The EU’s new Corporate Sustainability Reporting Directive (CSRD) is sparking a crackdown on greenwashing and urging fashion companies to report on ESG metrics following defined standards that can be verified with external audits.
Encompassed in the EU Strategy for Sustainable Textiles which itself is anchored among other wider schemes such as the Circular Economy Action Plan (CEAP) and The European Green Deal, the new CSRD will require nearly 50,000 qualifying large organisations and SMEs in various sectors, including fashion, to report on ESG metrics following defined standards that can be verified with external audits.
The EU Strategy for Sustainable Textiles signals that the EU intends to pass laws to tackle the fashion industry’s overproduction crisis and drastically reduce the waste, pollution, and labor rights infringement it is responsible for.
The new directives and proposals are already having an impact on what is being communicated to consumers, as the policymakers signal they are working on aligning definitions of “sustainability” and which standardized criteria must be met to qualify to make such a claim without misleading consumers.
In August 2022, the Norwegian Consumer Authority (NCA) and Netherlands Authority for Consumers and Markets (ACM) issued a joint document outlining how the Higg Materials Sustainability Index (MSI) tool developed by the Sustainable Apparel Coalition (SAC), one of the most well-known sustainability rating systems, should improve the underlying data behind its claims, otherwise it would breach the countries’ marketing legislation and therefore become illegal.
This has prompted Decathlon and H&M, among other retailers, to stop using the SAC label to avoid sanctions by the ACM. Meanwhile, France is working on a new law that would require brands to add “carbon labels” to fashion products indicating an environmental “score” from A to E.
The EU policymakers are hoping that the EU Strategy for Sustainable Textiles could reverberate through global value chains, as brands wishing to continue selling in the Single Market will have to set up their operations accordingly and are likely to adopt such practices in other regions to maximize the return on their investments.
Providing access to insights and data about one’s social and environmental impact is set to become a key part of the shopping experience because, globally, consumers increasingly want fashion companies to be purpose-driven, as illustrated by Euromonitor’s Voice of the Consumer: Lifestyles Survey 2022.
As the EU and other governments are trying to tackle the lack of regulated framework when it comes to sustainability, it is becoming strategic for fashion companies to proactively map out their supply chain.
Traceability is indeed a requirement to identify risks in terms of green claims or forced labor and will help prove compliance with relevant environmental or employment laws, in due time. Traceability is also the first step towards transparency.
In the short term, this is likely to drive the adoption of blockchain technology and end-to-end supply chain mapping among fashion players.
More such initiatives are expected in the near future as the pressure from both consumers and regulators increases, and companies need to set a roadmap today with measurable sustainability objectives to be ready for tomorrow.
The new CSRD will force fashion companies to take a more serious approach to sustainability, with reporting requirements that go beyond mere tokenism. In response, firms will need to invest more in sustainable production methods, traceability, and environmental impact assessment. The fashion industry must take a more holistic approach to sustainability, from production through consumption and disposal, to make a real impact on the environment.
Importantly, the new legislation also demands transparency from fashion companies, which has been lacking in the past. The move towards transparency is essential if the industry is going to be held accountable for its actions and if consumers are going to be able to make informed choices about the clothes they buy. Consumers want to know the impact their purchasing decisions have on the environment, and they want to know the companies they’re buying from are taking sustainability seriously.
Brands that embrace the new legislation and demonstrate that they are operating in a sustainable way will be rewarded by consumers. Those that continue to put profits ahead of the planet will eventually suffer.
In conclusion, the new CSRD will force the fashion industry to take a more serious approach to sustainability, and it’s about time. Companies will need to invest in sustainable production methods, traceability, and environmental impact assessment to ensure compliance. The move towards transparency is essential if the industry is going to be held accountable for its actions, and consumers are going to be able to make informed choices about the clothes they buy. It’s a step in the right direction, and the industry must keep moving forward towards a more sustainable future.
