Sustainability plummets as priority in 2025 for fashion brands

Sustainability has fallen off the radar as a primary concern for fashion brands. Corporate execs are more preoccupied with weak sales, according to McKinsey & Co.’s State of Fashion report for 2025. Inflation-squeezed consumers are refusing to pay more for off-the-rack styles. Competition from cheap knockoffs is also pressuring the world’s ready-to-wear merchants, noted McKinsey in the consulting firm’s annual survey of business leaders in the industry.

That appears to leave little room for the industry to spend the $1 trillion that analysts project is needed to decarbonize.

Only 18 percent of fashion business leaders name sustainability a top risk for growth next year, a drop from 29 percent for 2024, according to McKinsey, which released its report Nov. 11. Some are even dropping their net zero targets completely.

• Consumption, meanwhile, is rising steeply enough that by 2050, apparel could make up more than 25 percent of the world’s carbon emissions. Currently it’s at about 4 percent.
• Two-thirds of brands are behind their net zero goals for 2030.
• By then, the consumption of clothing, by weight, will rocket upward by 63 percent.

Although “the sustainability collective” ranks as the No. 10 priority that executives told McKinsey they will manage in 2025, “climate urgency” was the No. 2 concern in last year’s “State of Fashion” report.

“Imperatives, including profitability and growth, eclipse discretionary aspirations,” said Ken Pucker, a former Timberland chief operating officer who teaches business at Tufts University and Dartmouth University. “This changes when sustainability no longer is bespoke and optional.”

A trend or a fad?

Sustainability, however, is not completely passé, according to McKinsey Senior Partner Karl-Hendrik Magnus. Complex regulations are coming online in Europe and California, for instance, and many companies are already starting to reshape their value chains.

Yet the downgrading of sustainability by apparel CEOs will take a toll on boardroom awareness as well as on launching and initiating major new programs, Magnus added. “That’s probably the biggest challenge, on fighting back on the realization that has now started really sinking in, that progress is too slow — from target setting to action — it is not happening fast enough, that the degree of post competitive collaboration is way too little,” Magnus said.

Upstream operations comprise 70 percent of the industry’s emissions footprint. And to move forward, apparel businesses should make three big priorities for sustainability, according to McKinsey:

1. Work together. Brands should band together in a “dual mission” to chase profits and collective action.
2. Help suppliers to draw down their emissions. Strategize and work with them on incentives and plans to decarbonize.
3. Team up with organizations that trace progress and measure impacts. Keep data open across the business, its partners and its stakeholders.

The risks of moving slowly

The risks of falling behind include becoming irrelevant to consumer demand, especially if circularity and other environmentally or socially “friendly” selling points become a new norm, according to Magnus.

There’s also an economic risk of moving too slowly toward net zero. “There are ways to decarbonize just about any step in the value chain,” Magnus said. “However, they are largely not at scale and not abundant. So it’s a bit like fiddling together a little puzzle where there [are] white and green puzzle pieces.” Some companies have a surplus of “green” pieces, such as resources and tools to help to slash suppliers’ emissions.

Efforts are popping up, including the nonprofit Future Supplier Initiative, launched in June. H&M Group and Bestseller in January partnered on an offshore wind project to help supply 40 percent of Bangladesh’s power by 2041. 

Yet few brands have the resources of, say, H&M to help suppliers shift away from coal power. The company is among the top 40 percent of big names in a space with some 300,000 brands. Each brand has about a 3 percent share of global sales, according to McKinsey. 

“Some companies will be able to put an entire puzzle piece together out of only green pieces,” Magnus said. “But unfortunately, there are too little green pieces for the entire industry. There’s just too few solar powered boilers in Bangladesh to only produce with solar powered heat.”

Brands that lie low and accept the slow pace are left with the “white pieces” that cost more or don’t fit with the green ones, Magnus said. However, companies that have shifted to comply with regulations, such as the EU Strategy for Sustainable and Circular Textiles, may pre-emptively satisfy future, smaller rules, he added.

Collaboration tips and other opportunities

Three-quarters of clothing brands don’t bother to collaborate with suppliers on sustainability, according to McKinsey. However, those who do should do the following:

• Focus on the core or highest-volume suppliers to partners on strategic commitments.
• Make long-term commitments with suppliers, including purchasing agreements and price premiums for the short term.
• Tackle the industry’s bottlenecks together. Work with banks on interest-free loans or discounts on orders, for example. Educate suppliers and collaborate with policymakers, too.

Up to half of the efforts to drive down Tier 2 emissions may pencil out to cost nothing, the report noted. Plucking the low-hanging fruit of cheap efficiencies can offset the material innovations that cost more, according to McKinsey.

Fortunately, more chief sustainability officers (CSOs) in the past several years have begun to speak at “eye level” with CEOs and CFOs, according to Magnus. They just need to do a better job of explaining the “levers” to pull toward decarbonization, which can occur in stages and differ greatly from one company to the next.

Should a company take the pathway of transforming materials or optimizing energy, for instance? Communicate those tradeoffs, he advised sustainability leaders.

“The traditional market may not be growing as it had in the past but other markets that have lower sustainable impacts are growing,” said Karla Magruder, president and founder of Accelerating Circularity, a New York City nonprofit. 

The market for secondhand clothes is growing 15 times faster than the overall sector in 2023, according to McKinsey. And in 2025, pre-owned clothes will comprise 10 percent of global sales. That will expand by 12 percent each year and reach $350 billion in 2028, the report found.

“Reuse is environmentally one of our best options for lowering our impact,” Magruder added.

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