Fashion CFOs Are Turning Sustainability Into A P&L Issue
The Global Fashion Agenda's latest summit and "The CFO Agenda" report underscore a critical shift: chief financial officers are now central to driving sustainability in fashion. Amid supply chain volatility and rising costs, sustainability is no longer optional, but a non-discretionary expense. While CFOs recognize its importance, integrating sustainability into financial metrics remains a challenge. The report offers guidance for CFOs to embed environmental and social considerations into financial planning, moving beyond mere risk mitigation to becoming "transformation enablers." Examples like MAS Holdings demonstrate successful integration, tracking "sustainability revenue" through ERP systems. Mulberry's CEO and CFO also highlight how sustainability can enhance brand value and profit, with the CFO actively weaving it into financial strategy and supply chain resilience. This marks an evolution of the CFO role from scorekeeper to strategic future forecaster, essential for industry viability.
Global Fashion Agenda (GFA) put chief financial officers in the driving seat at this year’s Global Fashion summit. The shift from CEOs to CFOs acknowledges a new reality: sustainability costs are becoming non-discretionary. Add seemingly interminable supply chain volatility, extreme weather, trade shifts and rising raw material and the CFO’s involvement becomes unavoidable.
It’s in this context that GFA’s latest report–The CFO Agenda–was penned in collaboration with Boston Consulting Group. The publication builds on others before it, including Aii’s Cost of Inaction and H&M and EY’s white paper Accelerating Fashion Decarbonization. The forebear reports quantify well the material risk that climate change poses to businesses; they also posit the evolving role of CFOs includes data management, tracking, forecasting and capital allocation to embed sustainability measures to fortify business operations and supply chains. Planning and strategizing, though, do not equal action.
“Sustainability is important [and] brands believe it’s critical, but the level of integration isn’t where it should be,” says Justin Pariag, Chief Sustainability Officer at GFA, explaining the line of inquiry in their CFO-focused report. To probe this lack of integration, the report collates the anonymized wants of more than 30 CFOs and senior executives and provides a four-level ranking to categorize them by sustainability integration maturity. The report, which was launched at the annual Global Fashion Summit in Copenhagen, also included an assessment of 150 brand earnings calls to gauge sustainability mentions as a proxy for prioritization.
Most CFOs rated sustainability as ‘very important’ or ‘critical’, though the report uses the term broadly, covering social and environmental actions from worker conditions to water pollution. Few reported that sustainably is fully integrated across their organization or reflected in their financial metrics.
The report offers strategic guidance on how CFOs can implement sustainability-linked financial measures to better manage costs, risks, and long-term performance across day-to-day, annual, and multi-year planning. The report places CFOs on a maturity ladder, from ‘Risk Mitigator’ to ‘Transformation Enabler’, although the GFA and BCG did not categorize the 30 surveyed and interviewed CFOs. Analysis of earnings calls indicated that sustainability had been deprioritized due to fewer mentions.
Manufacturer CFOs were not included in GFA’s inaugural report, but are set to feature in future editions, explained GFA’s CEO Federica Marchionni. She believes the first port of call had to be brands. “Fashion needs a fundamental reallocation of capital,” she declared, adding that CFOs are “the architects of that shift”. Marchionni called on chief financial officers to “be a partner to the vision of CEOs”, calling for an end to chronic underinvestment in products and supply chains.
But what is happening to capital allocation inside the supply base? Are suppliers deprioritizing sustainability too? How integrated are sustainability measures such as investing in recycled materials, process innovation and energy efficiency? And where does finance collide with sustainability on the factory floor?
“There is a limit [to] sustainable project investments without continued market demand,” says Jennie Peterson, Partner at Hong Kong-headquartered New Focus Textiles, which owns textile and garment facilities in China and Vietnam. “Suppliers now are looking to manage risks carefully and optimize costs in an uncertain market.”
While New Focus Textiles invested significantly in ‘next-gen’ and recycled fiber inventory, their own recycling facilities, and take-back educational programs between 2022-2025, Peterson says market requirements have now shifted. “There is a stronger demand for upgrades in technology and process innovations as the industry has quickly entered an intelligent Industrial Revolution”. Peterson adds: “We are allocating more resources [to] technology and operational upgrades instead of new sustainability projects, pilots [and] conferences”.
Peterson says the New Focus Textiles forward strategy is to invest in three key areas: traceable and premium materials, new technology for greater efficiency and benchmarking, and construction of new facilities in China and Vietnam with state-of-the-art machinery, water treatment, solar power, computerized weaving and dyeing, and smart inspections to detect defects in finished fabrics and errors in color matching during dyeing.
“Those investment decisions for improved product output, reduced long-term operational costs, and compliance requirements also benefit sustainability ESG goals with less waste, fewer samples, reduced effluents [and] better dyes/fibers” says Peterson. In terms of quantification of sustainability gains, she says “this can be measured by corporations such as Worldly FEM reports [and] Material Exchange MIS to see the benefits of investing in superior facilities, technology, and fibers for reduced environmental load and traceability.”
Peterson hinted at using AI for ‘smart inspections’, while at the other end of the value chain, Mango CFO Margarita Salvans lamented it in the CFO Agenda: “There was a time when you wouldn’t have a meeting without talking about sustainability. Now the dominant topic is AI–but that doesn’t mean efforts have slowed down.” Mercifully, supplier-side AI looks more practical than the Western zeitgeist version: fewer grand promises, more defect detection, efficiency and waste reduction. If GFA’s report asks CFOs to integrate sustainability into financial systems, MAS shows what that looks like in practice.
Surath Chandrasena is CFO of MAS Holdings, the billion-dollar global garment manufacturer headquartered in Sri Lanka and supplying the world’s largest sports and underwear brands. The privately owned powerhouse has embedded sustainability investment in day-to-day, annual, and long-range budget planning. It has established sustainability KPIs, with the key one being ‘sustainability revenue percentage’.
“[We have a] configured ERP (Enterprise Resource Planning) system to identify sustainability-created revenue at the point an order is put into the system,” explains Chandrasena. Sustainability-created revenue includes that from recycled or next-gen materials, for example. “We can track earnings from this to monitor and report KPIs”.
The CFO explains: “We present annual plans to the board including initiatives, costs, and expected outcomes [via] improved compliance or [sustainability] indicators”. Chandrasena says the board weighs the sustainability priorities in the company’s sustainability roadmap, the Plan for Change 2030, against financial metrics and then signs off on capital allocation.
MAS also has an approval system for sustainability capital investments and tracks how Capex performs against financial and sustainability-related KPIs. “We have a long-range planning cycle revised yearly,” says Chandrasena. Within this scope is consideration of green financing and corporate VC funding opportunities for sustainability investments, evaluated by the company’s Investment Task Force.
“There is one sustainability-linked investment we are making through that fund [where] we look at new technologies, startup-level firms, and sometimes the investment is looked at alongside what we can contribute as a manufacturer ourselves, for example market access,” explains the CFO. An example is their recent investment in Syntetica, alongside Lululemon, where MAS is both an investor and strategic partner.
“Because of our reputation, we see startup entities coming to us and looking for partnerships to bring more than capital–that’s been a plus point,” says MAS’s CFO. Despite their size and might, supplier competitiveness remains fierce, says Chandrasena. “Sustainability alone won’t differentiate you from another vendor. You have to offer the lead times [and] prices to be competitive. For me, it’s the entry ticket”.
Andrea Baldo finds himself the CEO of a relative oddity today: a brand that manufactures its own products. Mulberry, the publicly listed British heritage brand, operates two factories in Somerset, UK, making around half of the brand’s leather goods. Baldo is the company’s unofficial sustainability evangelist and catalyst, following his stint at Ganni, one of fashion’s favorite sustainability-champion brands. At Mulberry, he is leading the charge to connect profits to purpose, because they’re natural bedfellows, he says, since fashion is an industry that cashes in on emotions, not number-based logic.
“50% of the value [of a product] is based on perception,” says Baldo. So when he was presented with enough UK-derived regenerative leather to make just 88 handbags, he did not start with scalability or ROI. He considered the brand value of telling a story in which the material, manufacturing and label were all British.
It turns out that those 88 bags, made from British Pasture Leather, sold out at a premium price due to fashion’s well-honed aspiration-and-scarcity formula, but Baldo maintains that sustainability is an opportunity to be wrangled into any brand’s proposition, depending on its values. While CEOs may set the sustainability vision, the CFO’s role in delivering it has been overlooked for too long. “I said this to Federica [Marchionni]: The real conversation is finance, because the CEO can talk about the brand and the aesthetic, and the board can [talk] about the [brand] doing good, but at the end everything touches the P&L, and everything has to make sense.” That’s where Mulberry’s CFO Billie O’Connor takes the helm of the sustainability ship.
“I think Andrea and I work really well together because he likes that I want to understand the whole business,” says O’Connor. “If I understand how all of our operations and supply chain work, if we come across something that will be a real improvement on our sustainability journey but it’s a little bit more costly, we can work together on how we get a bit more efficiency out of the operation to help pay the premium”. The CFO is referring to materials with improved sustainability credentials, for which a new accredited supplier may need to be onboarded, for example, introducing additional costs. But these choices begin with material and design guardrails.
A critical and oft-overlooked subject is the designer’s role in product sustainability. Baldo says that if you have sustainability KPIs for products and the brand, “you need to put some boundaries on the design team”. For example, rather than the designer having utter materials-abandon, they are presented with only approved ones. Before Baldo’s time, the designers might have chosen the lowest-impact option; now it’s all they’re offered. And he’s clear that any higher material cost has to be part of the value the product offers to the customer, like how British Pasture Leather does with its ‘made from and within the isle’ cachet.
In terms of balancing ‘green premiums’ and customer value for Mulberry products, Baldo explains it’s a team effort, spanning finance on pricing and the product and design on sourcing. Together, they evaluate each product's margin, ensuring quality and competitive pricing. “[We’re] not thinking about each decision in isolation, [but instead] understanding the entire value chain of our whole operation right the way through to how we sell in store”, explains O’Connor.
On sustainability as a priority, O’Connor says: “I think in some organizations in the past, and perhaps still, sustainability was a bit of a tick box, something that they felt they had to do. I think if you have the right mindset in a role like mine, you weave it all together to just be part of doing good business”. It takes will on the part of the CFO, though. “I do think you have to make a conscious choice to weave together finance and sustainability. I think there are still some roles where the CFO just wants the leanest margin, the best profit, and if the company can do a bit of sustainability on the way, great”.
Reflecting back on the CFO agenda’s finding that earnings calls are de-prioritizing sustainability, O’Connor says Mulberry isn’t one of them. “An update on ESG is a standing board item, and we absolutely go along every time with an update, whether that’s how our circularity program is doing, buyback, or the pre-loved range and how that’s having an impact”.
Supply chain resilience is also firmly within the Mulberry CFO’s remit. “When we’re doing our planning for three to five years, we're thinking about the operating model underneath, because everything will have to shift. The ESG and all of the risks associated with the supply chain are part of that strategic thinking”.
In conclusion, reflecting on how the CFO role has evolved from accounting-led to strategic, O’Connor says: “Just reporting the history was what we used to do, and now we’ve got to predict the future, with a degree of certainty. That keeps us on our toes and keeps me awake a little bit at night”. Marchionni may be losing sleep, too. “Amid growing volatility, sustainability is no longer a peripheral concern but a defining force shaping the economics of our industry.”