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How Much Will Climate Change Cost Fashion?

The industry isn’t planning for rising temperatures and intensifying flooding that could slash export earnings in just a handful of key manufacturing hubs by $65 billion by 2030, a new report finds.
Workers salvage clothes from a factory through floodwaters on the outskirts of Phnom Penh in 2020.
Workers salvage clothes from a factory through floodwaters on the outskirts of Phnom Penh in 2020. (Tang Chhin Sothy/AFP via Getty Images)

Key insights

  • Brands, regulators and investors aren’t planning for climate change risks that could cost the industry billions of dollars in lost revenue, according to a new report by Cornell University’s Global Labour Institute and investment firm Schroders.
  • Failure to adapt supply chains to manage rising temperatures and intensifying flooding could lower export earnings from four key manufacturing hubs by $65 billion by 2030 and significantly dent operating profits at exposed brands, the report found.
  • “The impact is significant enough for all parts of the industry to have a vested interest to address the issue,” said Angus Bauer, head of sustainable research at Schroders.

In April, temperatures in Bangladesh’s capital Dhaka soared above 40 degrees Celsius (104 degrees Fahrenheit), kicking off a prolonged heat wave that blasted the apparel-producing hub for months.

Temperatures that high can be dangerous even for low-intensity work like sewing clothes, especially when coupled with Dhaka’s muggy climate, sapping productivity and putting workers at risk.

But while such weather extremes are becoming increasingly common and destructive, brands, regulators and investors are failing to factor the impact of climate change into their strategies — putting tens of billions of dollars at risk, according to a new study.

By 2030, soaring temperatures and intensifying flooding could reduce export earnings in just a handful of key manufacturing hubs by $65 billion, prevent the creation of nearly one million new jobs in those locations and significantly dent operating profits at exposed brands compare to a scenario in which the industry takes steps to adapt, the report published Wednesday by Cornell University’s Global Labour Institute and investment firm Schroders.

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“These are conservative estimates,” said Jason Judd, executive director at Cornell’s GLI. “It’s quite possibly an underestimate.”

‘Someone Else’s Problem’

Bangladesh experiences heat waves every year, but this year’s was the longest since the country’s independence in 1971, according to officials at the Bangladesh Meteorological Department. A May study by the World Weather Attribution group found man-made climate change had made record-breaking heat waves in Bangladesh at least 30 times more likely.

Nazma Akter, the founder and executive director of the labour advocacy group Awaj Foundation, said she has heard reports of symptoms of heat stress like headaches, fever and diarrhoea affecting garment workers every day for the last few months.

The issue isn’t just heat; it’s heat and humidity — a stultifying and dangerous combination that can pose serious risks at relatively normal temperatures.

When it’s hot and muggy — measured using a Wet Bulb Globe Temperature reading — productivity for even moderate effort manufacturing work (like sewing clothes) is estimated to decrease by around 1.5 percent for every degree the temperatures rise above 25 C. At a WBGT of 32 C, workers can experience high heat stress and at 35 C, most workers will feel severe effects, including heat stroke and even death, research shows.

This July was the planet’s hottest on record, and a United Nations report published earlier this month found the world off track to meet climate goals, with temperatures on track to rise as much as 2.6 C above pre-industrial levels.

The analysis by Cornell and Schroders examined how productivity would likely be affected at apparel and footwear factories in Bangladesh, Cambodia, Pakistan and Vietnam if the industry does nothing to fortify its supply chain against hotter temperatures and intensifying flooding.

Collectively, the four countries represent about 18 percent of global apparel exports, host roughly 10,000 clothing and footwear factories and employ some 11 million garment workers. They are also among the world’s most vulnerable to climate change and already under threat from weather extremes.

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In cities like Karachi, Dhaka, Ho Chi Minh and Phnom Penh, the average number of days where the wet-bulb temperature exceeds 30.5 C are expected to rise more than 50 percent by 2030 compared to 2014 levels, the analysis found.

Flooding is also a growing risk, and while the impact is likely to be more isolated and localised, the long-term costs to affected areas could run well above those created by high temperatures, potentially knocking out key infrastructure for protracted periods of time.

“These are no longer intangibles; these are things that are measurable,” said Angus Bauer, head of sustainable research at Schroders. “In financial terms, the impact is significant enough for all parts of the industry to have a vested interest to address the issue.”

But while a growing number of fashion brands are promoting their commitments to address climate change by curbing their emissions and investing in nature restoration, few indicate how they plan to address such existing and intensifying risks in their supply chain.

By 2050 the cost of inaction is expected to be even more dramatic, curbing export earnings in Cambodia, Vietnam, Bangladesh and Pakistan by nearly 70 percent, or $1.4 trillion dollars, compared to a scenario in which steps are taken to adapt the supply chain to rising temperature and flooding risk, according to the analysis.

“Adaptation to climate breakdown is not part of the fashion industry’s plan,” it said. “Climate ‘loss and damage’ for manufacturers and workers are treated by brands as externalities — someone else’s problem.”

Towards Adaptation

The way the fashion industry has historically managed supply chain disruptions is to simply shift sourcing locations. But few existing manufacturing hubs are immune to the risks of climate change, and those with the least exposure lack capacity, the report found.

Exactly how much brands are exposed will vary depending on their supply chains, but many lack visibility over their sourcing risks.

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The report’s findings should raise the pressure on companies to start measuring and mapping their vulnerability and acting to adapt to as well as mitigate climate change.

Better regulation and binding standards governing acceptable indoor temperatures “top the list” as a starting point, said Judd.

And though adaptation measures could require costly retrofitting to factories, others are cost-effective and easily accessible.

According to one study, a group of Indian clothing factories were able to reduce indoor temperatures during the hottest months of the year by 2.4 C by introducing more energy-efficient LED lighting. Research conducted in Bangladesh suggested that simple steps like adding green or shaded roofs, installing exhaust and industrial fans and allowing workers sufficient breaks for water could reduce the indoor temperature by 2 C during the warmest weather and improve productivity by 1.4 percent a year.

“If efforts start to tilt towards adaptation… we get a win, win, win,” said Bauer. “We’ll get outcomes that are better for workers and better outcomes for suppliers and brands.”

Further Reading

Is Fashion Sleepwalking Into the Climate Crisis?

The extreme and deadly weather experienced around much of the world in July got little mention on big brands’ earnings calls, signalling that investors and executives still aren’t treating climate as an immediate business risk.

About the author
Sarah Kent
Sarah Kent

Sarah Kent is Chief Sustainability Correspondent at The Business of Fashion. She is based in London and drives BoF's coverage of critical environmental and labour issues.

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