India's fashion supply chain has always been shaped by the weather. As monsoons grow less predictable and climate policy tightens across global markets, Indian apparel brands are beginning to feel pressure not just on production — but on profitability. A new analysis 'Cost of Inaction' by the Apparel Impact Institute puts a number on what many brands are already feeling. By 2030, the industry faces a cotton–carbon double shock, where raw-material volatility and carbon pricing converge to create a material hit to costs and margins .
The report estimates that even a 3% increase in climate-related costs can translate into a 34% drop in profits for a typical apparel brand operating on single-digit EBIT margins, and these costs are already flowing into supplier invoices and cost-of-goods-sold (COGS).
India's Cotton Dependence Amplifies Supply Risk
Cotton sits at the heart of India's exposure. The fibre accounts for nearly 20% of global textile production, with India alone contributing around 25% of global cotton output. However, the report flags India as one of the most climate-vulnerable cotton producers, largely because nearly 60% of cotton cultivation is rain-fed, leaving yields highly sensitive to erratic monsoons and rising temperatures.
Climate modelling cited in the report suggests that global cotton production could decline by about 7% by 2040, with volatility intensifying well before that. Even a 3% drop in cotton supply could push up apparel COGS by around 1% and erode EBIT margins by up to 0.5 percentage points by 2030-a significant hit for Indian brands already operating with tight buffers.
Carbon Costs Add A Second Layer Of Pressure
Alongside cotton volatility, Indian fashion exporters face growing exposure to carbon pricing — Carbon costs-both explicit and implicit-now cover about 28% of global emissions, up sharply from 5% two decades ago, and are increasingly being passed through supply chains .
India's manufacturing footprint heightens the risk. Cotton garments produced in India carry materially higher embedded emissions than those made in China or the EU, reflecting coal-heavy power grids and energy-intensive wet processing. As a result, apparel exported from India to Europe could face COGS increases of roughly 3-3.5% once mechanisms like the EU's Carbon Border Adjustment Mechanism (CBAM) extend to textiles in the early 2030s.
For context, the EU accounts for over 35% of global apparel imports, exposing Indian exporters to carbon costs set not domestically, but by overseas regulation.
Together, cotton supply shocks, energy volatility and carbon pricing form a compounding risk. The report warns that by 2030, climate inaction could result in a three-percentage-point margin shock, and by 2040, climate costs could wipe out nearly 40% if brands delay investment. The report adds that deals in supplier electrification, renewable energy, and climate-resilient cotton practices can stabilise costs within three to five years.
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