by Lauren Zahringer
If you’ve invested in fashion, textiles or footwear, chances are you’re exposed to part of the estimated US $20 billion in financial risk from hazardous chemicals.1 I call this the “chemical blindspot” – it’s not the car you see that causes the accident, it’s the one you don’t see coming.
The visibility gap is striking. The fashion sector alone uses more than 10,000 different chemicals, around 15 per cent of which are known to pose a risk to ecosystems and human health.2 These substances do not disappear after manufacturing; they persist in waterways and soils, fuel pollution and biodiversity loss, and expose companies and investors to mounting liabilities and reputational risks.
Despite the growing use of carbon-accounting standards such as PCAF, most investors and businesses still lack visibility of chemical pollution risk within their portfolios and supply chains. This December, I will join over 200 financial institutions at the inaugural Finance Biodiversity Summit to address these gaps and advance financing solutions for biodiversity and natural capital.
Investors cannot afford to wait for a perfect screening framework. Decarbonisation, biodiversity and circularity all depend on chemistry, and inadequate oversight leads to environmental, financial and reputational exposure. While risk-screening tools for chemical hazards are still emerging, there are already solutions that help mitigate risk and move forward now.
Since 2015, the ZDHC Foundation and its community of over 375 Signatories have led the global transition to sustainable chemical management. Implementation of the ZDHC MRSL has demonstrated significant reductions in hazardous chemical use and related biodiversity impacts. Research has shown, as indicated in Protecting Supply Chains and Natural Capital, that ZDHC Roadmap-to-Zero adoption can reduce negative impacts on nature by up to 90 per cent – a substantial proof of efficacy and a solid foundation for future-proofing strategies.
Investors should integrate chemical risk and natural capital into valuation models, support brands that adopt ZDHC requirements and engage with us to learn about our solutions and partnership opportunities.
For business leaders and brands, mapping supply chains, enhancing transparency and upholding the highest standards of chemical management are essential – not only to reduce risk but to gain a competitive advantage. Partnering with ZDHC helps achieve this.
We need to pay attention to and focus on chemistry, working together to de-risk fashion and design an investible future. You can reach out to me directly with your questions or ideas at zahringer@zdhc.org.
Lauren Zahringer leads ZDHC's Signatory growth, development, and investor engagements. Reach out to her directly at zahringer@zdhc.org.
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