Fashion CFO Agenda 2026: building financial resilience through sustainability

Paradoxically, although sustainability is increasingly influencing the economics of the fashion industry, its involvement among executives is waning. A new report titled “Fashion CFO Agenda 2026” argues that sustainability is no longer just a high-visibility issue, but a key financial discipline essential to the long-term resilience of companies. The report was co-authored by Global Fashion Agenda (GFA) with Boston Consulting Group (BCG) and launched today as part of the ongoing Global Fashion Summit.

However, the practice in the boardroom is different. The report highlights a key discrepancy in the industry: Research has shown that mentions of sustainability in business results have fallen by about a third since 2022. Leaders are shifting their focus to immediate challenges such as the adoption of artificial intelligence (AI) and geopolitical instability. The report shows why anchoring sustainability in finance should become a requirement for CFOs.

Sustainability priorities and budget pressures

Sustainability is now a key factor reshaping the cost structures of fashion companies through increasing financial impact. Climate-related disruptions have already led to price increases of up to twofold for raw materials such as cotton and wool. Margarita Salvans, Chief Financial Officer (CFO) of Mango, notes that the focus has shifted from “if” to “how.” Specifically, it’s about “how we balance sustainability priorities within the context of budget pressures.” The integration of these factors into corporate finances is presented as a prerequisite for managing risks and unlocking new values.

A major upcoming financial pressure is the introduction of Extended Producer Responsibility (EPR) for textiles. This shifts the end-of-life costs of products onto the manufacturers. In the EU, member states must have these systems in place by April 2028. For a large MOE company, EPR fees could result in a 1.1 percent increase in cost of goods sold (COGS) by 2030. At the same time, net profit could fall by four percent, according to the report. To mitigate this, he suggests “eco-modulation,” where fees are adjusted to reward circular or more environmentally friendly designs.

Unlocking value and efficiency

Despite the costs, the report identifies significant economic benefits of sustainable practices. Around 70 percent of greenhouse gas emissions in the fashion sector could be reduced cost-effectively or even with cost savings, for example by switching to renewable energy.

In addition, circular business models such as resale and rental outperform the overall market. An average annual growth of ten percent is forecast for second-hand fashion until 2030. According to the report, these models offer a way to decouple revenue from resource usage while diversifying revenue streams.

The role of CFOs is evolving into strategic guardians of financial resilience. This role is separate from, but complementary to, that of Chief Sustainability Officer (CSO). While CSOs provide direction, CFOs enable implementation. This happens by firmly anchoring sustainability in financial control, planning and strategic capital allocation. “When you start measuring the impact, you discover inefficiencies,” notes Adam Karlsson, CFO of H&M Group. He highlights how sustainability data uncovers hidden operational waste.

Four approaches to prioritization

With short-term budget pressures the biggest barrier to investment, the report outlines four financial approaches to prioritization. These are risk reduction, cost optimization, commercial driver and transformation enabler. Companies should choose an approach based on their level of maturity and goals. They should move from a pure focus on compliance to integrating sustainability into core strategy. Dorte Rye Olsen, Head of Sustainability at Danish fashion group Bestseller, emphasized that (double) materiality tests “remain an essential tool to ensure that we allocate resources and capital where we have the greatest impact.”

Effective use of capital is crucial for scaling innovations. This includes next-gen materials and textile-to-textile recycling. For example, H&M Group used its New Growth & Ventures division to become the majority owner of the resale platform Sellpy. Their sales more than doubled between 2022 and 2025. The report suggests using advanced mechanisms such as sustainability-adjusted minimum returns or internal carbon prices. This allows the long-term benefits of these strategic investments to be better reflected.

Ultimately, CFOs cannot succeed in isolation. Success requires both internal coordination and external collaboration. Internally, strong alignment between the CFO and CSO as well as buy-in from the board are crucial to finding compromises. Externally, initiatives such as the Future Supplier Initiative (FSI) show how brands can work together to secure suppliers’ capital expenditure through mixed financing structures.

“For most companies, investments in sustainability are still largely driven by economic fundamentals. These include cost predictability, security of supply and effective risk management. However, as market mechanisms and regulatory frameworks increasingly internalize these factors, a stronger foundation is emerging. Sustainability investments can thus become a natural and integral part of core business strategy,” concludes Engin Mete, Chief Growth Strategy Officer and CFO of Re&Up.

Weaken

Despite the report’s compelling financial logic, there is a potential weakness in the argument. There is a tension between long-term resilience and the immediate survival of thin-margin providers. The report suggests that 70 percent of emissions can be reduced cost-effectively. However, the direct savings often benefit the suppliers. Brands will therefore have to rely on “indirect benefits” that may not materialize quickly enough to offset the four percent net profit decline predicted by EPR fees.

Furthermore, the transition from risk reduction to transformation support requires capital flexibility. The report itself admits that this is currently constrained by short-term budget pressures, the main obstacle to investment. By describing the decline in executive attention as a “fundamental discrepancy,” the authors risk underestimating it. There is a very real possibility that for some companies the immediate costs of implementing sustainability could exceed the value created in a weak market.