Renewable and energy-efficient manufacturing

In the 2025 Fossil Free Fashion Scorecard, Stand.earth is building on the 2024 Clean Energy Close Up report with a deeper investigation into brands’ efforts to fund and enable the decarbonization of their supply chains. A just energy transition for the fashion industry means decarbonizing in a manner that is inclusive, fair, and provides lasting benefits to workers and communities. 

Brands which authentically support and advocate for a just energy transition will adopt a number of measures to share the burden of decarbonization fairly among those who profit from the industry. This includes sharing financial responsibility for changes related to reducing fossil fuel reliance and transitioning to renewable energy between brands and manufacturers, both through direct financing, preferential loan access and collective financing agreements; collaborating with manufacturers to develop and implement targets and solutions that are appropriate for their geography and business; and addressing the inherent brand-manufacturer power imbalance by establishing long-term, collaborative supplier relationships and fair purchasing agreements which provide stability and assurance.

During the current period of global economic uncertainty around inflation and increased trade barriers, it is more imperative than ever that brands provide the long-term financial partnership and pricing that will enable manufacturers to commit to decarbonization projects without being disadvantaged. Without action by brands, decarbonization will not take place at the scale and pace that they—and the urgency of the moment—demand.

To put this into context, thermal combustion is both a key priority for decarbonization, as well as an important issue for workers and communities living near factories, bringing significant impacts on air pollution, health and well-being. In Bangladesh, 83% of emissions in the textile and apparel sector come from the on-site burning of fossil fuels, primarily fossil gas^[1]. If Bangladesh is going to develop a sustainable fashion industry by 2030, it is going to require the large-scale transition of thermal processes to more energy-efficient, lower heat, and cleaner alternatives, which may have high upfront costs or long pay back periods. ^[2]

According to new research from Aii and Global Efficiency Intelligence, electric boilers and industrial heat pumps are the most effective solutions, but have pay back periods of more than two years, requiring ongoing support from brands.^[3] Direct support to finance feasibility studies, pilots and advocate for government incentives is critical to support a move away from coal and interim transition fuels like biomass.^[4]

While information sharing into concrete brand action has improved since the 2023 scorecard, reporting remains heavily anecdotal, with few brands sharing specific data on the full depth of support being delivered, the share of suppliers reached, and financial details about the level of their own investment. Deeper and more even transparency on supply chain decarbonization progress is essential to ensure accountability, and improve collaboration where brands share facilities.

Providing training and information on energy efficiency and renewable energy to at least Tier 1 and 2 manufacturing suppliers is the approach to supply chain most commonly pursued by fashion brands in 2025. Nearly three quarters (30/42) of companies provided evidence of information-sharing or training to suppliers on energy efficiency and renewable energy which went beyond engagement on basic training through the Higg FEM. 

Some strong examples included:

• Through H&M Group’s Green Fashion Initiative the company’s suppliers have access to in-house energy efficiency engineers and receive training, support and best practices on how to make credible renewable energy usage claims, measure their GHG emissions and how to mitigate environmental impact, and on setting science-based targets. The company states that 100% of its Tier 1 and Tier 2 suppliers have access to this training and support.^[9]
  
• Alongside its Water and Carbon Leadership Program, American Eagle Outfitters requires that all of its strategic suppliers complete the GIZ Climate Action Training Program by 2025. In 2024, the company also worked with USAID and local consulting firms to offer online trainings on renewable energy solutions (e.g. RECs, DPPA, solar rooftop system local regulation) to suppliers in Vietnam, Bangladesh and China. ^[10]
  

Beyond energy efficiency and renewable electricity training for suppliers, brands should provide more comprehensive support to strategic suppliers, including paying for feasibility studies, funding transition plans, and assisting in appropriate target-setting. Just over half (24) of companies showed evidence of this deeper engagement:

• Kering reports working with Tier 1 and Tier 2 suppliers on feasibility studies and to set targets as part of their transition plans^[11]
• Outdoor brands like Mammut have participated in the European Outdoor Group Carbon Reduction Project, which also helps Tier 2 suppliers set climate-related targets. ^[12]
  
• New Balance, Patagonia and REI supported the formation of the Textile Heating Electrification Tool with the Outdoor Industry Association. This tool aims to enable fashion brands and suppliers to calculate the potential energy consumption, GHG emissions and cost savings of transitioning from fossil fuel-based heating to electric solutions like industrial heat pumps, electric steam boilers, and electric thermal oil boilers in countries like Bangladesh and Vietnam.^[13]
  

For feasibility studies around renewables:

• Levi Strauss & Co has connected its suppliers with market experts to help with measuring their overall solar feasibility on-site or off-site through a CAPEX or OPEX model. ^[14]
• Primark reported implementing a supply chain renewable energy roadmap to 2030, starting in India in 2024. This includes partnering with Ren Energy and factories in the Tamil Nadu region and investigating opportunities for collective purchasing of on-site solar panels and for collective purchasing of offsite-generated renewable electricity^[15]. This blueprint could be well used in other key sourcing regions.

Strong financing mechanisms are critical to support capital investments and direct solutions for supplier decarbonization. Financial support by brands is an essential part of a fair distribution of responsibility for climate action, as well as responsibility for the significant burden and harm that is already being caused by climate breakdown and the uneven distribution of profit and power between brands, manufacturers, and workers. Access to loans—including preferential rates enabled by brand support—has a role, but fair financing means moving beyond debt-based models to direct or collective support directly available to manufacturers for specific decarbonization projects on an annual basis. 

Examples of supplier financing:

H&M Group provided several ways it is doing so through its Green Fashion Initiative which focuses on financing on favorable terms for those with limited technical expertise, restricted access to finance, high interest rates and low financial return, to address common barriers that suppliers face. The company reported that 23 projects had been funded, resulting in a potential reduction of 148,000 tonnes CO2e in the supply chain, of which 67,000 tonnes are attributable to H&M Group based on its share of business with the suppliers.^[23]

The company also publicly shared the total spend on its decarbonisation activities across the value chain was approximately SEK 1.7 billion, a welcome level of transparency that others in the industry should follow.  ^[24]

Through its Sustainable Supply Chain Finance Program, PVH rewards high-performing suppliers with better financing rates based on their sustainability performance. The company has partnered with established banks like HSBC and Standard Charter to provide suppliers with access to competitive financing based on a set of science-based environmental targets as well as a series of social elements.^[25]

Collective financing mechanisms are also an important piece of the puzzle: A handful of companies were engaged in programs like the Apparel Impact Institute’s Future Supplier Initiative^[26] which is currently supported by Bestseller, Gap Inc., H&M Group and Mango in Bangladesh. 

However, beyond some evidence from H&M Group, no clear examples were found of brands offering non-debt based financial support directly to manufacturers for decarbonization projects, raising concerns about the continuation of debt-cycles and increased pressure on suppliers to foot the bill for climate action. 

For 28/42 brands – two thirds – the research found no evidence of any form of decarbonization financing. This included Adidas, Allbirds, Aritzia, Asics, Boohoo Group, Burberry, Columbia Clothing, MEC, Next, ON-Running, Prada, Under Armour and Walmart, among others.

Business uncertainty for manufacturers, exacerbated by global turmoil, presents a serious long-term barrier to climate action. A just energy transition requires procurement policies that enable suppliers to invest in climate action, providing greater financial security with longer term purchasing agreements and prices that can support the costs of decarbonization. 

Few strong examples were found, and details remain anecdotal for this element of a just energy transition. While it is becoming more common for brands to incorporate metrics like renewable energy adoption and GHG emissions reduction into vendor scorecards, which may influence orders, it is important to note that demands and ratings systems imposed on manufacturers can easily reinforce existing colonial power structures, rather than acting as a structure for a collaborative relationship, and should be carefully examined.

Walmart appears to offer an example of a company linking environmental performance to purchasing decisions which result in meaningful incentives. The company worked with CDP and HSBC to launch the Sustainable Supply Chain Finance Program, an early-payment program to incentivize suppliers who set science-based targets through Project Gigaton or have achieved certain score thresholds from CDP.^[31]

No brand shares details of specific approaches to contract length or pricing, or even average price changes over time, which would show evidence of long-term, secure and fair sourcing relationships with suppliers that invest in decarbonization initiatives. This level of transparency is needed to prove that language around a just transition is more than just lip service.  A small number of brands in the Scorecard shared some encouraging details: Chanel stated that it prioritized sustaining its strategic supplier base for long-term operations rather than seeking short-term financial gains. To support suppliers, it confirmed long-term orders for production planning and, in some cases, provided shorter payment terms to improve liquidity. ^[32]

Fair pricing that reflects and supports wage increases as well as sustainable production is an essential part of delivering a just energy transition, enabling manufacturers to pay workers a living wage. However, examples of brand transparency on prices were limited, and where present were not linked to decarbonization.

Are these policies actually working? This year, Stand.earth evaluated progress on increasing supply chain electricity from renewable sources and a sustained increase in thermal energy from electricity, although limited transparency from brands was a barrier, presenting a murky picture of the state of the transition. 

Just four companies clearly disclosed progress in increasing supply chain electricity from renewable sources: H&M, Lululemon, Nike and PUMA. H&M Group reported that in 2024 it increased the share of renewable electricity sourced in its Tier 1-3 supply chain to 36%, of which 7% is from PPAs and green tariffs, and 9% is generated on site^[35]. Lululemon reported increasing supply chain renewable electricity to 14% among “core Tier 1 and Tier 2 suppliers^[36]. Nike recorded increasing in renewable fuel consumption (27% of total), renewable electricity (16% of total) and renewable energy consumption (19% of total)^[37]. Meanwhile, PUMA demonstrated an increase in renewable energy consumption for its Tier 1 supplier base. In 2021, this was 17,763MwH and in 2022 was 37,322 MwH^[38].  

Limited transparency is also a barrier to understanding the state of the thermal energy transition, although it is positive to note that several brands detail facilities that have phased out coal. On Running reported that 100% Tier 1 suppliers have already done so^[39] and PUMA shares the percentage of production powered by coal across different countries including Vietnam, China and Cambodia for Tier 2 leather and textile production^[40]. H&M Group reported that the number of Tier 1 and Tier 2 supplier factories use on-site coal boilers declined to just 19 in 2024, compared to 117 in 2022)^[41]. 

More challenging still is understanding what brands are transitioning thermal processes to. It is essential that companies publish transparent data about their supply chain energy and electricity sourcing.

While brands and retailers have made concerted efforts to increase access to support and training on energy efficiency and renewable energy adoption, there is much work to be done in providing similar levels of financial and technical support to develop climate transition plans and undergo on-site feasibility studies.