Why sustainability must become a financial KPI for fashion and apparel

The fashion and apparel sector is confronting one of the most profound transitions in its history. Supply chains, product design, materials, logistics, technology infrastructure and retail footprints are all being reshaped by the move to a low-carbon economy. Yet, despite clear strategic intent, sustainability is still not embedded where it matters most: in financial performance metrics.

According to new research from Risilience’s Climate and Nature Risk Report 2025, only 41% of fashion and apparel companies link their climate targets directly to financial KPIs. This gap between ambition and financial integration is now one of the sector’s most significant barriers to resilience and long-term value creation.

A sector with strong intent — but a critical blind spot

Fashion and apparel companies are, in many ways, ahead of the curve. Climate governance has moved decisively into the boardroom; 80% of fashion and apparel businesses discuss climate very frequently at board level, and 43% of all CapEx is now allocated to sustainability goals, the highest of all industries surveyed.

This shows a sector actively investing in transition and treating climate as a strategic priority rather than a compliance exercise. However, the intent – though clear and compelling – has yet to yield enterprise-level value.

Despite rising spend and executive focus, only 41% embed climate targets into financial KPIs. The consequences can be felt across the business, as 38% of companies report unclear ownership of sustainability internally, and a third (31%) say insufficient collaboration between sustainability and finance teams is a barrier to adopting finance-grade risk models.

Why this gap matters

The broader market context is clear: climate and nature risks have shifted decisively from sustainability issues to core business risks influencing strategy, capital allocation and profitability.

Fashion is especially exposed due to:

• Long, globally distributed supply chains

• Heavy reliance on raw materials with high climate and nature dependencies

• Tight margins vulnerable to climate-related cost shocks

• Rapid product cycles requiring continuous adaptation

In this environment, failing to link climate to financial outcomes weakens resilience, obstructs investment decisions and limits the ability to demonstrate ROI on decarbonisation.

Strategic steps for fashion and apparel companies

To close this integration gap and turn climate ambition into measurable enterprise value, fashion and apparel organisations must take four decisive steps:

Embed climate and nature risk into governance and finance system

Climate risk can no longer sit in ESG siloes. Integrating climate into enterprise risk management, financial planning and board reporting ensures consistent and accountable decision-making.

Build finance-grade climate and nature models

Most companies still operate in qualitative phases of climate risk assessment. Fewer than one in five have developed finance-grade models, and only 9% have embedded risk quantification into strategic planning. This is the next frontier, and the prerequisite for credible transition plans, ROI narratives and capital allocation.

Tackle Scope 3 with aligned incentives and supplier governance

Data quality, supplier alignment and inconsistent regulatory environments are the top execution challenges across all sectors. Fashion’s supply chains amplify this complexity. Success now depends on supplier engagement and data-sharing, procurement-sustainability alignment and clear incentives tied to decarbonisation outcomes.

Integrate nature alongside climate

Three-quarters of global companies now have a nature-risk plan, signalling a rapid shift in investor and regulatory expectations. Fashion, with its direct dependency on land use, biodiversity and water systems, cannot separate nature from climate strategy.

From risk to ROI

Risilience supports global fashion and apparel brands in building audit-ready disclosures, financially quantified transition plans and integrated climate-nature strategies that withstand regulatory scrutiny and meet investor expectations.

The fact that only four in ten fashion and apparel companies link climate targets to financial KPIs shows how much opportunity remains. Climate and nature risks are no longer abstract sustainability issues. Businesses that quantify these risks, embed them into governance and financial systems and align incentives across their supply chains will build resilience and competitive advantage in the face of economic and political challenges.

Fashion and apparel companies have the ambition, the investment momentum and the executive focus. What they now need is financial integration to turn climate strategy into measurable value. The organisations that move first will not only manage risk more effectively, but they will also secure investor confidence, unlock growth capital and lead the industry’s transformation.

• See more resources to support the fashion and apparel sector on our dedicated page.

• Download the Risilience-comissioned and independently-conducted Climate and Nature Risk Report 2025 to explore how global corporates have responded to climate and nature risk in the wake of geopolitical and economic uncertainty. The survey polled more than 500 senior sustainability and finance executives across the US, UK and Europe on how global businesses with an annual turnover of $700m to $50 billion+. GMT.