Etude

Decarbonizing Fashion: How to Align Impact with Business Value

New analysis separates the decarbonization paths of fashion and luxury apparel, revealing the highest-value actions brands can take today.

Par Matteo Capellini, Claudia D'Arpizio, Euan Murray, et François Vayleux

First published on juillet 08, 2025
min


At a Glance Fashion accounts for approximately 2% of global emissions, but only 11% of the industry’s market value is on track to meet 2030 targets. Focusing on levers that align climate impact with business value makes near-term emissions reductions possible. MACC analysis reveals divergent paths: Fashion apparel must prioritize sourcing and energy; luxury can improve forecasting and resale. The opportunity: Cut emissions while protecting performance by acting where value and impact intersect. Economic headwinds and consumer pushback on pricing are pressuring apparel brands. Some fashion apparel players are adapting quickly. Others are losing ground—hit by tariffs, shifting tastes, or both. Luxury has been especially hard hit. Yet even amid volatility, one priority remains non-negotiable: decarbonization. The fashion industry accounts for roughly 2% of global greenhouse gas emissions—a footprint that cannot be ignored. And while the long-term goal for most players is net zero by 2050, progress must begin now. The nearer milestone—meaningful emissions reductions by 2030—is proving elusive. Despite a flurry of pledges and climate commitments, companies representing just 11% of the industry’s market value are currently on track to meet their disclosed near-term goals. The reasons are complex, but the implications are clear. Decarbonization is no longer a side initiative; it’s a core business challenge that will reshape industry dynamics over the next decade. For executives, the task is to drive measurable emissions reductions while protecting—and, ideally, enhancing—business performance. That means making hard choices about which levers to pull, where to invest, and how to sequence actions for both short-term returns and long-term resilience. Not all decarbonization strategies are created equal. They differ dramatically in cost, complexity, and payoff. Some are quick wins; others require systemic shifts in supply chains, product design, and customer engagement. The most effective path forward lies at the intersection of carbon impact and business value—where environmental gains align with commercial logic. Acting in this zone isn’t just about doing the right thing. It’s about creating the financial headroom and operational momentum needed to tackle deeper, more transformative change down the line. Two curves, two stories One of the smartest ways to compare potential decarbonization levers is using a marginal abatement cost curve (MACC). To help fashion brands prioritize, we built two: one for fashion apparel, one for luxury (see Figures 1 and 2). Each reflects a representative “meta-brand” based on aggregated public data, focuses on near-term targets, and models emissions growth through 2030 in line with expected market growth. Fashion apparel Our fashion apparel “meta-brand” reflects a typical global apparel manufacturer with a materials mix of approximately 45% cotton and 30% polyester. We modeled emissions across the value chain—from raw materials extraction to garment production, transportation, branding, and product use. While the net-zero race will likely require fashion to revisit its business model—shifting focus toward value, durability, and reducing impact per wear—in the near term, brands must prioritize high-impact, cost-effective levers that fit within current operating models. A key takeaway from the MACC analysis is the potential of AI to improve demand forecasting and reduce e-commerce returns—two areas where inefficiency drives both emissions and margin erosion. Getting size, style, and color right the first time not only boosts sell-through rates but also cuts waste and returns across the value chain. On the supply side, sourcing remains a critical lever. While shifting to recycled materials is an important first step, the bigger opportunity lies in influencing supplier behavior. Long-term contracts and volume guarantees can help manufacturers transition to lower-emission methods—such as dry instead of wet processing. In regions like Southeast Asia, where coal still dominates industrial energy use, transitioning to cleaner power sources could yield some of the sector’s most significant carbon savings. Figure 1 Fashion apparel’s marginal abatement cost curve underscores the value of sourcing, supplier engagement, and cleaner energy Notes: Power purchase agreements are dependent on market and geography; marginal abatement cost differs by plant size, operating country, time to implement levers, and other factors; this is especially relevant for emerging technologies; carbon credit purchase and investments in physical offsets were not considered Source: Bain analysis Luxury fashion Luxury’s path is different. Our luxury meta-brand’s emissions are concentrated in raw materials—especially leather, followed by various forms of cotton and polyester. Many luxury goods are made in France and Italy, where low-carbon energy grids reshape the carbon footprint. Importantly, durability and lower impact per wear are intrinsic to the luxury business model. Products are designed to last, used for longer periods, and often passed on—which naturally supports a more resource-efficient model over time. Two high-potential actions stand out: cutting overproduction and scaling resale. Figure 2 Luxury fashion’s marginal abatement cost curve shows resale and overproduction reduction as top near-term levers Notes: Power purchase agreements are dependent on market and geography; marginal abatement cost differs by plant size, operating country, time to implement levers, and other factors; this is especially relevant for emerging technologies; carbon credit purchases and investments in physical offsets were not considered Source: Bain analysis Reducing overproduction Luxury brands typically achieve a sell-through rate of around 60%, meaning that approximately 40% of inventory remains unsold at full price. This relatively low sell-through rate reflects a long-standing trade-off in the industry: With high gross margins, many brands have historically accepted overproduction as a cost of avoiding stockouts and missing potential sales. However, this approach is increasingly untenable. Unsold inventory not only ties up capital and erodes margins through discounting but also carries a significant environmental cost—one now under growing regulatory scrutiny. Emerging rules in markets like the EU and France restrict practices such as inventory destruction, pushing luxury brands to improve forecasting accuracy and reduce overproduction Technology is playing an increasingly central role in helping brands address overproduction and improve inventory efficiency. AI-powered sales forecasting is already in use or being tested by approximately 60% of fashion brands, enabling more accurate predictions of consumer demand across styles, sizes, and geographies. In parallel, around half of brands are leveraging AI to allocate stock more precisely, ensuring the right products reach the right markets at the right time while reducing the likelihood of excess inventory. Beyond forecasting and allocation, technology is also enabling new production models. Brands are beginning to pilot made-to-order and made-to-measure approaches that significantly reduce waste by producing only what is needed. One example is Son of a Tailor’s custom-fit t-shirts, made using algorithm-driven sizing and on-demand manufacturing to eliminate standard inventory altogether. Secondhand Most fashion brands today don’t bear the full environmental and social costs of their linear business models. Now, regulation is pushing fashion toward circularity by banning inventory destruction and supporting resale. Secondhand resale is often less profitable—and, in many cases, hardly profitable—compared to firsthand sales. That’s the starting point. As a decarbonization lever, resale only delivers a real impact if it displaces the production and sale of new items. In other words, emissions are only reduced when secondhand volumes grow at the expense of firsthand volumes. Today, that’s not happening at scale. As a result, secondhand remains a negative-ROI decarbonization lever for most brands. Adding to the challenge, the bulk of secondhand activity today happens on third-party platforms like Vinted and eBay—channels that brands don’t control and that offer limited visibility into customer behavior or inventory flows. To change this, brands need to own the resale channel through buy-back schemes, branded resale platforms, or partnerships that integrate resale into the core business. The strategic goal is clear: Turn secondhand into a profitable, brand-owned channel that drives both customer lifetime value and emissions reductions. Done right, resale can shift from margin drain to margin growth—and become a credible, scalable decarbonization tool in the process. Upcoming EU regulations requiring digital product passports (DPP) could unlock new possibilities. Imagine a one-click resale button or automated buy-back by the brand. Tools are coming, and early movers will benefit. Where to go from here The fashion industry has no shortage of ambition. What it now needs is execution. The sector’s decarbonization path will be long and, in places, disruptive—but the immediate priorities are clear. Reducing overproduction and scaling resale—particularly in the luxury segment—stand out as credible levers with the potential to deliver both climate impact and commercial returns. Done right, these steps can unlock the operational and financial headroom required to go further. But the bigger challenge lies in turning performance into habit. That means treating decarbonization not as a standalone initiative, but as a business discipline embedded in sourcing, supply chain, inventory management, and product strategy. Fashion doesn’t need more pledges. It needs precision, pragmatism, and pace. The leaders in the next phase will be those who move early, act decisively, and align sustainability with competitive advantage.

At a Glance

Fashion accounts for approximately 2% of global emissions, but only 11% of the industry’s market value is on track to meet 2030 targets.
Focusing on levers that align climate impact with business value makes near-term emissions reductions possible.
MACC analysis reveals divergent paths: Fashion apparel must prioritize sourcing and energy; luxury can improve forecasting and resale.
The opportunity: Cut emissions while protecting performance by acting where value and impact intersect.

Economic headwinds and consumer pushback on pricing are pressuring apparel brands. Some fashion apparel players are adapting quickly. Others are losing ground—hit by tariffs, shifting tastes, or both. Luxury has been especially hard hit.

Yet even amid volatility, one priority remains non-negotiable: decarbonization. The fashion industry accounts for roughly 2% of global greenhouse gas emissions—a footprint that cannot be ignored. And while the long-term goal for most players is net zero by 2050, progress must begin now.

The nearer milestone—meaningful emissions reductions by 2030—is proving elusive. Despite a flurry of pledges and climate commitments, companies representing just 11% of the industry’s market value are currently on track to meet their disclosed near-term goals.

The reasons are complex, but the implications are clear. Decarbonization is no longer a side initiative; it’s a core business challenge that will reshape industry dynamics over the next decade. For executives, the task is to drive measurable emissions reductions while protecting—and, ideally, enhancing—business performance. That means making hard choices about which levers to pull, where to invest, and how to sequence actions for both short-term returns and long-term resilience.

Not all decarbonization strategies are created equal. They differ dramatically in cost, complexity, and payoff. Some are quick wins; others require systemic shifts in supply chains, product design, and customer engagement.

The most effective path forward lies at the intersection of carbon impact and business value—where environmental gains align with commercial logic. Acting in this zone isn’t just about doing the right thing. It’s about creating the financial headroom and operational momentum needed to tackle deeper, more transformative change down the line.

Two curves, two stories

One of the smartest ways to compare potential decarbonization levers is using a marginal abatement cost curve (MACC). To help fashion brands prioritize, we built two: one for fashion apparel, one for luxury (see Figures 1 and 2). Each reflects a representative “meta-brand” based on aggregated public data, focuses on near-term targets, and models emissions growth through 2030 in line with expected market growth.

Fashion apparel

Our fashion apparel “meta-brand” reflects a typical global apparel manufacturer with a materials mix of approximately 45% cotton and 30% polyester. We modeled emissions across the value chain—from raw materials extraction to garment production, transportation, branding, and product use.

While the net-zero race will likely require fashion to revisit its business model—shifting focus toward value, durability, and reducing impact per wear—in the near term, brands must prioritize high-impact, cost-effective levers that fit within current operating models.

A key takeaway from the MACC analysis is the potential of AI to improve demand forecasting and reduce e-commerce returns—two areas where inefficiency drives both emissions and margin erosion. Getting size, style, and color right the first time not only boosts sell-through rates but also cuts waste and returns across the value chain.

On the supply side, sourcing remains a critical lever. While shifting to recycled materials is an important first step, the bigger opportunity lies in influencing supplier behavior. Long-term contracts and volume guarantees can help manufacturers transition to lower-emission methods—such as dry instead of wet processing. In regions like Southeast Asia, where coal still dominates industrial energy use, transitioning to cleaner power sources could yield some of the sector’s most significant carbon savings.

Fashion apparel’s marginal abatement cost curve underscores the value of sourcing, supplier engagement, and cleaner energy

Notes: Power purchase agreements are dependent on market and geography; marginal abatement cost differs by plant size, operating country, time to implement levers, and other factors; this is especially relevant for emerging technologies; carbon credit purchase and investments in physical offsets were not considered

Source: Bain analysis

Luxury fashion

Luxury’s path is different. Our luxury meta-brand’s emissions are concentrated in raw materials—especially leather, followed by various forms of cotton and polyester. Many luxury goods are made in France and Italy, where low-carbon energy grids reshape the carbon footprint.

Importantly, durability and lower impact per wear are intrinsic to the luxury business model. Products are designed to last, used for longer periods, and often passed on—which naturally supports a more resource-efficient model over time.

Two high-potential actions stand out: cutting overproduction and scaling resale.

Luxury fashion’s marginal abatement cost curve shows resale and overproduction reduction as top near-term levers

Notes: Power purchase agreements are dependent on market and geography; marginal abatement cost differs by plant size, operating country, time to implement levers, and other factors; this is especially relevant for emerging technologies; carbon credit purchases and investments in physical offsets were not considered

Source: Bain analysis

Reducing overproduction

Luxury brands typically achieve a sell-through rate of around 60%, meaning that approximately 40% of inventory remains unsold at full price. This relatively low sell-through rate reflects a long-standing trade-off in the industry: With high gross margins, many brands have historically accepted overproduction as a cost of avoiding stockouts and missing potential sales. However, this approach is increasingly untenable. Unsold inventory not only ties up capital and erodes margins through discounting but also carries a significant environmental cost—one now under growing regulatory scrutiny. Emerging rules in markets like the EU and France restrict practices such as inventory destruction, pushing luxury brands to improve forecasting accuracy and reduce overproduction

Technology is playing an increasingly central role in helping brands address overproduction and improve inventory efficiency. AI-powered sales forecasting is already in use or being tested by approximately 60% of fashion brands, enabling more accurate predictions of consumer demand across styles, sizes, and geographies. In parallel, around half of brands are leveraging AI to allocate stock more precisely, ensuring the right products reach the right markets at the right time while reducing the likelihood of excess inventory.

Beyond forecasting and allocation, technology is also enabling new production models. Brands are beginning to pilot made-to-order and made-to-measure approaches that significantly reduce waste by producing only what is needed. One example is Son of a Tailor’s custom-fit t-shirts, made using algorithm-driven sizing and on-demand manufacturing to eliminate standard inventory altogether.

Secondhand

Most fashion brands today don’t bear the full environmental and social costs of their linear business models. Now, regulation is pushing fashion toward circularity by banning inventory destruction and supporting resale.

Secondhand resale is often less profitable—and, in many cases, hardly profitable—compared to firsthand sales. That’s the starting point.

As a decarbonization lever, resale only delivers a real impact if it displaces the production and sale of new items. In other words, emissions are only reduced when secondhand volumes grow at the expense of firsthand volumes.

Today, that’s not happening at scale. As a result, secondhand remains a negative-ROI decarbonization lever for most brands. Adding to the challenge, the bulk of secondhand activity today happens on third-party platforms like Vinted and eBay—channels that brands don’t control and that offer limited visibility into customer behavior or inventory flows. To change this, brands need to own the resale channel through buy-back schemes, branded resale platforms, or partnerships that integrate resale into the core business.

The strategic goal is clear: Turn secondhand into a profitable, brand-owned channel that drives both customer lifetime value and emissions reductions. Done right, resale can shift from margin drain to margin growth—and become a credible, scalable decarbonization tool in the process.

Upcoming EU regulations requiring digital product passports (DPP) could unlock new possibilities. Imagine a one-click resale button or automated buy-back by the brand. Tools are coming, and early movers will benefit.

Where to go from here

The fashion industry has no shortage of ambition. What it now needs is execution. The sector’s decarbonization path will be long and, in places, disruptive—but the immediate priorities are clear.

Reducing overproduction and scaling resale—particularly in the luxury segment—stand out as credible levers with the potential to deliver both climate impact and commercial returns. Done right, these steps can unlock the operational and financial headroom required to go further.

But the bigger challenge lies in turning performance into habit. That means treating decarbonization not as a standalone initiative, but as a business discipline embedded in sourcing, supply chain, inventory management, and product strategy.

Fashion doesn’t need more pledges. It needs precision, pragmatism, and pace. The leaders in the next phase will be those who move early, act decisively, and align sustainability with competitive advantage.