The Hidden Nature Risks in Your Fashion Supply Chain

Why nature risk is the blind spot in fashion sustainability

Most fashion brands have a carbon footprint calculation. Many have science-based emissions targets. Almost none have an equivalent picture of their nature-related risks.

This is partly historical — carbon accounting frameworks have existed for decades, while nature accounting is still maturing. But it is also partly structural: nature risks are disaggregated (water stress in Pakistan has nothing to do with deforestation in Brazil) and they sit primarily in Scope 3 at T2 and T3 in the supply chain, where data is scarce and procurement leverage is limited.

That is changing fast. CSRD ESRS E4, the EUDR, and TNFD recommendations all require supply chain nature risk assessment. Investors are pricing it in. And the physical risks — water scarcity disrupting cotton yields, deforestation regulation blocking leather sourcing — are becoming operational, not just reputational.

Cotton: a water crisis hiding in plain sight

Cotton accounted for about 4.7% of global pesticide sales and 10.2% of insecticide sales in 2019 (ICAC) — materially lower than the 24% / 16% figures still widely quoted from 1990s data. Sales are a weak proxy for field use, and regional intensity varies enormously. It is also one of the most water-intensive crops on the planet: water footprint estimates vary widely by method and geography — roughly 1,900 litres of irrigation water plus 6,000 litres of rainwater per kilogram of cotton lint on a global average basis (Transformers Foundation, 2021), rather than the round 10,000-litre figure often quoted without a green/blue split, depending on production method and location.

The problem is not just volume — it is geography. The Indus River basin (Pakistan) and parts of northern India supply a significant share of global cotton, and both face severe to extremely high water stress by 2030 under Aqueduct projections. The Aral Sea — once one of the world's largest lakes, fed by rivers used for cotton irrigation — is almost entirely gone. The Murray-Darling basin in Australia faces intensifying seasonal drought.

For a brand sourcing 60% of its cotton from high-stress basins without any water intensity targets in its supplier contracts, this is not a distant risk. It is a medium-term supply security issue and, increasingly, a regulatory disclosure requirement under ESRS E4.

The mitigation levers are well understood: drip irrigation adoption, certification to Better Cotton or equivalent standards, water intensity KPIs in supplier agreements, and diversification into lower-stress sourcing regions. The challenge is measurement — knowing which basins your cotton actually comes from requires more than a country of origin field in your supplier database.

Leather: the deforestation link most brands underestimate

Brazil supplies approximately 25% of global leather exports. The Brazilian Cerrado — a vast tropical savanna recognised as one of the world's 36 biodiversity hotspots — has lost over 50% of its native vegetation, driven primarily by cattle ranching expansion. The Amazon has lost a further 17% of its original forest cover, much of it to the same pressure.

The leather supply chain is long and opaque. A T1 footwear supplier in Italy or Portugal may be purchasing leather from a T2 tannery in Brazil, which sources hides from T3 cattle ranches spread across multiple states. Tracing that leather to the farm — and proving the farm did not sit on recently deforested land — is precisely what the EUDR requires, and what most brands cannot currently do.

The Leather Working Group (LWG) certification provides some assurance at the tannery level, but it does not cover the farm-to-tannery link. Farm-level geolocation and deforestation screening against Global Forest Watch data is needed for full EUDR compliance.

Outside Brazil, Argentina and Colombia also carry elevated deforestation risk for cattle. Indonesian leather is a smaller but growing market with significant forest conversion exposure. Brands sourcing from these origins without a clear deforestation policy and supplier verification programme are carrying material regulatory and reputational risk heading into 2027.

Viscose and lyocell: the forest fibres most brands aren't watching

Viscose, lyocell (Tencel), and modal are made from dissolving wood pulp. They are widely marketed as sustainable alternatives to synthetic fibres — and for good reason, when the pulp is sourced responsibly. The complication is that approximately 30% of global dissolving pulp still comes from regions where ancient and endangered forests are actively logged.

The Canopy "HotButton" report, updated annually, rates every major dissolving-pulp supplier on forest risk. Brands purchasing from suppliers rated "red" or "orange" are sourcing fibre with a direct link to forest destruction. The EUDR covers wood-derived textiles — viscose included — so this is not only a reputational exposure.

FSC- or PEFC-certified dissolving pulp is available from a growing number of suppliers in Scandinavia, Brazil, and South Africa. Switching to certified sources eliminates most of the forest risk and satisfies the EUDR's deforestation-free requirement. The question for most brands is whether they know which mills their viscose comes from — the answer is usually no.

Wool: land degradation and water stress in sheep country

Merino wool from Australia and New Zealand carries comparatively low deforestation risk. But overgrazing is a significant and underreported driver of soil degradation in key production regions. The Riverina and Murray-Darling basin in Australia — where much of the world's finest merino is grown — face intensifying drought and groundwater depletion.

As climate stress compounds, wool-producing regions face growing yield volatility and water conflict. Brands with high wool exposure and no supplier-level water engagement are carrying a long-term supply security risk that is not yet reflected in their sustainability reporting.

Regenerative grazing practices — holistic planned grazing, soil carbon sequestration — are gaining traction in Australia and New Zealand as both a mitigation and an opportunity. Early-mover brands that co-invest in these programmes with key wool suppliers are building supply security and generating disclosure-ready impact metrics simultaneously.

Polyester: the pollution risk nobody is measuring

Synthetic fibres don't cause deforestation. But polyester production in China — which accounts for over 65% of global polyester fibre production (Textile Exchange, 2025) — generates significant wastewater discharge risk, particularly in textile dyeing and finishing clusters in Zhejiang, Jiangsu, and Guangdong provinces.

Zero-liquid-discharge (ZLD) compliance is the industry standard for responsible wet processing, but adoption is uneven and verification is inconsistent. Brands buying polyester from mills without verified ZLD compliance cannot rule out water-pollution liability under emerging supply chain due diligence frameworks.

Microplastic pollution from synthetic textiles is a separate and growing issue. ESRS E2 (Pollution), which is separate from ESRS E3 (Water and Marine Resources) will require disclosure on this as it applies to the value chain. Brands with high synthetic fibre exposure should begin tracking this now.

Turning risk into action

The common thread across all five commodities is the same: the data needed to understand the risk exists, but most brands don't have it systematically assembled against their own sourcing profile. A pressure assessment — mapping your specific commodity-country pairs against global datasets on deforestation, water stress, species risk, and pollution — transforms a generic risk picture into a specific, actionable one.

The brands with the lowest nature risk in 2030 are the ones building that data infrastructure now.