Major fashion brands and retailers face growing water-related risks

A pioneering report by Planet Tracker has unveilsed significant water-related risks confronting major fashion brands and retailers, including Adidas, Gap, H&M, Inditex, Levi Strauss, Nike, PVH Corp, Ralph Lauren, and VF Corp. Amid escalating water stress in critical manufacturing regions, the report urges companies and investors to prioritise water risk management for sustained long-term viability.

Although direct operations may appear minimally affected, the report cautions that indirect impacts could pose substantial threats. It identifies three primary classes of water-related risks—physical, regulatory, and reputational—compromising operations and supply chains due to water scarcity, regulatory changes, and reputational harm.

North American brands, in particular, confront escalating water stress, accentuating the urgency for strategic water risk mitigation. Richard Wielechowski, Senior Investment Analyst at Planet Tracker, underscores the imperative for apparel corporates to develop comprehensive plans to mitigate these risks and enhance long-term sustainability. Financial implications are significant, with potential operating profit declines for apparel brands from water-related disruptions.

Water-related disruptions could negatively affect profits

Acknowledging the scarcity of consistent and comparable data, Wielechowski advocates investor engagement to address this data gap and support water risk mitigation strategies.

The report underscores the necessity for apparel companies to transparently disclose water usage and risks, amid projections of worsening water stress in manufacturing regions. Financial institutions are urged to factor water-related risks into investment decisions and collaborate with companies to disclose water usage and implement mitigation strategies, such as Science Based Targets for water.

Planet Tracker's innovative dashboard provides a comprehensive geospatial overview of nearly 800 brands, facilitating a nuanced understanding of water stress intensity and projections at regional and corporate levels, offering valuable insights for stakeholders across the textiles value chain.