Why Investors Are Rooting for ‘Clean’ Fashion
By Jasmin Malik Chua July 29, 2025 3:50pm
“Clean” beauty? What about “clean” fashion?
It’s still comparatively early days for the latter, but as consumers become increasingly alarmed by “buyer beware” headlines about the toxic chemicals that might be lurking in their fit checks, so, too, are investors.
“Toxic ingredients are the big blind spot in the supply chain, so they represent a liability for brands,” said Alexandra McPherson, director at Clean Production Action’s Investor Environmental Health Network, a Massachusetts-based collaborative that promotes the use of safer chemicals to increase shareholder value. “And this is because consumers and the public at large are just increasingly concerned about chemicals such as PFAS, phthalates and BPA being linked to epidemics that are on the rise, like cancer in young people, learning disabilities or asthma.”
To help consumer-facing brands like apparel and footwear purveyors come to grips with their chemical management, or the lack thereof, IEHN has launched new guidance, complete with a bevy of resources and best practices, that can propel them toward solutions with fewer reputational, legal and market dangers.
Regulatory compliance alone is no longer going to cut it, the suggested roadmap says. With chemical pollution having crossed a so-called “planetary boundary,” a burgeoning segment of shoppers clamoring for ingredient transparency and a broadening slate of regional and national laws governing chemical use—not to mention the litigation that is catching on—the effectiveness of a company’s chemical management is now material to its financial performance.
“This is not just a niche issue anymore for investors,” McPherson said. “Essentially, the guidance is asking companies to move beyond compliance, eliminate chemicals of concern and really understand and know their chemical footprint—as well as reduce it. And, ultimately, we’re trying to get companies to innovate versus litigate on these issues.”
IEHN recommends three main strategies that can lead to not only risk reduction but also what it says is long-term value creation. The first is to conduct a full chemical hazard inventory and disclose the resulting chemical footprints. The second task is to adopt hazard-based chemical management policies with time-bound goals. And the third involves investing in safer alternatives and offering suppliers incentives to follow suit.
It’s a process that could be revelatory in many ways, said McPherson, citing the example of Keen, which after conducting an audit of the per- and polyfluoroalkyl substances—the aforementioned PFAS—it wanted to “give the boot,” found that 70 percent of the PFAS in its shoes were applied by overenthusiastic suppliers even in places they weren’t necessary, such as the laces or threads of a non-waterproof shoe. “Why are we using a DWR finish on our sandals?” was one question the Oregon-based firm asked itself, referring to the durable water repellent coating that is, more often than not, derived from such “forever chemicals.”
For the remaining 30 percent, Keen sought out safe, effective and affordable alternatives by turning to lists managed by the likes of Greenpeace. Then it was test, test, test and then test some more to make sure the substitutes still met the brand’s durability and performance standards. Keen also hired a full-time restricted substances expert who checks in on its factories to ensure that PFAS isn’t inadvertently winding up in its products, say via a non-stick coating on their molding machinery. All in all, it spent 10,000 hours to avoid more than 150 tons of PFAS. The brand’s kicks still repel water and dirt; just not spaghetti sauce, which it didn’t need them to do anyway.
“PFAS is one of the greatest case studies, but there are many other chemicals that represent a risk for companies and brands,” McPherson said. “There are around 2,500 known chemicals of concern that are ubiquitously used in most sectors.”
Wrinkle-free shirting might contain formaldehyde, a known carcinogen. Phthalate-based plasticizers that are linked with reproductive concerns, such as infertility and reduced sperm count, are common in footwear. The best way forward, she added, is for companies to use platforms such as GreenScreen for Safer Chemicals or ZDHC to “understand and know” the implications of their inputs, even beyond those that might present an immediate red flag. Voluntary disclosure guidance can also be obtained from standards organizations such as the Sustainability Accounting Standards Board, better known as SASB, and, at some point shortly, the Global Reporting Initiative.
All of which to say, while this might represent a tall order, it’s not an impossible one. The easy way that clean beauty has taken over store shelves can also offer an indication of the return on investment that awaits clean fashion’s early adopters.
“We know that it’s possible for companies to find out what’s in their supply chain, in terms of hazardous chemicals that they may be using,” said Caroline Boden, shareholder advocacy manager for Mercy Investment Services, a Missouri-based ministry of the Sisters of Mercy of the Americas. “We’ve seen from Target and from others, certainly in the electronic sector and the beauty sector as well, that they’re able to know what they’re using and work towards transitioning out, identifying safer alternatives. And with that, they’re able to disclose as well.”
Boden would like to see more happen in the way of mandatory regulatory frameworks that would drive additional chemical transparency, particularly in the United States, where there is more opacity around the issue. Moves such as California’s statewide ban on PFAS—the first in the country—will “assist with that,” she said, and so will countries’ embrace of the Global Framework on Chemicals on an international level.
“We’re not asking companies to share proprietary information,” Boden said. “We’re asking companies to do due diligence on knowing within their supply chain, verifying it and screening it against best-in-practice tools, and then making decisions from there to choose to use and drive their supply chains toward safer chemistries. We feel that the cost of inaction now is greater than the cost of taking action.”
As with anything, more uniformity on a large scale would be ideal, but “they’re different across sectors,” for instance, cosmetics versus apparel, McPherson said. There are also strong intersections between health concerns and, for example, environmental justice or labor rights, especially because fashion production tends to occur in poorer countries with laws that see little to no enforcement. Decarbonization is another factor that could also come into play at a time when climate concerns have bubbled to the fore.
“So from an investor perspective, we’re asking companies to not look at regulations as sort of the standard they use to set their requirements but to go with best practices,” she added. “Because even if there’s not a regulation, the litigation risk or the reputational risk is going to cause more financial harm for these companies that aren’t getting ahead and future-proofing their supply chains.”
