Fashion works on the assumption that cotton will keep growing, ports will continue functioning, employees will stay working, and consumers will keep shopping. Climate tipping points threaten many of these things.

These are the thresholds at which natural systems begin shifting from one state to another, often in ways that become self-reinforcing and difficult or even impossible to reverse, like a spilled glass of water. Scientists increasingly warn they’re a real risk, and say some tipping points are already playing out, with implications for fashion.

Ice-sheet collapse could mean the world sees long-term sea-level rise, threatening coastal regions with economic disruption. Amazon degradation would mean the rainforest becomes a drier, poorer ecosystem, which will have consequences for biodiversity, local livelihoods, and the moisture flows that support agricultural regions producing globally traded commodities including cotton. A collapse or a severe weakening of the Atlantic Meridional Overturning Circulation — which moves warm water to the North Atlantic from the tropics — could disrupt the system that keeps the UK and Europe relatively mild. Winters would become far colder and summers both warmer and drier — a combination that would make crop production far harder.

Despite the growing concern among scientists, companies across industries aren’t funneling the compound risks climate tipping points can create into their risk planning. Following a survey of global banks, the United Nations Environment Program (UNEP) last year concluded that none had fully integrated tipping points into their physical risk assessments, while only 5% were partially accounting for them.

“Tipping points haven’t really come up,” says Francois Souchet, founder of climate data consultancy Swanstant. “I don’t know whether people haven’t realized it, or because they are still hoping for the best and the questions raised by tipping points are much harder.”

Pressure may be mounting for that to change. Earlier this month, JP Morgan released a report highlighting the need for businesses and investors to start factoring climate tipping points into decision-making. According to the report, tipping points have been hard to quantify because the science is still evolving, the timing and scale of impacts are uncertain, and the financial consequences may be indirect, non-linear, and outside normal pricing horizons.

Unlike the gradual warming and incremental damage assumed in many climate-risk models, tipping points raise the possibility of abrupt, cascading disruption. The consequences may not be immediately obvious, and by the time they are, the threshold may already have been crossed. Standard valuation and underwriting tools are often built around short forecast periods and historic relationships, which means they don’t capture the risks that emerge abruptly.

But given the enormous consequences, the need to grapple with tipping points is real. “Just because an event is improbable does not mean it is impossible,” Sarah Kapnick, JP Morgan’s global head of climate advisory, wrote in the report.

The question for fashion, says Mike Barrett, chief scientific advisor for WWF UK, is not only how the industry is exposed to those risks, but how it is contributing to them — and what role it could play in reducing them.

Grappling with tipping points

The fashion industry has focused its efforts on climate goals like increasing recycled content, reducing water usage, and cutting down on greenhouse gas emissions. But researchers at Cornell University’s Global Labor Institute say that chasing rapid production growth contradicts the industry’s stated goal of a smaller carbon footprint. The industry also often overlooks adaptation — the need to protect factories, workers, and sourcing regions from the physical impacts of climate change.

If the industry does not adapt to extreme heat and humidity, the Cornell researchers say business could take a serious hit. Without adaptation, they estimate that losses could amount to 4.9% of GDP in Bangladesh, 6.5% in Cambodia, and 5.1% in Pakistan — all key apparel production hubs. Jason Judd, executive director of the Global Labor Institute, says adaptation could be as simple as making cool water available, or adding insulation to a roof, but if there are sudden temperature spikes, manufacturers who want to keep producing will need to cut working hours and increase rest.

Lewis Perkins, president and CEO of the Apparel Impact Institute (Aii), says the organization hasn’t explicitly modeled climate tipping points, but sees these as underscoring the need to invest in climate action and resilience. In a February report, the Aii predicted that climate risks could hurt fashion companies’ profits by up to 67% by 2040. “The cost curve for inaction is not linear; it accelerates as physical climate risks, policy changes, and market shifts begin to compound,” says Perkins. “Tipping points represent the moment when those pressures move from manageable to systemic.”

H&M also doesn’t separately account for the risks from climate tipping points, but says these are included as part of its overall analysis of climate risk. The Swedish retailer has listed its number one physical climate risk as increased cotton prices from droughts and flooding, alongside disturbances to ports from cyclones, storms and heavy rainfall, and water scarcity. It has said that multiple climate impacts occurring at once could lead to societal disruption.

Souchet, who previously led the Ellen MacArthur Foundation’s Circular Fashion Initiative, says one way to start grappling with the possible impacts from tipping points is to model for consecutive years of disruption. “Instead of asking what the climate looks like on average, you ask: what if we have three extreme El Niño years one after another, and what does that do to cotton production in India, which we know is monsoon-dependent?”

But many of the measures companies take to protect against physical risk are unlikely to be sufficient in a scenario of abrupt, cascading change, Souchet says.

Regenerative agriculture, for instance, can improve soil moisture and help sequester carbon, but it cannot fully protect crops during a prolonged severe drought or major heat rises. “It buffers a little, but it doesn’t change the game from a tipping point perspective,” he says. “It’s a bit like using tape to stop a leak.”

Although some investors are beginning to act on tipping point risks, these are currently under-modeled. JP Morgan says regulation could force the issue by requiring such risks to be quantified, causing markets to reprice exposed assets sooner. For long-term investors who want to begin incorporating tipping points into their financial models, JP Morgan suggests mapping exposure, running scenarios that include abrupt changes and updating risk assessments as the science evolves.

For fashion, this could mean asking not only whether a supplier can withstand one bad flood or heatwave, but what happens if cotton yields, ports, worker productivity, and consumer demand are all hit at once. Barrett points to the worries about food security and essential commodities in the wake of wars in Ukraine and the Middle East, adding that climate tipping points could trigger far more significant disruption.

“For all sectors that rely on natural resources — whether that’s water or materials — it becomes very clear that if tipping points play out, there is no economic future in which these sectors can flourish,” says Barrett. “The same applies to fashion.”