Supply chain and sustainability: Managing risks in apparel

Expectations for greater supply chain transparency and due diligence are on the rise across the apparel sector, driven by stakeholder pressure and regulatory developments such as the EU's Digital Product Passports for textiles. However, the risks faced by this sector extend far beyond data requests and regulation.

Operating through some of the world's most complex and globally dispersed value chains, apparel businesses are exposed to climate-related disruption, biodiversity dependencies, and scrutiny of labour, community, and product practices. Understanding the potential impact of this exposure is essential to protect long-term value and resilience.

Climate risks impact long-term supply chain resilience

Two of the world's largest textile exporters, Bangladesh and Cambodia, are among the countries most exposed to rising temperatures. By 2039, Bangladesh could experience almost 100 days per year above 35°C, while Cambodia already averages 64 such days annually. Prolonged heat at factories increases health and safety risks and places additional strain on machinery and cooling systems. In some cases, businesses must impose shorter working hours or temporary shutdowns.

Flooding, meanwhile, presents an equally disruptive challenge. In Bangladesh's Chattogram region, flooding has repeatedly submerged access roads serving export-oriented factories, delaying the movement of workers and goods. Production schedules have been disrupted by transport bottlenecks and power interruptions, whilst shipping delays have led to missed vessel connections. These delays can result in penalty charges, costly air freight alternatives, and demands for discounts from buyers.

Further, rising insurance premiums and reduced cover for climate-exposed assets are compounding financial pressures. Beste Group, a producer affected by the Prato floods in Italy, reportedly lost a newly purchased machine with an estimated value of €7 million. As the equipment was insured for only 60% of its value, the company faced significant replacement costs.

With climate-related disruptions becoming more frequent, apparel manufacturers must invest in adaptation measures to protect workers and maintain operations and product supply. These measures can include upgrading ventilation and cooling systems, modifying factory buildings to reduce heat exposure, improving flood resilience, and increasing inventory buffers.

Biodiversity risks hide in raw material sourcing

In the apparel sector, biodiversity exposure can remain hidden several tiers upstream. Man-made cellulosic fibres like viscose, rayon, and modal are widely used across fashion supply chains. According to a report by environmental non-profit EARTHDAY.ORG, citing research from the CanopyStyle initiative, an estimated 300 million trees are harvested each year to produce these materials.

Where sourcing is linked to ancient and endangered forests, the protection, degradation, or depletion of these ecosystems would restrict fibre availability and increase competition for certified sustainable sources. Apparel businesses can mitigate these risks by evaluating biodiversity dependencies and diversifying towards responsibly sourced fibres.

Another staple of the apparel sector is cotton, which accounts for 19% of global fibre production. Cotton production presents a sourcing risk because it is often concentrated in areas facing water scarcity and ecosystem degradation.

For instance, large-scale cotton irrigation contributed to the collapse of the Aral Sea basin in Central Asia, causing biodiversity loss, water loss, and ecosystem degradation. Today, apparel companies face scrutiny not only on labour conditions and carbon emissions, but also on their impact on water-stressed landscapes.

Biodiversity risk frequently originates from upstream sourcing that remains largely invisible to procurement teams. Building more resilient supply chains requires greater oversight and supplier engagement, which enables apparel businesses to map their risk exposure and work with suppliers to mitigate it.

Socially responsible supply chains protect communities and trust

Social sustainability challenges arise due to the complexity, global reach, and length of the apparel sector's value chains. Production frequently spans multiple countries and supplier tiers, increasing exposure to human rights risks such as excessive working hours, inadequate wages, unsafe workplaces, forced labour, and child labour. Gaining visibility over these issues can be more difficult among lower-tier suppliers and in raw material sourcing regions.

Alongside labour-related impacts, apparel companies are expected to consider the social consequences of their activities on affected communities. The extraction and processing of raw materials, including cotton cultivation and the sourcing of both natural and synthetic fibres, can generate adverse impacts on local populations. These impacts stem from land use pressures, water consumption, pollution, and competition for natural resources.

Similarly, end-of-life management for textile products is attracting greater attention. Growing volumes of textile waste can create environmental and social burdens for local communities where disposal, informal waste management, or recycling activities take place.

Apparel companies also face expectations from consumers and regulators regarding visibility of sourcing practices, product composition, sustainability claims, and the social conditions under which garments are produced. To maintain trust and avoid allegations of greenwashing, it is necessary to provide clear product information, robust traceability systems, and credible substantiation of sustainability-related claims.

Preparing for apparel's next generation of business risks

Effectively managing sustainability risks is central to business resilience and long-term competitive advantage. Supply chain visibility is a particularly valuable resilience enabler. It allows businesses not only to respond to regulations, but also to assess supplier risks, work with them on mitigation measures, diversify sourcing where feasible, invest in climate-adaptive infrastructure, and make transparent, credible claims that protect brand value.

To assess how resilient your business is to longer-term sustainability risks, consider the following:

How have extreme weather events affected factory operations, inventory availability, or logistics performance? What is the associated financial impact?
Where are you already seeing signs of supply chain vulnerability, such as declining fibre quality, reduced crop yields, supplier disruptions, or longer lead times?
What investments have been made to improve the resilience of manufacturing sites and sourcing regions to physical climate risks? How are these investments being prioritised?
What sustainability-related risks have been elevated into enterprise risk management processes, and how have they influenced sourcing strategies, capital investments, or growth plans?

Identifying vulnerabilities early and taking targeted action allows apparel companies to protect business value while improving safeguards for the livelihoods connected to supply chains.

The RSM Global Sustainability team supports apparel businesses with multiple ESG services, including sustainability-related risk assessments, value chain mapping, resilience testing, and governance reviews. Contact a member of the team to discuss your procurement team's specific sustainability challenges.