Sustainability ‘takes a backseat’ as fashion industry prepares for uncertain outlook

Sustainability has slipped down the list of priorities for fashion industry executives, as they prepare for economic uncertainty in 2025.

This is according to the McKinsey and Business of Fashion ‘State of Fashion 2025’ report, which combines market insights and surveys to predict top priorities and challenges for the sector over the coming year.

While sustainability objectives topped the list of opportunities for the industry in 2024, they do not appear in the top three for 2025. In fact, only 18% of fashion executives consider sustainability a top-three risk for growth in 2025, compared to 29% for 2024.

“This year, in an environment where growth may be constrained, the focus on sustainability has faded into the background, as executives prioritise other opportunities, such as differentiating their brands and offering new designs to capture market share,” McKinsey explains.

Concerning slowdown amid slow progress

This is concerning, given that sustainability progress has already been slow in the industry: the report shows that 63% of brands are behind on their 2030 decarbonisation goals, despite the fact that it is projected to represent more than a quarter of the world’s carbon budget by 2050.

Earlier this year, another report by Fashion Revolution also showed that a wide majority of the world’s top 250 fashion brands were not doing or disclosing enough on decarbonisation.

Perceived economic complexities, supplier and brand fragmentation and consumers’ unwillingness to pay more for sustainable products are all barriers to action in the sector, while it’s estimated that decarbonising fashion supply chains could cost up to US$1 trillion.

“With the exception of a handful of brands, the industry has yet to unlock a marketable, at-scale value proposition for sustainable fashion,” concludes the McKinsey analysis.

From overproduction to ‘planning excellence’

Overproduction in particular has yet to be addressed, with nearly 90% of brands refusing to disclose the number of garments they make annually. 

According to McKinsey, an estimated 2.5 billion to 5 billion items of excess stock were produced by the fashion industry in 2023, worth between US$70 billion and US$140 billion in sales.

The consultancy adds that inventory planning is made even more difficult by climate change and increasingly unpredictable weather patterns – but slow growth in 2025 will push companies towards “end-to-end planning excellence, with brands increasingly adopting tech tools and adjusting their operating model to support agile supply chains”.