Why Is Sustainability Overlooked in Fashion Company Earnings?
By Flawless Magazine
At a time when climate headlines dominate the news and environmental regulations are tightening globally, one might assume sustainability is central to fashion companies’ financial narratives. But a close reading of recent FY24 earnings calls reveals a troubling gap.
Flawless Magazine analyzed the full-year 2024 earnings transcripts of 12 major fashion and beauty companies—including LVMH, H&M, Inditex, Nike, L’Oréal, and Tapestry. While most mentioned environmental, social, and governance (ESG) initiatives at least once, sustainability was rarely presented as a value driver. In some cases, it was relegated to a footnote, squeezed between more traditional growth levers: pricing strategy, regional performance, and product innovation.
The Missing Link Between ESG and Earnings
On the surface, sustainability might seem like a non-financial concern. But that framing is outdated—and increasingly, risky. According to a 2023 report by McKinsey, companies with strong ESG performance experience lower capital costs, better employee retention, and more brand loyalty. Investors are paying attention.
Yet in most earnings calls we reviewed, ESG mentions were vague and brief:
“We remain committed to our sustainability goals,” one CEO noted, without clarifying timelines, metrics, or financial implications.
“Our new collection includes more recycled materials,” another said, without connecting it to cost savings, brand equity, or consumer demand shifts.
This superficial approach misses the point: ESG isn’t just a moral imperative. It’s a material business factor.
Opportunity Lost
Fashion is at a crossroads. Brands face growing pressure to reduce emissions, eliminate hazardous chemicals, and ensure fair labor across their supply chains. But this pressure also creates opportunity: in innovation, efficiency, consumer trust, and market differentiation.
- Materials innovation (e.g., mycelium leather, regenerative cotton) can reduce costs over time and unlock new market segments.
- Circular business models—such as resale, repair, and rental—offer fresh revenue streams with lower carbon impact.
- Energy-efficient manufacturing can insulate brands from rising fuel costs and supply chain disruptions.
These are not marginal concerns—they are competitive advantages. But if they don’t appear in earnings narratives, they risk being underfunded or deprioritized.
The Risk of Silence
Failing to integrate sustainability into financial discussions also carries reputational and operational risk. Regulators in the EU, US, and UK are increasingly scrutinizing greenwashing and requiring more detailed ESG disclosures. Climate-related risks—from floods to droughts—already disrupt supply chains and threaten sourcing regions. Yet few companies explicitly tied these risks to revenue forecasts or strategic plans.
This omission is especially glaring given fashion’s environmental footprint:
- Up to 10% of global emissions.
- 20% of global wastewater.
- Significant contributions to microplastic pollution and textile waste.
How can these realities not be reflected in financial planning?
A Tale of Two Leaders
There are exceptions. L’Oréal stands out for embedding sustainability targets into its executive compensation structure and discussing the ROI of its green science innovation during its earnings call. Similarly, H&M provided detail on circularity pilots and how they tie into long-term growth strategy.
But these examples were the minority. Most brands treat ESG as a communications exercise, not a core business lens.
What Investors Want to Hear
A growing number of institutional investors now consider ESG performance as material to long-term value. BlackRock, State Street, and Legal & General have all issued frameworks pushing for ESG integration—not just in reports, but in earnings and strategy.
For brands that hope to future-proof themselves, this means:
- Quantifying the ROI of sustainability initiatives.
- Disclosing emissions reduction trajectories alongside revenue goals.
- Discussing material risks, such as raw material scarcity or regulatory changes.
- Highlighting innovation that decouples growth from environmental degradation.
Changing the Script
It’s time for fashion to move beyond boilerplate ESG statements. Investors, regulators, and consumers are asking deeper questions. Brands that continue to silo sustainability will struggle to justify their resilience—and relevance.
The good news? There’s still room to lead.
Imagine a quarterly call where a CFO discusses how transitioning to recycled polyester cut input costs by 12%. Or how supply chain electrification reduced carbon emissions and improved delivery reliability. These aren’t distant hypotheticals. They’re happening now, just not being said.
Sustainability belongs in the earnings spotlight—not just in CSR pages or annual reports. Because the future of fashion won’t just be judged by style or sales—but by whether it can thrive without costing the planet.
Flawless Magazine will continue to track how fashion and beauty redefine value. Stay tuned.
