Why fashion is doubling down on sustainability even as value-seeking shoppers ignore the pitch
The fashion industry is facing significant challenges as it shifts towards sustainability amidst changing consumer behaviors. According to a McKinsey report, brand strength and flexible sourcing will be crucial for profit protection by 2026. Rising production costs and macroeconomic shocks are complicating sustainability efforts for retailers, particularly discount brands.
- ▪Retail strategies are evolving as brands can no longer rely solely on scaling up and lowering costs.
- ▪The McKinsey report highlights that brand strength and flexible sourcing will be key to protecting margins by 2026.
- ▪Rising energy prices due to geopolitical tensions are increasing production costs for synthetic fibers.
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For much of the last decade, retail's financial playbook was simple: scale up, lower sourcing costs, and use tactical promotions to clear the racks. In 2026, brands can no longer rely on those levers to grow profits, according to the latest State of Fashion report by McKinsey and the Business of Fashion.Instead, brand strength and flexible sourcing are becoming important levers for protecting margins. Executives said that changes to margin and cost strategies will be the second-most important theme shaping the industry in 2026 — second only to trade disruptions like tariffs, the report found. Adding to the sector's challenges of wavering consumer demand and aggressive new e-commerce competition are macroeconomic shocks hitting production lines.
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