Why CFOs and CEOs Must Rethink Margin in the Era of Sustainability

With more than 25 years in fashion retail and with various qualifications in sustainability, We’ve seen the persistent tension between profit margins and environmental responsibility. For CFOs and CEOs, especially within UK high street retailers, margin has long been the primary metric guiding buying decisions. Yet this traditional approach is becoming untenable in the face of tightening regulation, evolving consumer expectations, and the escalating costs of environmental degradation

The current model often fails to internalise the full impact of a product. Margin is typically calculated by subtracting total cost of goods sold from revenue received, with little consideration for environmental or social externalities. However, with legislation such as Extended Producer Responsibility (EPR) and the incoming Digital Product Passport (DPP) requirements across the EU, and soon the UK, this is no longer viable. These regulations will force brands to account for end-of-life costs, recyclability, traceability, and material provenance. For instance, under EPR, retailers may soon be charged fees based on the recyclability of their products and packaging—directly affecting the bottom line.

UK high street retailers are grappling with how to meet these demands without eroding profit. Many CFOs are hesitant because sustainable products can carry a higher upfront cost, disrupting established margin expectations. But this hesitancy ignores the hidden costs of inaction: regulatory fines, loss of market access, reputational damage, and declining relevance with younger, values-driven consumers.

Simultaneously, the second-hand market is experiencing significant growth. Vinted reported a 36% increase in revenue in 2024, reaching €813.4 million, and nearly tripled its pre-tax profit to £80 million. eBay noted that nearly 40% of clothing, shoes, and accessories sold on its platform in 2024 were classified as "pre-loved," indicating a substantial shift in consumer behavior. The UK second-hand apparel market is projected to grow from USD 3.1 billion in 2023 to over USD 8 billion by 2032, with a compound annual growth rate (CAGR) of 11.12%. (FashionUnited.com, TheTimes.com, BMMagazine.co.uk, Vinted.com)

These trends raise critical questions: Are retailers leaving customers and profit on the table for second-hand platforms to feast? Is the reluctance to engage in reprocessing and resale initiatives causing traditional retailers to miss out on emerging revenue streams? You want to know who your biggest competitor is – it’s the collective of all your best customers selling your goods AND shopping your goods on second hand platforms.

It's time for margin calculations to evolve. Impact must be part of the equation—factoring in carbon emissions, water usage, ethical sourcing, and circularity- including pre-loved value . Retail leaders who fail to adapt will find themselves outpaced by competitors embracing impact-adjusted margins and capitalizing on the growing second-hand market.

Sustainability is no longer a marketing story; it could be your financial savour and we know just how to open pandora’s box @OurFashionFix.