Sustainability mentions without financial clarity

Across the 2024 full-year earnings calls of 12 major fashion and beauty companies, sustainability was a recurring theme. Executives frequently referenced initiatives such as carbon reduction, circular fashion programs, and ethical sourcing. However, these mentions were often vague and lacked quantifiable financial context. While companies were eager to highlight their commitment to ESG values, few provided concrete data linking these efforts to revenue growth, cost savings, or long-term shareholder value.

For example, several brands spoke about transitioning to more sustainable materials or reducing water usage in production, yet failed to articulate how these changes impacted their bottom line. Were there measurable cost efficiencies? Did these initiatives drive customer loyalty or brand differentiation in a competitive market? These questions remained largely unanswered.

In some cases, sustainability was framed as a reputational asset rather than a strategic business driver. This approach risks underplaying the tangible financial implications—both positive and negative—of ESG initiatives. Without clear metrics or performance indicators, investors and stakeholders are left to interpret the value of sustainability efforts based on sentiment rather than substance.

Australian investors, in particular, are increasingly seeking transparency around ESG performance. The lack of financial clarity in these earnings calls may hinder their ability to assess the long-term viability of companies operating in the fashion and beauty sectors. As regulatory expectations evolve and consumer demand for ethical practices grows, the pressure to connect sustainability with financial outcomes will only intensify.

Missed opportunities in ESG risk disclosure

While most of the companies reviewed acknowledged ESG themes during their 2024 earnings calls, few addressed the potential financial risks of failing to act on sustainability. This omission represents a significant missed opportunity, particularly as climate-related and social risks become more material to business operations. For instance, none of the 12 companies explicitly discussed how supply chain disruptions due to extreme weather events or geopolitical instability might impact sourcing costs or inventory levels—despite these being increasingly common occurrences in the Asia-Pacific region.

Similarly, regulatory risks were largely overlooked. With Australia and other markets tightening disclosure requirements and introducing stricter environmental standards, companies that fail to adapt may face compliance costs, fines, or even restricted market access. Yet, these potential liabilities were rarely mentioned. Only a handful of companies briefly alluded to upcoming legislation, and even then, the discussion lacked depth or financial quantification.

Social risks, such as labour rights violations or lack of diversity in leadership, were also underrepresented in the risk narratives. In an industry heavily reliant on global manufacturing networks, failing to address these issues can lead to reputational damage, consumer backlash, and legal exposure. However, most companies chose to highlight philanthropic initiatives or community engagement programs rather than confront the systemic risks embedded in their operations.

For Australian stakeholders, this lack of transparency is concerning. Investors, regulators, and consumers are increasingly aware of the financial implications of ESG risks. Without clear disclosure, companies may appear unprepared or unwilling to manage these challenges proactively. This not only undermines investor confidence but also limits the ability of the broader market to price in ESG-related risks accurately.

To meet evolving expectations, companies must move beyond surface-level ESG mentions and begin integrating risk assessments into their financial narratives. This includes scenario planning, stress testing, and disclosure of potential cost impacts. By doing so, they can demonstrate resilience and strategic foresight—qualities that are becoming essential in today’s volatile operating environment.

Bridging the gap between ESG and profitability

To effectively bridge the gap between ESG initiatives and profitability, fashion and beauty companies must begin treating sustainability not as a peripheral concern but as a core business strategy. While many brands have made public commitments to reduce emissions or improve labour practices, few have articulated how these efforts translate into financial performance. This disconnect is particularly evident in earnings calls, where ESG is often discussed in isolation from revenue, margins, or return on investment.

Some companies are beginning to make progress by embedding ESG metrics into their operational KPIs and linking executive compensation to sustainability outcomes. For example, tying bonuses to reductions in carbon intensity or improvements in supply chain transparency can signal to investors that ESG is being taken seriously at the highest levels of governance. However, such practices remain the exception rather than the norm across the sector.

Australian investors are increasingly looking for evidence that ESG investments are delivering measurable returns. This includes cost savings from energy efficiency, increased sales from eco-conscious consumers, and reduced risk exposure through more resilient supply chains. Yet, few companies are quantifying these benefits in their financial reporting. Without this data, it becomes difficult to assess whether sustainability is enhancing or eroding shareholder value.

To close this gap, companies should consider the following actions:

• Integrate ESG into financial forecasting: Include sustainability-related costs and savings in earnings projections and capital expenditure plans.
• Report on ESG ROI: Provide case studies or data points that demonstrate how specific initiatives have led to revenue growth, cost reduction, or risk mitigation.
• Engage with investors on ESG strategy: Host dedicated ESG briefings or include detailed ESG appendices in earnings materials to address investor concerns directly.
• Adopt standardised reporting frameworks: Use globally recognised standards such as the Task Force on Climate-related Financial Disclosures (TCFD) or the Sustainability Accounting Standards Board (SASB) to ensure consistency and comparability.

By taking these steps, fashion and beauty companies can move beyond aspirational ESG narratives and begin to demonstrate how sustainability is driving long-term profitability. This shift is not only essential for meeting the expectations of Australian investors and regulators but also for maintaining competitiveness in a market where ethical and environmental considerations are increasingly influencing consumer behaviour.

Sustainability mentions without financial context

Across the 2024 earnings calls of 12 top fashion and beauty companies, sustainability was a recurring theme—yet the conversation often stopped short of linking these initiatives to financial performance. While nearly all brands acknowledged ESG efforts, only a handful translated these into measurable business outcomes, leaving a gap between purpose and profit that savvy investors and consumers are beginning to question.

For example, several global fashion houses highlighted their use of recycled materials and carbon reduction goals, but failed to quantify how these efforts impacted margins, cost savings, or customer acquisition. One luxury label spoke at length about its circular fashion pilot, yet offered no insight into how this affected inventory turnover or resale value. In a market where Australian consumers are increasingly eco-conscious and willing to pay more for sustainable options, this lack of financial clarity feels like a missed opportunity.

Beauty brands were no exception. A leading skincare company touted its refillable packaging and cruelty-free certifications, but didn’t disclose whether these changes influenced customer retention or reduced packaging costs. Another cosmetics giant mentioned its commitment to net-zero emissions by 2030, but omitted any discussion of the capital investment required or expected ROI.

Without tying ESG efforts to tangible business metrics, these companies risk positioning sustainability as a marketing checkbox rather than a strategic growth driver. For the Australian fashion market—where transparency and authenticity are increasingly non-negotiable—this disconnect could erode trust and brand loyalty among female consumers who are both style-savvy and sustainability-minded.

Overlooked risks of ignoring ESG initiatives

Failing to address the financial implications of ESG initiatives isn’t just a missed opportunity—it’s a growing liability. In the 2024 earnings calls, several fashion and beauty companies glossed over the potential risks of not advancing their sustainability agendas. For Australian brands and retailers, this oversight could have serious consequences, especially as regulatory pressures and consumer expectations continue to rise.

One major risk is reputational damage. In a market where 73% of Australian women say they consider sustainability when making fashion purchases, brands that lag behind on ESG transparency risk being called out—or worse, boycotted. Social media backlash can spread quickly, and without a clear sustainability narrative backed by data, companies may find themselves on the defensive.

There’s also the operational risk of supply chain disruption. Several companies mentioned climate-related challenges in passing, but few acknowledged how extreme weather events, resource scarcity, or shifting labour standards could impact sourcing and production. For example, cotton yields affected by drought or floods can spike material costs, while non-compliance with modern slavery laws could lead to fines or import bans—issues that are particularly relevant for Australian importers and retailers.

Financial institutions are also tightening the screws. Investors are increasingly integrating ESG metrics into their risk assessments, and companies that fail to demonstrate progress may face higher borrowing costs or reduced access to capital. Yet, only a minority of the reviewed companies addressed how ESG performance factored into their financial planning or investor relations strategies.

For the Australian fashion industry, where local designers and global brands alike are competing for a conscious consumer base, ignoring these risks isn’t just shortsighted—it’s potentially costly. As ESG reporting becomes more standardised and mandatory disclosures loom on the horizon, brands that don’t get ahead of the curve may find themselves scrambling to catch up.