are often energy-intensive facilities that wash and dye raw fabrics. Many brands do not monitor this layer closely enough.
Another challenge is continuity. As supply chain carbon management is relatively new, brands have yet to develop robust internal systems to tackle the issue. When staff leave, significant delays can occur in implementation, stalling progress as new employees take time to learn the processes.
Moreover, the carbon issue remains unfamiliar to many sourcing and buying teams who influence a brand’s strategy and decisions regarding supplier engagement.
Despite these challenges, many brands have made sufficient progress to establish best practices for achieving deep decarbonization of Scope 3 emissions. Key strategies include:
- Identifying Hotspots: Most brands source high volumes from a limited number of strategic suppliers. Engaging these companies in depth can yield significant wins at low transaction costs.
- Providing Technical Support: Many suppliers are either new to carbon management or skeptical about the financial benefits of low-carbon investments. Brands can bridge this gap by funding initial technical analyses that offer credible data on the economics of efficient production technologies, onsite renewable energy, and sourcing renewables from utilities and local markets.
- Offering Incentives: A carbon target represents a brand’s commitment to sourcing lower-carbon production. Brands should clearly communicate this by gradually shifting order volumes to lower-carbon suppliers and providing a clear transition roadmap.
- Collaboration: The fashion sector is inherently collegial, with brands collaborating with one another and manufacturers through trade organisations like Cascale and the Apparel Impact Institute. Such collaboration reduces transaction costs, reinforces the importance of carbon issues, and prevents duplicative approaches that frustrate suppliers.
Ultimately, for most fashion brands, achieving carbon targets is not primarily about cost. The leading brands are recognising this and, in doing so, are building deeper insights and stronger relationships with their vendor base. Conversely, companies that fail to engage are signalling struggles with transparency, supplier engagement, and innovation in their supply chains—an image that is far from favourable at a time where reputation is critical.
For Australian fashion brands and retailers, it’s time for action. Most are yet to measure their Scope 3 emissions, let alone set an emissions reduction target or engaged their suppliers. The key is simply to get started. By learning from successful global brands and leveraging partnerships, companies of all sizes can make meaningful progress.
