Fashion’s unpaid bill: the cost of the catwalk’s climate retreat

New York. London. Milan. Paris.

Throughout September and October, fashion week becomes fashion month, as the ‘Big Four’ – New York, London, Milan and Paris – take turns unveiling their spring/summer ready-to-wear collections and setting the commercial tone for the year ahead. Fashion aside, they are also setting the reputational tone – at a time when the industry remains under scrutiny for its environmental impact.

Just a few years ago, the world’s biggest clothes designers and manufacturers appeared united around a clear direction. The future of the industry would be sustainable – consumers, governments, and wider society expected it; the commercial case was strengthening; and it was, quite simply, deemed the right thing to do. Today, that certainty seems to have disappeared. Over the past two years, a number of major brands have watered down their sustainability commitments or even ditched them altogether. Burberry has pushed back its net-zero target by a decade to 2050. Ralph Lauren has also dropped its 2040 net-zero commitment in favour of shorter-term targets. Nike has reduced its sustainability reporting, with shareholders recently rejecting a proposal to increase the firm’s transparency on its climate goals.

For investors, the question is whether sustainability has fallen out of fashion, or whether the twin forces of tighter regulation and rising climate risk will push the sector back on track

For investors, the question is whether sustainability has fallen out of fashion, or whether the twin forces of tighter regulation and rising climate risk will push the sector back on track.

Fashion’s growing climate cost is still not priced in

In the first quarter of 2026, China- and Singapore-based clothing giant Shein added an average of around 4,700 new items to its website every day. By the end of March, its range exceeded two million apparel styles.¹ The scale and speed illustrate how much the industry has changed in recent decades. Where fashion houses once operated around longer seasonal trends, today’s ultra-fast fashion outlets are built for speed, using real-time online engagement data to respond to demand and bring new designs and products to market within days. Consumers have followed the industry’s cue. In 2021, the average US consumer purchased 69 garments, compared with 40 per year in the 1990s².

In the race to produce more, faster, global textile production has doubled since the turn of the millennium, reaching 124 million tonnes in 2023³. As production has expanded, so too has the industry’s environmental impact. The imbalance is striking. Fashion is estimated to account for around 1.6% of global GDP yet is responsible for up to 8% of global greenhouse gas emissions. It also consumes enough freshwater to drain Lake Geneva – one of Western Europe’s largest lakes – two and a half times in a single year⁴.

In 2024, 120 million tonnes of clothing were discarded – enough to fill more than 200 Olympic stadiums.⁵ With only 12% reused and less than 1% recycled, most ended up in landfill or were incinerated, while some made their way to open waste sites such as Chile’s Atacama Desert, now home to sprawling piles of clothes covering more than 300 hectares⁶. 

A central part of the problem is that clothing manufacturers bear little direct legal responsibility for the environmental cost of over-production. As much as 30% of all clothing produced – up to 45 billion garments a year – is estimated to go unsold. For many brands, the financial cost of selling out of a popular product line can be greater than the costs of producing excess stock, creating a powerful incentive to overproduce.⁷ The result is that much of fashion’s climate impact remains unpriced.

The result is that much of fashion’s climate impact remains unpriced

EU anti-destruction law comes into force

For much of the past decade, sustainability pledges from many of the sector’s biggest names have been voluntary, with minimal consequences for failing to meet them. In Europe, that is beginning to change. From July 2026, the EU’s Ecodesign for Sustainable Products Regulation introduced a ban on the destruction of unsold apparel and footwear, initially for large enterprises, with medium-sized enterprises to follow from 2030.⁸

Critics warn, however, that exemptions allowing companies to donate unsold stock rather than destroy it could simply shift the problem elsewhere, adding to an already overwhelmed second-hand clothing market and the flood of items ending up on West African beaches.

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France offers a cautionary precedent. Its anti-waste law has banned the destruction of unsold clothing since 2022, but while it has reduced direct incineration and recycling, it appears to have done little to curb overproduction, with the volume of clothing entering the market continuing to rise⁹. One investigation found that the law’s donation incentive had enabled some of the biggest firms to generate returns on unsold items, fuelling a new market in brokering large clothing donations.¹⁰

Read also: Plastics: after Geneva, the road ahead

Could new taxes level the playing field?

As the industry waits to see how effective the EU’s new rules will be, some are calling for fiscal measures on waste-intensive business models to help level the playing field for companies investing in more sustainable production.

Major luxury houses are already rethinking how they use resources. Louis Vuitton’s 2030 environmental roadmap puts greater emphasis on eco-design, circular creativity, and turning unused materials into high-value resources, while Hermès is focused on producing closer to demand, reducing waste, and extending product lifespans through repair and reuse.¹¹

But one challenge remains: while surveys show consumers are willing to pay more for sustainably produced garments, that willingness has yet to translate at scale. Federica Marchionni, CEO of Global Fashion Agenda, a nonprofit promoting sustainable fashion, says, “I wish consumers were leading, putting dollars [behind their choices]. But consumers aren’t paying the premium for more costly sustainable products.”¹²

That is where new taxes could help shift the economics. One proposal is a ‘nature tax' on the resource inputs used to produce clothes. Another is to reduce tax on labour – an approach supported by the Ellen MacArthur Foundation, which has published a leading report on sustainable tax policy. Lower labour taxes would benefit businesses working with second-hand materials, where labour makes up a bigger share of costs than it does for companies that rely on virgin materials.

Securing supply chains against extreme weather and geopolitical shocks

Policy tools can be powerful, but their implementation is often uncertain. In July 2026, Haute Couture Fashion Week in Paris unwittingly showcased far more powerful forces that will, sooner or later, mandate change across the industry. As models walked the catwalks, guests sweltered in temperatures approaching 40 degrees Celsius. At the same time, 400 miles south, the country’s wildfire crisis was intensifying¹³. For an industry that depends heavily on nature for its source materials and large volumes of freshwater, the warning could hardly have been starker.

Compound drought and heat events across cotton-growing regions are also becoming more frequent and severe, significantly contributing to crop failures.¹⁴ This summer, extreme heat in India and Pakistan threatened a historic fall in cotton production and pushed prices up more than 5% in a single week,¹⁵ while Chinese officials have warned that heatwaves and floods could hit cotton yields later this year¹⁶. Similar pressures are emerging in wool production, where heat stress is affecting lamb numbers and wool quality,¹⁷ as well as access to freshwater¹⁸.

Geopolitical fragmentation is adding another layer of risk. Restrictions on shipping in the Strait of Hormuz have raised the cost of the petroleum-based chemicals used to make polyester. In India, the world’s second-largest polyester producer, staple fibre prices jumped 26.5% in a single month after the closure.¹⁹

The solutions are straightforward, if not easy to achieve

The solutions are straightforward, if not easy to achieve. More recycling to reduce dependence on fragile supply chains, and regenerative farming to strengthen the resilience of cotton and wool farming in the face of extreme weather. Artificial intelligence could also play an important role, improving demand forecasting to cut overproduction by up to 15%²⁰.

Some major names are leading the way. Stella McCartney and Brunello Cucinelli, for example, have both made strong commitments to regenerative farming as leading members of the Circular Bioeconomy Alliance and the Sustainable Markets Initiative. Their efforts are part of a broader push to address a less widely recognised challenge: fashion's growing dependence on fossil fuels. Today, around 70% of textiles are made from petroleum-derived synthetic fibres such as polyester, nylon and acrylic, leaving the industry exposed not only to environmental criticism but also to energy-price volatility and geopolitical disruption. Recent spikes in oil prices and polyester feedstock costs have highlighted how vulnerable those supply chains can be.

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In response, industry leaders are experimenting with alternative models that reconnect fashion with biological rather than fossil-based resources. One example is the Armani Agroforestry Cotton Living Lab²¹ in Apulia, southern Italy, launched by the Sustainable Markets Initiative Fashion Task Force, the Circular Bioeconomy Alliance and Armani Group. The project combines regenerative agriculture, biodiversity restoration and digital traceability to demonstrate how natural fibres can be produced more sustainably and brought to market at commercial scale. For companies following this path, the case is becoming as commercial as it is ethical. More resilient sourcing can reduce exposure to both climate and supply-chain risks while strengthening long-term competitiveness.

As supply chains come under pressure from geopolitical disruption and climate change, the move towards more sustainable business models is becoming…more about survival

Mitigating risk and building a competitive edge

The fashion industry’s apparent backsliding on sustainability targets is blamed, at least in part, on prevailing market conditions. Trade tariffs and subdued consumer sentiment hit the sector in 2025, and only low single-digit growth is expected in 2026.²² Against this backdrop, it is perhaps unsurprising that some sustainability targets are falling by the wayside. 

Yet as supply chains come under pressure from geopolitical disruption and climate change, the move towards more sustainable business models is becoming less about ‘doing the right thing’ and more about survival.

Read also: Thread counts: regenerative cotton on the rise in fashion

At Lombard Odier, we are convinced that the recent retreat by some fashion houses will not define the industry’s long-term direction. Whether the transition is accelerated by regulation, resource constraints or the realities of a more fragmented and climate-stressed world, the commercial case for more resilient value chains is strengthening.

For fashion companies, that means reducing waste and water use, improving traceability and investing in agricultural systems that restore soil health and make raw-material production more resilient to drought, flooding and rising temperatures. For investors, the transition is also creating opportunities across regenerative agriculture, next-generation materials, recycling, supply chain technology and more efficient production.

Fashion has long relied on natural capital without fully accounting for its value. Increasingly, it is also confronting the hidden risks of its dependence on fossil fuel-derived materials. The opportunity now is to build supply chains that are both more regenerative and more resilient, turning environmental challenges into drivers of innovation, competitiveness and long-term growth.