When it comes to sustainability, fashion is notoriously under-regulated.
Efforts to reduce pollution or weed out labour abuses largely rest on voluntary commitments or codes of conduct that create little accountability. Where regulation does exist, it’s often poorly enforced. It’s a state of affairs that campaigners routinely point out has failed to drive transformative change, despite the proliferation of high-profile sustainability initiatives from brands.
But that is starting to change. In Europe and the US, where many of fashion’s biggest companies are based, governments are considering a raft of new policies and regulations that could transform the industry, including stricter supply chain obligations, tighter guidelines on marketing a product as sustainable and incentives to support better business models.
“The industry has been pretty used to being under the radar,” said Jonas Eder-Hansen, global affairs director at sustainable fashion advocacy group Global Fashion Agenda, but “regulation is coming.”
A More Responsible Supply Chain
When the US banned imports of cotton products from China’s Xinjiang region earlier this year over allegations of forced labour, it raised the stakes for companies to ensure they have oversight of where and how their clothes are made.
Fashion brands typically outsource their manufacturing, often to complex and opaque networks of suppliers outside the jurisdictions that govern their corporate headquarters, but now regulators are looking to strengthen due diligence requirements.
In March this year, members of the European Parliament voted by a landslide to press ahead with proposed legislation that would make companies more accountable for ensuring environmental and social standards are upheld across their supply chains.
The exact terms and scope of the new standards will become clearer later this month, when a draft of the directive is expected, but they are likely to cover any large company that does business in the European Union, even if they are headquartered elsewhere. Penalties could include fines, sanctions or import bans.
It will likely take two to three years for these measures to be implemented, but “any company that waits for the ink to dry on this directive is deluded,” said Sam Eastwood, a London-based lawyer specialising in corporate due diligence and compliance.
A Crackdown on Greenwashing
Governments are also looking to crack down on inflated marketing claims, as more and more brands seek to appeal to consumers with promises of eco-conscious or ethically made products.
In May, The Netherlands’ competition watchdog launched investigations into 170 companies, 70 of which are in the clothing sector, for making misleading marketing claims about their products’ sustainability. Those found to have fallen foul of the authority’s rules could be fined up to €900,000 (about $1 million), or a proportion of company turnover.
The UK is drafting new guidance on how businesses can comply with consumer protection laws when marketing products as environmentally friendly. And in the US, a group of fashion brands and sustainable fashion advocates has written to the Federal Trade Commission asking it to review its guidance on green marketing.
Those that are not getting ready right now... are at risk of really being [in a] race to catch up with regulations
The EU is also looking to create common, standardised methods to communicate a product’s environmental footprint and help consumers cut through any marketing, though exactly how this will be calculated is a matter of ongoing debate.
Still, the requirements could come into force within the next four years, and given the long lead times of the traditional fashion design and manufacturing cycle, brands should brace for these changes as if they are around the corner, said Baptiste Carriere-Pradal, chair of the Policy Hub, an EU policy advocacy group representing the interests of the Sustainable Apparel Coalition, Global Fashion Agenda, Federation of the European Sportswear Industry, Textile Exchange and Zero Discharge of Hazardous Chemicals.
“Those that are not getting ready right now, to be able to better understand the footprint of their product [and] how this can be communicated to consumers are at risk of really being [in a] race to catch up with regulations,” he said.
When the G7 met in the UK last week, Stella McCartney was among a group of global executives in attendance, calling on policy makers to help drive sustainable investments and industry action.
“I’m here to encourage these world leaders to really look at laws, look at policy change, how to incentivise the young designers of tomorrow,” McCartney told Sky News ahead of the meeting. Such intervention could help unlock long-term investments in new technologies and infrastructure required to scale more sustainable business models.
For instance, the EU is driving efforts to establish a more circular textile and clothing industry, seeking to reduce waste and encourage recycling.
By 2025, all EU municipalities will need to have systems in place for collecting textiles. France already requires clothing producers and retailers to pay for clothes to be collected, sorted and recycled once the consumer is finished with them in a so-called extended producer responsibility (EPR) scheme, and it’s banned the controversial practice of destroying unsold products. Other governments are looking at similar schemes.
The EU’s plans for a standardised approach to sustainability data could feed into circular strategies too, with potential incentives and lower textile collection costs for brands selling products with a smaller environmental footprint.
While there are still hurdles to bringing these initiatives to life, and concerns about how they can be standardised across all 27 EU member-states, efforts to mandate textile collection and recycling are a crucial step towards a more coordinated, scaled-up approach to fashion’s waste problem.
“Policy and regulation we all know can have a significant impact on business, and if done in the right way for the fashion industry it will encourage innovation, action and progress in the key areas like climate change and supply chains,” said Alan McGill, global head of sustainability reporting and assurance at PwC.
A New Reporting Framework
Companies of all sizes are accustomed to sharing financial figures for the scrutiny of auditors, shareholders and regulators. Soon they may have to do the same for their performance on environmental, social and governance criteria.
If done in the right way for the fashion industry, [regulation] will encourage innovation, action and progress in the key areas like climate change and supply chains.
To be sure, many fashion companies do disclose some information about their performance on this front in annual sustainability reports, but disclosures vary widely. Information can be difficult to find and interpret, and comparisons are distorted by a lack of consistency.
Requirements for greater transparency and more standardised reporting are on the horizon. The EU, UK and US are all planning to implement mandatory requirements in this area, with companies listed on the London Stock Exchange expected to disclose climate risks as part of financial reports by 2022.
Stricter regulation will not only drive greater transparency, it will also require companies to sharpen their focus and make more effort to understand and measure their environmental footprint.
“It really begins to highlight where risks might arise,” said Emily Cromwell, Deloitte’s UK consumer lead on sustainability. “That’s powerful insight. I think [it] shouldn’t be viewed as a burden, but as an opportunity.”