The Business Case for Nature

In 2022, devastating floods left cotton farmers in Pakistan in an impossible position. As much as 40% of the annual cotton yield had been wiped out. Their livelihoods were at stake, and fashion companies like H&M that would have bought that cotton were left hanging.

The situation had a “huge impact” on H&M’s ability to get the cotton it needed at the price and time necessary, says H&M Group’s biodiversity impact lead Jennie Granström. “Now, we are scaling regenerative agriculture in cotton, and that’s primarily for resilience — so we can feel safe that there will be raw material production in a world where climate change puts a lot of pressure on nature and farmers.”

Situations like this are becoming increasingly frequent and more intense as the climate crisis accelerates. And it’s not just cotton. Fashion is vulnerable to a wide-ranging slate of nature risks, affecting everything from the quality and quantity of natural fibers to the effectiveness of dyeing and tanning processes, and the insurability of its supply chain and retail networks.

If there’s a silver lining to the continuous stream of climate change-related events globally, it’s that sustainability teams have never had an easier time making the business case for fashion to invest in nature. “It’s really come home for people this year,” says Rachel Kolbe Semhoun, head of sustainable sourcing and nature initiatives at French luxury group Kering. “People are finally realizing that old-fashioned approaches aren’t going to fit the bill.”

Kering was one of the first companies to create a dedicated nature strategy, working with leading biodiversity consultancy Biodiversify in its infancy to map out fashion’s exposure to nature-related risks. It implemented the industry’s first Environmental Profit and Loss (EP&L) framework in 2016 to capture things like water and air pollution, land use, and greenhouse gas emissions on the balance sheet. This work underpinned the business case for nature at Kering, laying the groundwork for its 2020 biodiversity strategy, its early support of the science-based targets for nature in 2024, and its industry-leading water strategy in 2025.

Other fashion companies are starting to make similar investments, to varying extents. H&M has also set science-based targets for nature, and has a longstanding partnership with the World Wildlife Fund (WWF) to strengthen ecosystem resilience, including along the Satpura-Pench Corridor in India. Topshop owner Bestseller is also investing heavily in nature: at the Textile Exchange conference on Tuesday, sustainable raw materials manager Danique Lodewijks told attendees the company is heavily invested in regenerative agriculture for cotton, noting its $3 million donation to the Regenerative Fund for Nature, co-founded by Kering and non-profit Conservation International.

Also at the Textile Exchange conference, VF Corp’s VP of global product stewardship, sustainability and government affairs Sean Cady shared the company’s approach to scenario planning, in which nature plays a significant role. Some of the more extreme scenarios it has modeled include a future where snow melts and skiing ceases, so “no one buys The North Face puffer jackets”. (US brand group VF Corp has owned The North Face since 2000.) While this might be unlikely to come to fruition, the process of considering every possible future builds a useful “muscle” in the company, he explained. “We want to make choices today that reduce the potential downside risks to our business in the future.”

Now, a new wave of fashion companies that haven’t previously considered nature are waking up to its impacts, and its potential to ravage their supply chains. If you don’t have a decade of groundwork to build from, how do you begin making the business case for nature? Vogue Business called on the small-but-mighty pool of experts to find out.

Get specific

To make the business case for nature, you first need to understand what nature means to your business, says Biodiversify co-founder Dr Samuel Sinclair. He points to two clients in the food and beverage industry to illustrate the different approaches: one is a major multinational corporation selling fizzy drinks largely made from commodity crops widely available around the world; the other makes high-end wine that relies on specific Japanese plums, and a soft drink that relies on British blackcurrants. “These ingredients have to come from a certain place, and be of a certain quality to meet their needs,” explains Sinclair. “While they are thinking about nature as a supply chain risk that could affect supply, quality and prices, the first company might be thinking about it more in terms of public images or answering to their shareholders.”

Similar distinctions could be made in fashion. A mass-market brand might buy cotton as a commodity crop, opting for average staple length and quality, with little consideration of whether the cotton was grown organically or using conventional farming methods and synthetic fertilizers. In this case, they could source cotton from lots of different places. But a luxury brand might be much more specific, having invested millions in honing a brand image deeply tied to provenance (for example, Mongolian cashmere or British wool) and quality (such as extra-long-staple Pima cotton).

To understand the financial value of these nature risks — which is critical to making the business case for change — sustainability teams need to delve deep into every step of the supply chain. “You need to go into the nuts and bolts to understand where you can afford to shift the design, marketing, or procurement,” Sinclair says. “In doing that, you will figure out the financial value of the nature-related risks and opportunities, and how much it would cost to deal with the nature crisis now or in the future. Then, you can go to your CFO and say: you cannot escape this $60 million risk, but you could solve it by spending $20 million on nature. Suddenly, you can justify it.”

The challenge is that very few sustainability professionals have such a holistic view of the business. Most operate within siloes, and have a totally different agenda to the executives above them. “The other challenge is that most people have never seen a business case,” he adds. “At its heart, a business case is a very simple story that explains why you should do something to make more money. You cannot take a one-size-fits-all approach to that.”

Stay with the trouble

Some executives might try to bat down the business case for nature on the basis that insurance will cover the risks, but that mentality won’t work for long, Sinclair says. Insurance works on the basis that you can effectively spread risks, but if those risks happen at a frequency and intensity that outweigh insurance premiums — which is increasingly the case with climate change — the whole model becomes unviable. “If what should be absurd crises happen almost all the time, you can’t really insure against them,” he explains.

The other issue is that nature-related risks are highly specific and context-dependent, and they compound exponentially. “Insurance companies often base their analysis on the data of what’s happened before, but that is almost irrelevant to what’s going to happen in the future,” continues Sinclair. “With nature-related risks, they don’t have the same data sets they would normally use to manage risk, and they don’t have the methods to deal with the fact that the future is going to be completely different, and change much faster, than what’s come before. This is one of the biggest challenges when quantifying nature risks: none of us are ready for the speed at which change is coming.”

Companies that move early to invest in nature can play a role in shaping new insurance models, says Kering’s Kolbe Semhoun, by providing some of the data insurance companies are missing. “If you listen to the chief scientists at big multinational insurance companies, they’re starting to say that nature-based solutions are going to make a difference. Our gray infrastructure can’t manage, and nature-based solutions are a lower investment and a longer-lasting solution that is far more adaptive to the changes that come with it. And we have some of the data they need to start modeling it out.”

Keep your audience in mind

When a sustainability team wants to address nature, its biggest priority should be getting executive buy-in, says Sinclair. “Until you have executive buy-in, there’s almost no point in doing anything that is not pushing in that direction.”

This sentiment was echoed in the Vogue Business deep dive into what makes a winning sustainability team earlier this year, which found that the teams managing to pull off meaningful transformations were more focused on translating sustainability into something that anyone, at any layer of the business, could resonate with. To do this effectively, they need a strong grip on who they’re pitching to, where their existing knowledge sits, and who has their ear. “If it’s the chief procurement officer pitching instead of the sustainability team, it’s more likely to be seen as a critical issue,” says Sinclair.

“The goal is to be able to say: we might have 90 other problems, but if the dye doesn’t stick, or the cotton isn’t this specific strand length, or we don’t have this specific leather, then it’s going to have a massive financial impact,” he explains. According to a new report from Biodiversify and Little Blue Research, based on a survey of 229 sustainability practitioners across more than 30 countries, climate resilience now trumps compliance as the main reason business leaders act on nature. At the same time, 53% of those practitioners say building the business case for nature is their biggest challenge.

At the end of the day, money talks, and the latest science clearly connects nature to financial returns, says ecologist and Nature’s Echo author Tom Crowther. “Until now, humans have needed to remove nature in order to increase food production,” he explains. But at a certain point, removing nature means depleting resources. “We’ve found — very recently — that the planet is just beyond this tipping point. So now, in order to maximize production, our best option is not to remove nature, but to restore it. Global markets are increasingly going to depend on improved nature.”

Position nature as a resilience play

Ultimately, the business case comes down to risks and resilience. “It’s incredibly expensive to have to switch out your supply chains, particularly when you’re in a bind, and something unexpected happens,” says Tony Goldner, CEO of the Taskforce on Nature-Related Financial Disclosures (TNFD), a framework many companies use to map their nature risks and dependencies. “So nature is just a smart investment. It might involve spending money today, but it’s about mitigating the risk of much more significant losses in the future.”

While regulation is slowly chugging in this direction, the pressure mounting quickest is from investors. TNFD recently released a report on investor awareness and expectations around nature, which showed that 96% of investors now think nature poses a potential risk to the returns in their portfolio, and about 60% list nature as one of their top three concerns, says Goldner. “Companies would be wise to get started on this sooner rather than later, so they’ve done the assessment and they have a good sense of their nature-related issues when investors start asking more questions.”

A spokesperson for Inditex told Vogue Business that nature is a foundational part of the group’s sustainability strategy, as nature is “closely connected to the materials we use, the processes through which our products are made, how they are used, and the end of life of our products”. Its efforts include scaling recycled cotton to reduce pressure on virgin raw material production; working with non-profit Canopy to outlaw deforestation, degradation, and conversion of natural ecosystems in its sourcing; and investing in the Regenerative Fund for Nature.

Shocks and disruptions in the wood supply chain — connected to climate change and geopolitics — have happened historically, and there are likely many more to come, says Canopy’s head of impact Kari Stoever. “Given all the pressures on wood systems and the climatic system, the forest degradation and wildfires we’ve been seeing, you don’t want to wait until there’s a spike related to supply to realize you don’t have a lot of optionality in your fiber basket,” she explains.

By positioning recycled, next-gen alternatives to wood-based fibers as a resilience play, Canopy is hoping to bridge the green premium on those materials as a hedge risk for future volatility. “Starting with a low percentage blend has very minimal costs — you might be looking at a cent per garment — and it sends an important market signal at a time when demand is not sufficient to support the scale and bankability of innovative materials,” says Stoever. “Having that recycled content in there also has the potential to reduce or reprieve future fees related to extended producer responsibility (EPR) regulations, so the true cost comes down too.”

The stakes could not be higher, adds Stoever. “If you’re not looking at your nature dependencies and optimizing for a future where there’s more volatility in those supply chains, then your business is at risk.”