Fashion CFO Agenda 2026: Building financial resilience through sustainability

While sustainability is increasingly impacting fashion economics, executive attention is paradoxically dropping. A new report, “Fashion CFO Agenda 2026”, argues that sustainability is no longer just a “high visibility” topic but a core financial discipline essential for long-term company resilience. It has been co-authored by Global Fashion Agenda (GFA) and Boston Consulting Group (BCG) and was presented yesterday as part of the ongoing Global Fashion Summit.

The boardroom practice is different, however, and the report highlights a critical disconnect in the industry: As research has shown, sustainability mentions in earnings calls have declined by roughly one-third since 2022, as leaders shift focus toward immediate pressures like AI adoption and geopolitical volatility. The report shows why embedding sustainability into finance should become a CFO imperative.

Sustainability priorities vs. budget pressures

Sustainability is now a material factor reshaping the cost structures of fashion companies through intensifying financial implications. Climate-driven disruptions have already caused price spikes of up to twofold for raw materials like cotton and wool. As Mango CFO Margarita Salvans observes, the focus has moved from “if” to “how”—specifically, “how we balance sustainability priorities within budget pressure”. Integrating these factors into corporate finance is presented as a prerequisite for mastering risk and unlocking new value.

A major looming financial pressure is the implementation of Extended Producer Responsibility (EPR) for textiles, which shifts end-of-life costs to producers. In the EU, member states must establish these systems by April 2028. For a large mass-fashion player, EPR fees could lead to a 1.1 percent increase in cost of goods sold (COGS) and a 4 percent decrease in net profit by 2030, according to the report. To mitigate this, it suggests “eco-modulation,” where fees are adjusted to reward circular or lower-impact designs.

Unlocking value and efficiency

Despite the costs, the report identifies significant economic upsides to sustainable practices. Approximately 70 percent of fashion-sector greenhouse gas (GHG) emissions could be reduced at low cost or even with cost savings, such as switching to renewable power, it argues. Furthermore, circular business models (CBMs) like resale and rental are outperforming the overall market, with second-hand fashion projected to grow at a 10 percent compound annual growth rate (CAGR) through 2030. According to the report, these models provide a pathway to decouple revenue from resource use while diversifying income streams.

The CFO's role is evolving into the strategic custodian of financial resilience, separate from but complementary to the chief sustainability officer (CSO). While the CSO sets the direction, the CFO enables execution by hardwiring sustainability into financial control, planning and strategic capital allocation. “When you start measuring impact, you uncover inefficiencies,” notes Adam Karlsson, CFO of the H&M Group, highlighting how sustainability data reveals hidden operational waste.

Four approaches to prioritisation

Given that short-term budget pressure is the leading barrier to investment, the report outlines four financial approaches to guide prioritisation: risk mitigator, cost optimiser, commercial driver and transformation enabler. Companies should select an approach based on their maturity and ambition, moving from a focus on compliance to embedding sustainability into core strategy. Dorte Rye Olsen of Bestseller emphasises that (double) materiality assessments remain “an essential tool in ensuring we allocate resources and capital where we deliver the greatest impact”.

Effective deployment of capital is essential for scaling innovation, such as next-gen materials and textile-to-textile recycling. The H&M Group, for example, used its “New Growth & Ventures” function to become a majority owner of resale platform Sellpy, which saw its turnover more than double between 2022 and 2025. The report suggests using advanced mechanisms like sustainability-adjusted hurdle rates or internal carbon pricing to better reflect the long-term benefits of these strategic investments.

Ultimately, the CFO cannot succeed in isolation; success requires both internal alignment and external collaboration. Internally, strong CFO-CSO alignment and board buy-in are critical for navigating trade-offs. Externally, initiatives like the Future Supplier Initiative (FSI) demonstrate how brands can collectively de-risk supplier capital expenditure through blended finance structures.

“For most companies, investments in sustainability are still largely driven by economic fundamentals such as cost predictability, supply security and effective risk management. However, as market mechanisms and regulatory frameworks increasingly internalise these factors, a stronger foundation is emerging for sustainability investments to become a natural and integral part of core business strategy,” concludes Engin Mete, chief growth strategy officer and CFO of Re&Up.

Shortcomings

Despite the report’s compelling financial logic, a potential flaw in the argumentation lies in the tension between long-term resilience and the immediate survival of low-margin players. While the report suggests that 70 percent of emissions can be abated at a low cost, the direct savings often accrue to suppliers, leaving brands to rely on “indirect benefits” that may not materialise quickly enough to offset the 4 percent net profit erosion predicted from EPR fees.

Furthermore, the transition from a “risk mitigator” to a “transformation enabler” assumes a level of capital flexibility that the report itself acknowledges is currently restricted by short-term budget pressure—the leading barrier to investment. By framing the decline in executive attention as a “fundamental disconnect,” the authors risk underestimating the very real possibility that for some companies, the immediate cost of sustainability implementation may outpace the speed of value capture in a softening market.