For the last five years, the European Union has been at the forefront of an unprecedented push to regulate fashion.
Though the industry’s glamourous image long protected it from the level of scrutiny levelled at other sectors, like agriculture, automotives or oil and gas, its substantial environmental and social impact has made fashion a central target of the EU Green Deal — an eco-friendly policy agenda introduced in 2020 that aimed to modernise, clean up and grow the European economy.
Fashion was identified as a key focus because the textiles sector is “one of the least sustainable in the world,” according to the European Commission. It’s polluting, resource intensive, rife with human rights abuses and responsible for an increasingly overwhelming volume of waste. The result has been an exuberant flurry of new rules due to take effect over the coming years.
Starting this year, fashion’s biggest companies will need to collect and disclose an unprecedented amount of data about their social and environmental footprints and how they plan to tackle them. Still to come into force are regulations that will make brands more accountable for abuses in their supply chains, require products to carry environmental labels and levy fees on companies intended to fund efforts to deal with textile waste. Incoming rules aim to govern how products are designed, which materials can be used to make them and how much of it must be recycled.
The ambition to limit the unrelenting growth of excessive production and tamp down on the industry’s environmental and social harms are laudable. Whether the complex tangle of regulatory measures proffered by the EU will actually deliver on these goals is less certain.
Now, the backlash has come. With Europe’s economy stagnant, trade groups, nation states and a new, more right-leaning EU parliament elected last year are arguing that the regulatory red tape is stifling. Calls for some rules that will affect all industries to be rolled back are growing.
In February, the European Commission is set to discuss plans for a piece of “omnibus regulation,” intended to streamline and simplify several flagship pieces of legislation focused on improving reporting and governance of corporate supply chains. Renewed focus on improving the trading bloc’s competitiveness is likely to make way for a broader reevaluation of the medley of directives currently in the works, with many still to be finalised.
As a result, the rules that govern fashion could go in one of three directions.
If the measures are left unchanged, red tape will reign, the fashion industry will continue to deliver ever more planetary damage and consultants, lawyers and accountants will cheer. If the existing measures are watered down, it will likely lessen the administrative burden but do little to shift the industry from business as usual. Finally, if the patchwork of laws is rethought, streamlined and strengthened, the EU could, in fact, begin to address valid criticisms of its regulatory push and advance authentic sustainability in fashion at the same time.
Tangled in Ineffective Red Tape
Pro-business critics complain the incoming rules are too complex and costly — criticisms that may ultimately succeed in derailing regulatory efforts because they have merit. But the real biggest flaw in the EU’s approach to fashion is that the morass of proposed regulations aren’t likely to deliver on their goal to limit overconsumption or overproduction.
Instead, current proposals are based on proxy solutions, including the premises that disclosure will drive accountability, that circular systems will limit resource usage and that eco-scores will influence consumer choices. Unfortunately, there is little evidence to support any of these convictions.
Ambitions to establish a circular economy would be welcome if they were grounded in reality. The truth is, it will take decades and billions of dollars of investment to advance the technology and build the infrastructure required to collect, sort and enable old clothes to be recycled back into new raw materials at any kind of scale. Moves to introduce taxes to help fund such changes have so far set fees far too low to have any impact.
Meanwhile, reporting has become an industry unto itself. The EU’s flagship disclosure regulation, the Corporate Sustainability Reporting Directive, calls for companies to disclose information across 84 requirements encompassing over one thousand data points. Costs for large companies to deliver and assure a CSRD report are expected to amount to hundreds of thousands of dollars, if not more.
It is unclear what use investors, or other interested parties, will get from this deluge of information. They would likely benefit just as much from a reduced and simplified list of reporting requirements that, in fashion’s case, might include annual production volumes, units sold at full price, percentage of weight of sold garments with recycled inputs, carbon emissions (including supply chains), water usage, share of workers paid a living wage and with freedom of association, and gender pay equity.
Efforts to label products with an eco-score should be abandoned altogether, sidestepping the fraught debate over what credible metrics might look like. A far simpler and more forthright solution would be to ban footwear and apparel brands from using monikers such as “green” or “sustainable” altogether, since their products are neither.
To be sure, regulation of fashion is vital and past due. But failure to address the real shortcomings outlined above leaves room for skeptics to raise legitimate criticisms that could undermine the whole endeavour. The current moment should be seen as an opportunity to reduce red tape and refocus regulatory efforts on policies that will have a consequential impact. The risk, of course, is that simplification becomes its own excuse to delay and unravel regulatory efforts altogether.
Putting a Price on Pollution
To actually improve working conditions and limit environmental damage in fashion’s supply chains, businesses, rather than society, need to bear their costs. Where bad practice is found, companies must be responsible for remedying it and failure to live up to the required standards should come with heavy penalties.
One imperfect remedy to internalise (or make the brands pay for their environmental and social damage) is a carbon tax. However, an absence of data and complex supply chains make actually calculating how much brands should pay challenging. Perhaps instead, the EU might start with a tax on fast fashion. France has already put forward such a proposal, suggesting a charge starting at €5 and rising to €10 per qualifying garment. Funds raised from such levies could be allocated to suppliers to decarbonise factories.
The industry is likely to baulk at the prospect of any regulation that would raise costs, even if it is radically simplified. This is short-sighted. The biggest business risk to large established fashion labels at present is the rise of cut- price rivals like Shein and Temu, whose business practices have attracted heavy criticism.
To level the playing field, brands and trade groups ought to reverse course and aggressively lobby for legislation that effectively “lifts the floor” for operating standards. Such moves to end subsidies for social and environmental corner cutting would improve such brands’ ability to compete and begin to restore faith that fashion can be a positive agent of cultural and social change.
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