What does this mean for fashion?

The EU Corporate Sustainability Reporting Directive (CSRD) was just passed in January 2023. It is embedded in the EU Sustainable Textiles Strategy, which in turn is anchored in other broader programs such as the Circular Economy Action Plan (CEAP) and the European Green Deal. The directive has required almost 50,000 qualified large organizations and SMEs in various industries, including fashion, to report on ESG metrics according to defined standards that can be verified with external audits.

After years of little concrete action apart from international pacts like the UN Coalition for Sustainable Fashion and voluntary initiatives by companies, the EU Strategy for Sustainable Textiles now signals that the EU intends to legislate. They aim to combat overproduction in the fashion industry and drastically reduce the waste, pollution and labor rights violations it causes.

In the short term, the new EU regulations will force a crackdown on greenwashing

The EU strategy aims to take a holistic approach and change the way clothes are produced, sold and disposed of. Among other things, it includes proposals to levy a tax on carbon emissions and imports, the introduction of legal minimum requirements for sustainable design and the introduction of an EU-wide framework for Extended Manufacturer Responsibility (EPR) to enable fashion brands and manufacturers to effectively compensate for the pollution they cause Waste can be held responsible. These actions would encourage repair, reuse and circularity in fashion through better design, better sourcing and recycling practices.

EU Strategy for Sustainable and Circular Textiles: Overview of proposed actions

Immediately, the new guidelines and proposals are already having an impact on what is communicated to consumers, as policymakers are signaling that they are working to align definitions of ‘sustainability’ and what standardized criteria need to be met, to be able to make sustainability claims without misleading people.

This has already led to increased scrutiny and scrutiny by governments that are increasingly cracking down on greenwashing. In August 2022, the Norwegian Consumer Protection Agency (NCA) and the Dutch Consumers and Markets Authority (ACM) issued a joint document. In it, they outlined how the Higg Materials Sustainability Index (MSI) tool – one of the most well-known sustainability rating systems – developed by the Sustainable Apparel Coalition (SAC) should improve the data underlying its reporting, as otherwise it would violate countries’ marketing laws and thus would be illegal. This has prompted Decathlon and H&M, among others, to stop using the SAC label in order to avoid sanctions from the authority. Meanwhile, in France, a new law is in the works that will oblige brands to put ‘carbon labels’ on fashion products, which indicate an ecological ‘score’ from A to E.

The tide has also turned outside the EU

EU politicians hope that the EU strategy for sustainable textiles will rub off on global value chains. Brands wishing to continue selling in the EU single market will need to set up their operations accordingly and will likely adopt more sustainable practices in other regions to maximize the return on their investments.

In addition, more sustainable regulations are also emerging in other parts of the world outside the EU. In the UK, the Competition and Markets Authority (CMA) has investigated the sustainability claims of retailers Boohoo, Asos and George at Asda, and disclosure of ESG metrics is now mandatory for certain companies. In the US, California’s Garment Worker Protection Act, New York’s Fashion Sustainability and Social Accountability Act and the Federal Fabric Act signal significant regulatory change.

In addition, access to information and data on a company’s social and environmental impact will become an important part of the shopping experience. People around the world are increasingly demanding purpose-driven action from fashion companies, as shown by Euromonitor’s Voice of the Consumer: Lifestyles Survey 2022.

The proactive design of your own supply chain is becoming a strategic must

As the EU and other governments seek to address the lack of a governed framework when it comes to sustainability, it becomes a strategic imperative for fashion companies to proactively map their supply chain. Traceability is indeed a requirement to identify risks related to sustainability claims or forced labor and will help demonstrate compliance with relevant environmental or labor legislation when the time comes. Traceability is also the first step towards transparency, which more and more people expect from companies.

In the short term, this will likely see the adoption of blockchain technology and full supply chain mapping for fashion companies. Spanish fashion retailer Mango, for example, recently abandoned its 2017 ‘Committed’ label for identifying garments with ‘sustainable properties’ in anticipation of the new EU environmental regulations. Instead, it is gradually being replaced by a QR code that, when scanned, gives customers information about the composition of the garments and where they were made. This allows consumers to make their own informed decisions instead of having to blindly trust the company’s claims, which could potentially be challenged. This measure is anchored in the company’s comprehensive move towards full traceability of its value chain. It plans to release a list of its third-tier factories by mid-2023, after releasing details of its first-tier and second-tier suppliers in 2021.

More such initiatives are to be expected in the near future as pressure from both consumers and regulators mounts and companies need to put in place a plan with measurable sustainability goals today in order to be ready for tomorrow.

This article was published on FashionUnited.com. Translation and editing: Barbara Russ