Fashion contributes to 2 to ~3.5 per cent of global GHG emissions, per different estimates, and directly affects the lives of more than 60 million factory workers in Asia, of which more than 55 per cent are women

Byline: Jayanth Kashyap B., Investment Lead, Good Fashion Fund

2024 was confirmed to be the warmest year on record globally and the first calendar year that the average global temperature exceeded 1.5 °C relative to pre-industrial levels – potentially foreshadowing the onset of a 20-year period that may reach the Paris Agreement threshold (Nat. Clim. Change 2025). But climate change is not just an environmental crisis, but equally a human crisis. It contributed to the deaths (reported) of at least 3,700 people and the displacement of millions with the likely death toll being much higher in the tens, if not hundreds of thousands. Extreme flooding events or low rainfall, dangerous heatwaves, droughts and wildfires were prevalent throughout the globe and more so in developing countries. Such extreme weather threatens the health and lives of marginalised and vulnerable populations while exacerbating existing inequities of gender, caste and class.

Fashion contributes to 2 to ~3.5 per cent of global GHG emissions, per different estimates, and directly affects the lives of more than 60 million factory workers in Asia, of which more than 55 per cent are women. Limited climate action by brands and missed climate targets along with unsustainable manufacturing practices lead to poor working conditions for workers, especially women. The annual funding gap to make the industry sustainable is estimated at USD 20 to USD 30 billion and with the slew of worker protests in the past few years in producing countries, climate action and worker wellbeing seem to be at odds. This is where upcoming regulations and private sector participation from investors such as the Good Fashion Fund can enable a ‘just transition’ – both for the planet and for the people.

Despite geopolitical tensions globally, 2025 is a crucial year for policy makers, regulators, corporates, investors and manufacturers to ensure that progress against sustainability and goals are brought back on track for the coming years. The European Union (EU) will continue to have the largest influence on the fashion industry and supply chain as it starts its 2024 – 2029 term with sustainability at the core of its agenda. A report by The Remedy Project and Adelphi Consult, captures the legislative landscape from the EU and US, focusing on supply chain transparency, emission reductions, worker protection and generally heightened reporting requirements. What are some of the regulations with direct implications for the fashion industry and the supply chains in Asia?

● EU Corporate Sustainability Due Diligence Directive (CSDDD): fashion brands, of a certain size, are required to identify, prevent and mitigate human rights and environmental risks in their supply chain

● EU Ecodesign for Sustainable Products Regulation (ESPR): requires product durability, recyclability and environmental impact disclosure

● US Uyghur Forced Labour Prevention (UFLPA) and EU Forced Labour Regulation (FLR): bans imports linked to any form of forced labour

● Extended Producer Responsibility laws (EPR): requires brands to take responsibility for textile waste and invest in recycling infrastructure

● Other legislative acts such as Digital Product Passport (DPP), Directive on Green Claims: towards greater supply chain and product transparency from farm level and avoiding greenwashing claims

The implication for suppliers means higher compliance requirements (increasing cost and need for investment to improve working conditions); risk of market loss (if failing to meet new standards) and a move towards sustainable materials and manufacturing (adoption of circularity, decarbonisation strategies). Investors can play a critical role in aligning the flow of capital with sustainability and ethical labour practices within the fashion industry and supply chain. Pathways can include:

● Scale impact investing and sustainable investment strategies: The Good Fashion Fund (GFF) is presently the only global impact fund focused on the fashion supply chain. Through our investments in companies such as Kannapiran Mills, KKP Fine Linen and Progress Apparel we have directed capital towards efficient production technologies, clean energy and equally ensuring that labour practices are constantly improved

● Engage with brands and suppliers: Investors can push brands to disclose Scope 3 emissions and implement strong human rights due diligence, while demanding alignment with regulations like CSDDD and EPR. At the GFF, we strive to work closely with brands striving to make the transition and help guide suppliers in becoming regulations ready

● Financing with a climate lens: Financial flows should move towards projects and companies that enhance energy efficiency, reduce the load on freshwater consumption, waste reduction and release of hazardous effluents into water bodies. GFF can structure an ‘impact loan’ for instance, that incentivises manufacturers to reach its resource reduction targets. Other initiatives such as Future Supplier Initiative (Fashion Pact, Apparel Impact Institute), HSBC’s sustainability-linked loans or green financing programs are other solutions available in the market

● Financing with a social and gender lens: Through dedicated technical assistance or programs, investors can support initiatives that help factories go beyond basic compliance norms. These could be towards worker wellbeing, social protection, healthcare and upskilling programs for women workers for instance. GFF, for instance, has environmental and social action plans (ESAPs) for every investee and creates bespoke improvement programs based on the context and needs of the factories

● Scaling innovation and circularity: On the other end of the spectrum, investors should equally invest in innovations and start-ups with radical solutions for regenerative agriculture, textile recycling, alternative materials and bio-based or non-synthetic dyeing solutions. Legislations such as the DPP require extensive scaling support and funding to ensure seamless integration with the supply chains

The years ahead mark a critical threshold for the fashion industry to make changes rapidly. With increasing environmental and social issues, a just transition is not an obligation but an economic and ethical imperative. The fashion industry must realise that sustainability is a competitive advantage, and early adopters of climate-resilient and ethically responsible models will be the ones to glide through the upcoming turbulence with least resistance and stand to gain the most. The time for action was yesterday, and it is now a matter of how swiftly all of us can work together towards a better future for the fashion industry.