While fashion is sometimes dismissed as a ‘frivolous’ industry, its effect on the environment is enormous. The industry is heavily dependent on natural resources (especially water and cotton) and is a highly polluting business, generating the greenhouse gas emissions that cause climate change. This climate change, in turn, will affect water availability and crop production – posing threats to the industry’s future.
If no actions are taken to reduce greenhouse gas emissions, the demand for water is expected to exceed supply by 40% by 2030 . This could jeopardize cotton, a key input in apparel, as its production is heavily water-intensive. Additionally, the wet processing of clothing (washing and dyeing) also requires heavy water consumption, further demonstrating the substantive risks climate change poses to the fashion industry.
Fast fashion has only amplified all of these effects further, as it has increased the rate at which consumers purchase and dispose of clothes. H&M, a leading fast fashion retailer, offers an example of a company whose operating model is likely to be disrupted by the physical manifestations of climate change and serves as a case study for how the fashion industry can mitigate these threats.
H&M has already experienced the bottom line impact of climate change through extreme weather. The 2010 drought in China resulted in a 150% increase in the price of cotton – this produced a 30% decrease in profits for H&M, as it decided not to pass on the price increase to consumers . Long-term, H&M will face both top and bottom line impacts if the effects of climate change are not curbed, as these effects will both reduce its ability to produce the desired consumer demand for clothing and increase the prices of its raw material inputs.
Recognizing these risks, H&M has already taken steps to increase its sustainability. Focusing on becoming more energy efficient and increasing the usage of renewable energy (in its stores, offices, and warehouses) are the two key ways in which the company is attempting to mitigate climate change. From 2014 to 2015, H&M reduced its total emissions by 56% and increased the percentage of renewables in its total electricity use from 27% to 78% . Both of these metrics were achieved while simultaneously experiencing an 11% increase in net sales, illustrating how revenue and sustainability are not negatively correlated.
The following chart displays the progress H&M has made on both reducing emissions from its own operations and along its value chain :
H&M describes its “conscious actions” to be “climate smart” as the following:
“We will keep supporting innovation in technology enabling more environmentally friendly materials and processes. We will also continue to work for 100% renewable electricity in our own operations wherever there are credible renewable energy certificates which meet our evaluation criteria for quality and impact. We are committed to set science based targets to push our value chain into more sustainable operations.” 
As the company attempts to curb the effects of climate change and adopt more sustainable practices, a key challenge it faces is influencing the elements of its supply chain over which it does not have direct control – its third stated “conscious action.” H&M needs to use its bargaining power as one of the largest fast fashion retailers to influence the suppliers that are responsible for the majority of the carbon emissions within the value chain – through raw material production, fabric production, garment manufacturing, packaging, and transportation. Additionally, it should aim to encourage consumers to be more conscious of their clothing consumption and the energy impacts in the way in which they wash and care for their clothes.
The size and strength of H&M within the fashion industry lend it the ability to take on a transformative role and drive the industry to adopt more sustainable practices. By balancing growth with sustainability, H&M can become the industry leader in containing climate change.
 “Charting Our Water Future: Economic Frameworks to Inform Decision-Making,” 2030 Water Resources Group (2009), http://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/charting-our-water-future, accessed November 2016.
 Jacqueline Jackson, “Assessing the Environmental Impact of the Fashion World,” Environmental Leader, October 6, 2014, http://www.environmentalleader.com/2014/10/06/assessing-the-environmental-impact-of-the-fashion-world, accessed November 2016.
 H&M Conscious Actions Sustainability Report 2015, http://sustainability.hm.com/content/dam/hm/about/documents/masterlanguage/CSR/2015%20Sustainability%20report/HM_SustainabilityReport_2015_final_com_4.pdf, accessed November 2016.