More and more brands join the chorus saying “we will decarbonize!” That they are publicly taking responsibility for their emissions is a good first step. But should suppliers from the Global South pay for it?

The vast majority of emissions from most outdoor products occur during the manufacturing stage, and most products are currently produced in the Global South. So, it is natural that it is here that the greatest decarbonization efforts will take place. But is it fair for brands to place the financial burden of meeting their climate goals onto the shoulders of manufacturers? According to some suppliers, that’s exactly what is taking place.

Pactics is one such manufacturer. Based in Cambodia, its workers produce eyewear, sportswear, and backpacks for some of the world’s leading brands. Some are increasingly setting ambitious science-based climate targets – and then demanding suppliers do the heavy-lifting to meet them.

“Brands usually don’t know what these demands mean and what they cost,” says Arjen Laan, CEO of Pactics Group, pointing to among other things the additional staff and equipment this requires. “But around here, the motto is you just have to ‘absorb the costs.’ This basically means that we pay, and somebody else gets the benefit.”

According to Arjen Laan, the current division of the financial burden of decarbonization – or rather the lack of a division – is simply not going to work. For starters, access to financing in Cambodia is virtually impossible, whereby companies often need 100% collateral on the loan and still pay up to 18% interest rates. Loans from foreign lenders, meanwhile, are taxed heavily.

If brands are unwilling to help finance their own value chain’s transition targets, Arjen Laan sees their chances of successfully achieving them as slim: “If this situation is not remedied, decarbonization is going nowhere.”

Rare cooperation between suppliers

It turns out that Pactics is not alone in this opinion. Together with six other suppliers, Pactics commissioned a report to help make the manufacturer’s perspective known, titled “From Catwalk to Carbon Neutral: Mobilising Funding for a Net Zero Fashion Industry.” Its foreword explains its reasoning as follows:

“The catalyst for co-commissioning this paper is our shared conviction that if we fail to devise new ways of funding decarbonisation, we will also fail to realize our climate goals. We wanted to inspire more expansive, creative, and imaginative thinking about how the sector might go about collectively funding decarbonisation in such a way that goes beyond business-as-usual, and primarily debt-based, solutions.”

The report’s findings can be summed up thus: The apparel industry is growing rapidly, as are its emissions. While brands set science-based targets to mitigate these, they are also in an increasingly competitive market that is seeing a “race to the bottom” in terms of production costs. This leads to an unspoken assumption that manufacturers must fund the sector’s decarbonization.

Finding fair solutions

With the issue sufficiently described, the report then continues to spell out the various challenges manufacturers face in fulfilling these expectations, including financial, policy, and geographical barriers. But according to Arjen Laan, putting the problem into words was just half of the report’s value:

“We didn’t want to just criticize, but to provide constructive solutions.”

Solutions like cost-sharing with the consumers, for example, whereby products with a “green tag” are priced slightly higher to fund decarbonization of the product’s supply chain. Or a Just Transition Fund, where mandatory regulations levy funding for decarbonization projects. A related idea is the establishment of an industry-led Fair Climate Fund, where each value chain partner diverts a portion of their revenue to a fund, which in turn finances supply chain decarbonization projects.

On the latter, Arjen Laan points to the European Outdoor Group’s recently launched Impact Accelerator Fund for Climate (IAF) as a promising step in this direction. “If this project successfully scales up, it could make a difference. But it’s important to remember that it is not just about the money – it’s about the execution. What are the rules of engagement, and how is it to be distributed?”

Outdoor brands and suppliers need a “decent conversation”

According to Arjen Laan, the report has received solid traction since publication, and it continues to be referred to in discussions around the world. But will its calls to action become reality? Arjen Laan says that while he’s experienced many proactive clients who are willing to cooperate and find solutions, a common trend is for brands to simply send over consultants. And while he sees these efforts as well-intentioned, he suggests they are somewhat misguided:

“Suppliers are usually polite enough to welcome these consultants, but nobody knows what needs to be done better than we do – and here knowing the local context is key. Everybody keeps talking about solar, for example, but I actually just had to unplug my solar panels because local regulations aim to secure the government’s monopoly over energy production.”

That said, Arjen Laan says he is not particularly worried about carbon himself. As of 2024, roughly 70% of Cambodia’s total energy supply already comes from renewables. He does wonder, however, how producers in countries powered by coal (e.g., India) are expected to finance this transition.

And it’s not only about climate. Other incoming initiatives, such as product passports and due diligence legislation, are also of concern. And here, he says the same principle still applies: Who foots the bill?

According to Arjen Laan, the only way to resolve this question, equitably, is through dialogue: “I don’t always understand the brand perspective, so I’d like to hear their side. Then we can see if we can meet in the middle. We want to work as partners with brands, not just suppliers.”

In terms of next steps, his call to brands is simple: “Don’t forget us! Start a conversation with your suppliers today.”

 

 

 

Photos: Pactics Group