The profit of the fashion industry market will decrease by 34% by 2030 due to a decline in the overall operating profitability of companies amid climate change. This is stated in a report by the non-profit organization Apparel Impact Institute (AII).
According to a report by AII, three factors will impact company profits:
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an increase in taxes on greenhouse gas emissions;
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a rise in raw material prices;
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an increase in energy prices.
Changes to the tax base on carbon emissions are becoming an increasingly serious problem for companies. The report cites as an example the mechanisms of the European Union, which propose a tax on the import of goods whose production would require greenhouse gas emissions.
Three categories of emissions are distinguished based on scale. The first category is direct emissions, the second is indirect emissions (created as a result of purchasing electricity), and the third is emissions that are uncontrolled by companies at the stages of product manufacturing (production waste from suppliers or waste left by consumers).
Many countries around the world are setting goals to achieve carbon neutrality by the middle of the 21st century.
Fashion industry manufacturers fall into the third category. They will need to address the decarbonization of their supply chains, explained Senior Director of Sustainable Finance Kristina Elinder Lilius. According to her, brands face challenges in addressing decarbonization issues because they often do not own the supplying companies.
Moreover, many companies in the fashion industry simply lack the funds for such changes. In the report, AII experts advise companies to collaborate with suppliers to share the burden of decarbonization.
