The Hidden Cost: Who Pays for Fashion’s Net Zero?

Fashion’s climate ambitions are accelerating at pace. Net-zero targets, decarbonization roadmaps, and sustainability pledges have become standard markers of industry leadership and a respectable brand identity. But beneath this forward momentum, a more uncomfortable reality is emerging, one that is less about what the industry promises, and more about how those promises are being delivered. 

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By Sakshi Gupta

As fashion brands push for rapid emission reductions across their supply chains, a critical contradiction is emerging: the costs of transformation are not being shared equally. Instead, they are being systematically pushed downstream.

Nowhere is this more visible than in major manufacturing hubs like Bangladesh, Vietnam, and Indonesia, where suppliers are under increasing pressure to decarbonize production.

The fashion industry produces an estimated 3-4% of global carbon emissions, with up to 80% of these emissions coming from manufacturers concentrated in Asia. Recognizing this, brands have committed to decarbonizing their supply chains and sharply cut emissions through innovative technologies. 

In order to remain competitive, factories are investing in energy-efficient machinery, transitioning toward renewable energy, and pursuing green building certifications. These are not marginal adjustments but capital-intensive restructuring that requires long-term planning and financial stability. Yet the commercial environment in which suppliers operate has hardly changed. Prices and margins remain tightly controlled, contracts are often short-term, and order volumes fluctuate. The expectation is clear: suppliers must comply, but largely at their own expense.

High Costs, Little Reward

This dynamic has created what can be understood as a growing “climate cost gap” – a structural imbalance between who is expected to deliver decarbonization and who has the financial capacity to do so. The scale of this gap is significant. In Bangladesh alone, the investment required to decarbonize the garment sector runs into billions of dollars, while industry-wide estimates suggest that over $1 trillion will be needed by 2050. Despite this, direct financial contributions from brands remain limited. Only six of 42 major fashion brands reported providing any decarbonization financing for suppliers, according to a February report. Of these, five were structured as loans rather than price adjustments or grants, adding debt to suppliers’ balance sheets rather than redistributing risk across the value chain.

At the same time, the market does little to reward those who do invest. A 2025 investigation by the Business and Human Rights Resource Centre found that while 44 of the 65 brands analysed had set supply chain decarbonization targets, not one had adopted a just transition policy that included or protected supply chain workers, or paid a price premium for goods produced ethically or sustainably. Suppliers that adopt cleaner technologies or achieve high environmental standards are not guaranteed better prices, longer-term contracts, or more stable sourcing relationships. In practice, sustainability has become a tick-box exercise rather than a differentiator. This erodes the business case for deeper investment, particularly in a sourcing model still driven by cost efficiency and flexibility. For many suppliers, the calculation becomes not whether sustainability is necessary but whether it is financially survivable while still being able to operate and pay workers.

This challenging calculation risks completely undermining climate outcomes. Suppliers operating under sustained financial pressure have limited room to absorb additional costs, making it more likely that upgrades are delayed, scaled back, or implemented unevenly. In some cases, factories may continue to rely on cheaper, more carbon-intensive energy sources simply to remain viable. Environmental compliance risks becoming superficial: meeting minimum standards without enabling meaningful emissions reductions. The result is a decarbonization model that appears active on paper but delivers uneven and fragile progress in practice.

Unequal Burden

The unspoken risk is that the inequitable cost distribution is increasingly borne by workers and surrounding communities. Many of the regions being asked to finance decarbonization are already on the frontlines of climate vulnerability, facing rising temperatures, extreme weather, and unstable energy systems. Yet as suppliers absorb the financial burden of sustainability upgrades – often through debt or under sustained price pressure – those costs are rarely contained at the factory level. Instead, they are pushed further down, shaping wages, working conditions, and investment in worker safety. 

The consequences are already visible on the factory floor: extreme heat is making indoor environments more dangerous, while limited transparency around heat and humidity leaves workers, unions, and even investors without the data needed to respond. In the absence of adequate financing and accountability, spending on critical adaptation measures such as cooling systems or workplace protections becomes harder to prioritise. The result is a transition that is not only underfunded and inefficient, but socially regressive, externalizing climate risk onto those least equipped to bear it.

If left unaddressed, the implications are significant. A transition built on financially constrained suppliers is unlikely to deliver durable emissions reductions at the scale or speed required. Instead, it risks locking the industry into a cycle of partial compliance, where climate targets continue to proliferate but remain disconnected from the economic realities of production. Over time, this disconnect may not only slow progress but also undermine the credibility of the industry’s broader sustainability claims.

Rethinking Responsibility

What is needed, therefore, is not another layer of commitments, but a rethinking of how responsibility is structured. Decarbonization cannot remain a requirement imposed downstream; it must become a shared undertaking embedded in the commercial logic of the supply chain itself. This means aligning environmental goals with pricing mechanisms, contract stability, and financing models, through co-investment, blended finance, and regulatory frameworks that mandate due diligence and risk-sharing.

Until that alignment is achieved, fashion’s climate strategy will remain fundamentally constrained. The industry is not short on ambitious pledges, nor on technical pathways to reduce emissions. What it lacks is a model capable of translating ambitions into equitable and sustained action. And until the question of “who pays” is answered more honestly, the transition will continue to stall where it matters most.

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About the author: Sakshi Gupta works at the intersection of sustainability, human rights, and gender equity, with a focus on the ‘S’ in ESG and on how big ideas around equity actually show up in people’s lives. Working in NGOs and social impact consulting, her work is grounded in human-centric storytelling and community-driven approaches. She writes regularly on workers’ rights, women’s experiences, power dynamics, and people’s everyday lives through her Substack and for organisations’ blogs, with her work also featured in the Freedom Collective newsletter. She holds a BSc in Sociology from the LSE and has lived across Hong Kong, India, and the UK.