The Future Supplier Initiative, a new collective financing mechanism coordinated by the brand-backed Fashion Pact, is held up by industry advocates as an example of such collaboration. Alongside financial incentives, the initiative helps suppliers identify cost-effective decarbonisation projects with high-impact potential.

Embedded in the design of the initiative is the provision of ongoing supplier feedback, says Eva von Alvensleben, the pact’s executive director: “Suppliers are consulted from the very beginning of the process and are instrumental in approving and shaping these projects.”

The collective aspect is also important because it’s rare for one brand to be a supplier’s only customer. Getting a bigger group on board splits the risk and addresses the free-rider problem; brands are reluctant to go out on a limb to help finance projects that will benefit their competitors, especially when they’ll only be able to take credit for the sliver of emissions reductions that relates to the volumes they source. Working together reduces this friction and individual risks.

For instance, if all four brands are present in a factory where a $2 million project to install solar panels has been identified, each would be asked if they’d like to underwrite $500,000. The goal is to get more brands and banks involved and to expand the programme into more countries, including Vietnam, India, China, Italy and Türkiye.

“This initiative is really what we see as being the next big thing that our industry needs. It needs collaboration across companies, brands and businesses,” Bestseller chief executive officer Anders Holch Povlsen told WWD. “We all know that the big challenges lie deep within our supply chain. That’s where we have the [biggest] footprint today, and this is where we need to work.”

The Fashion Industry Charter for Climate Action estimates that 99 percent of total fashion brand emissions occur at the earlier levels of the supply chain. The brands’ new financing initiative looks to share the risks with Tier 1 and 2 facilities, or those at the raw material production, dyeing and finishing and manufacturing level.

How the FSI will work goes something like this: Participating brands will share the names, profiles and energy data of their Tier 1 and 2 factories with the risk management firm Guidehouse for analysis against a slew of parameters, such as the existence of climate targets and reduction potential. Brands will then decide which to prioritize and help “enable” their financing—however they end up doing it. The idea is to “bridge the investment gap” that prevents factories from, say, switching from fossil fuels to renewable energy, von Alvensleben said.

“A collective approach is about sharing costs; it’s about sharing risks; it’s about sharing responsibilities,” she said. “This whole industry has systematic issues that we need to overcome, that are bigger than one company alone can solve.”

The Future Supplier Initiative, facilitated by The Fashion Pact in partnership with Apparel Impact Institute, Guidehouse, and DBS Bank, launches with a programme in Bangladesh supported by Bestseller, Gap Inc., H&M Group and Mango.

It is actively recruiting more brands, with the intention of expanding to other key apparel manufacturing regions including Vietnam, India, China, Italy and Turkey.

With 99% of total fashion brand emissions occurring in the supply chain (Scope 3), the initiative aims to “accelerate the transition to net zero by sharing the financial risks and responsibilities of transitioning to renewable energy sources in Tier 1 and 2 garment and textile factories”.

Alongside financial incentives, technical support will be provided to help suppliers identify and implement low carbon technologies and solutions. Baselining and monitoring emission reductions will also be conducted to demonstrate the impact of projects financed and implemented by the initiative.

The initiative seeks to identify and match projects with the highest potential for impact. By identifying common factory units, interventions and costs, it will enable a global and regional joint effort between fashion brands, moving from targets and roadmaps to implementation and measurable reduction, beyond energy efficiency measurements.