Regulation, regulation, regulation – A how-to-cope guide for the apparel sector

Few industries are having to adapt to incoming regulatory pressures at the same rate and pace as the apparel and textile sector. Doing so is not only essential for compliance but to mitigate financial, reputational and transition risks in the long run. 

Blink and it might be possible to miss the reforms and policy developments stipulating new rules on green claims, disclosure on value chain reporting, product traceability, waste management and more. But how is policy altering how apparel and textile companies operate across the globe, especially in the global south? 

Ever since the European Commission adopted the EU strategy for sustainable and circular textiles in March 2022, the legislation has acted as a north star for framing where apparel and textile organisations should focus their attention and proactively engage on issues covered. 

In addition to setting specific eco-design criteria to improve product durability and recyclability, the strategy is set to enforce a directive on digital product passports. This will require data, including country of origin, for materials and processes to be on labels to encourage traceability. 

The strategy has importantly touched on product environmental footprint, underlining the need for standardised impact measurement for products across their life cycle. Harmonised extended producer responsibility is also addressed and will be enforced in member states in January 2025, in the hope of shifting responsibility upstream to producers to properly manage the post-consumer stage. The associated charges will give consideration to recycling and recovery across the life cycle and ensure producers cover the cost of improved waste management and circularity efforts. 

The EU waste framework directive aims to encourage additional labelling, record keeping, monitoring and control obligations from cradle to grave of products, focusing on final disposal and recovery. 

In a bid to empower citizens with correct information, the EU officially signed off on the green claims directive in March 2024, mandating companies to remove unsubstantiated claims on environmental impact, ensuring they are fair and accurate. The directive focuses on labels, the use of generic catch-all phrases like “eco-friendly”, as well as carbon neutrality claims achieved through offsetting. 

Similarly, in the UK, the Competition and Markets Authority’s green claims code has become ubiquitous in sifting through the good and the greenwashed. It has concentrated on claims that omit information, are overly ambiguous, lack meaningful comparisons, and don’t focus on the full life cycle impact of products. 

However, as organisations recalibrate their claims and communications on product impact, an unintended consequence of the heightened policing of claims is the move towards greenhushing, whereby brands are apprehensive to communicate anything at all regarding credentials and footprint data. 

Navigating the multiple sustainability reporting frameworks and initiatives can often feel like wading through alphabet soup. The need-to-know includes the corporate sustainability reporting directive (CSRD), which will require companies to disclose the impact of their full value chain activities and provide information on the climate risks to which the company is exposed, in order to address double materiality. Addressing double materiality is fundamental given that the sector’s key sourcing hubs are located in the global south, which faces multiple climate risks, especially extreme weather events and rising sea levels. 

Organisations should take into account international reporting standards linked to the International Sustainability Standards Board as well as guidance from the Global Reporting Initiative as a starting point. Many retailers and brands are now disclosing supply chain information and energy performance via CDP. 

In California, climate disclosure bills such as the SB253 require US companies with annual revenues exceeding $1bn and doing business in California to disclose their scope 1 and 2 greenhouse gas emissions data starting in 2026 and their scope 3 GHG emissions data by 2030. Whilst not many apparel and textile companies have revenues exceeding this figure, it signals how requirements are developing at a state level. 

The EU’s corporate sustainability due diligence directive (CS3D) has the power to hold organisations to account on due diligence obligations to identify, prevent and mitigate negative environmental concerns and human rights, not only within its own operations but across subsidiaries and in the supply chain. Importantly, non-EU companies acting within the EU could be liable. Since the draft was released in January 2024, voting on the directive was been postponed, failing to get the support of the European Council. 

However, after much toing and froing, on 15th March the final deal was approved by the council, although diluted in ambition. For instance, the threshold of the size of the company that will fall under the scope of the directive has doubled from 500 employees to 1,000 as well as increasing turnover from €150m, now to €450m. 

Also touching on human rights of the apparel and textile value chain, EU member states in March adopted the EU forced labour regulation which would prohibit all products made with forced labour worldwide from the EU market. 

Fashion’s resource extraction from ecosystems for the use of fibres, including man-made cellulosic fibres (MMCFs) such as viscose, lyocell and modal, which comprise 6.4% of the global fibre market in 2021, could soon be addressed if deforestation regulations are extended. 

Whilst the EU’s regulation on deforestation-free products will require organisations to prove products do not originate from deforested land or have contributed to deforestation, its scope currently covers palm oil, soy, leather, beef, cocoa, coffee, wood and rubber. It has not yet included wool, viscose and other MMCFs that could be sourced irresponsibly from land. There is the potential this could fall under the scope in the future, especially as biodiversity and nature impacts continue to be addressed following the COP15 Kunming-Montreal agreement with its overarching goal to protect 30% of lands, fresh waters and oceans by 2030. 

Tools such as Textile Exchange’s biodiversity dashboard exist to support target setting on nature-based indicators. 

The ubiquity of plastic in the apparel and textile industry, be that in fibres, packaging or supply chain operations has significant ramifications, both environmentally and socially. 

The world is moving slowly towards a global plastics treaty, following a resolution in March 2022 that was adopted to develop an international legally binding instrument on plastic pollution, including in the marine environment. Whilst negotiations aim to be completed in late 2024, companies should work proactively to mitigate their use of plastics, associated chemicals and microplastic pollution. 

Principally, for many this will mean reviewing the use of oil-derived synthetic fibres such as polyester and nylon, which now represent over two-thirds (69%) of textiles, requiring more oil than the annual consumption of Spain to produce. The European Environment Agency estimates about 8% of European microplastics released to oceans are from synthetic textiles and globally, this figure is estimated at 16-35%.

In March 2024, a coalition of organisations published a white paper pushing for the mandating of technology and filtration systems that could help reduce microplastic pollution from textiles. This is critical given that the EU aims to reduce microplastic releases by 30% by 2030. 

At a country level, France is an example of how nations can take responsibility in appropriately regulating the fashion industry’s major polluters. Also in March, French legislators proposed a new bill that could subject ultra-fast fashion brands with a high level of turnover to financial penalties, to offset the cost of their environmental impact. The bill, now approved by lawmakers, specifically referenced Shein, the Chinese company reported to produce an average of 7,200 new garments each day. This penalty could amass up to €10 per item sold, or up to 50% of the selling price by 2030. 

Alongside this, France is also considering a ban on the advertising of ultra-fast fashion brands. 

A handful of states across the US are introducing bills that could bring about beneficial changes for apparel and textile organisations. Firstly, the New York Fashion Sustainability and Social Accountability Act would mandate due diligence, reporting and transparency on the environmental and social impacts of products as well as requiring brands to map at least 50% of their suppliers across multiple tiers of the supply chain. 

In January 2024, House bill 2068 was introduced in the US state of Washington, which would require large fashion companies making over $100m operating in the state to disclose environmental due diligence policies amongst others. 

Elsewhere, California’s new Responsible Textile Recovery Act aims to cover the repair and reuse of clothing and the recycling of textile fibres. 

At a federal level, the Fabric Act is proposed legislation that would enforce minimum wage standards, ensure workplace protections in factories as well as increase the transparency of brand practices. 

For African nations, especially those involved in the second-hand textile market such as Ghana, action has been focused on sanctions and regulating the imports of used clothes into the continent, which negatively affected communities involved in the textile trade. In 2016, the East African Community set to ban second-hand imports by 2019. Uganda also banned imports of discarded clothing in 2023. 

Actions to remedy this waste burden are important as according to estimates, in 2019 46% of used textiles originating from Europe were found in Africa. 

The consequences for European companies will mean looking internally to develop waste infrastructure and recycling schemes as well as encouraging the durability of clothing to prevent items from ending up in landfills overseas. The EU waste shipment regulation, proposed in 2021, will help to restrict the exports of textile waste. 

In south and southeast Asia, key sourcing hubs including India, Bangladesh, Vietnam and Cambodia are immediately vulnerable to the impacts of climate change, so the focus must be placed on policies that can accelerate mitigation and transition. This includes advocating for energy reform, supporting suppliers in procuring energy from renewable sources, improving efficiencies and moving away from coal-fired boilers in manufacturing. 

Training and financial support, be that through subsidies or incentives on energy performance will prove useful tools. Elevating social conditions is essential too as garment workers in Bangladesh are paid as little as £92 a month.

The first quarter of 2024 has been characterised by how fast many regions are mobilising to effectively regulate the apparel and textile sector to improve social conditions as well as remedy its vast environmental impact. As 64 countries head to the polls in an historical election year, the results are likely to impact environmental regulations and demands for disclosure across the multiple tiers of supply chains. 

For all stakeholders, it will be beneficial to work proactively and move beyond compliance to collaborate and mitigate the extreme environmental risks that are already impacting sourcing, resource extraction and livelihoods.