Sustainable Fashion: How Regulations are Reshaping the Fashion Industry

The fashion industry has long been flying under the radar of regulations when it comes to sustainable fashion. The few existing regulations aren't enforced very well and haven't brought about big changes, even though many well-known brands have launched their sustainability initiatives.

But things are starting to change. In Europe and the United States, where many big fashion companies are based, governments are introducing new rules and laws that could completely transform the industry. These include rigorous supply chain requirements, full disclosure in emission reporting, stringent guidelines for labeling products as sustainable, and incentives to promote more responsible business models.

In this article, let's take a look at the five most powerful sustainability regulations that are reshaping the fashion industry.

1. New York Fashion Act

In November 2022, New York State amended the Fashion Sustainability and Social Accountability Act (in the proposal stage) requiring fashion sellers, operating in New York and with more than $100 million in annual revenue worldwide, to be accountable to environmental and social standards.

• Supply chain mapping: Fashion brands must trace and map at least 50% of their suppliers by volume across all supply chain tiers.
• Due diligence: Fashion companies must disclose their due diligence policies and actions taken to identify and mitigate their potential adverse social and environmental impacts.
• Impact reduction targets: Fashion companies must disclose the climate change targets they have adopted for impact reductions and for tracking due diligence implementation.
• Adverse Impacts disclosure: Finally, the fashion companies must disclose the annual volume of materials they produce, baseline and targets for greenhouse gas emissions, and use of recycled materials within 18 months.
• If the fashion companies fail to meet their targets, the New York state’s attorney general could fine them up to two percent of their annual revenues. Many fashion brands have pledged their support for the bill and if passed, it will establish New York as the global leader in thoughtful accountability for the fashion industry.

2. European Union (EU) Corporate Sustainability Reporting Directive

Corporate Sustainability Reporting Directive (CSRD) came into effect on January 5, 2023, enforcing all large companies and all listed SMEs (except micro-enterprises), to report on sustainability. Companies must submit and publish their first sustainability report in 2025 for the 2024 financial year aligned with the new CSRD rules. Information submitted must be certified by an auditor or an independent certifier.

The new CSRD requirements will apply to the following companies:

European companies

• All companies with securities listed on EU-regulated markets, except micro-companies.
• Net turnover of more than €40 million (in the preceding financial year) to be considered as a large company or SME.
• Listed SMEs benefit from an additional 1 year for implementation, requiring mandatory reporting starting on or after January 1, 2026.
• Non-listed SMEs have the option to report on a voluntary basis.

Non-European companies

• Companies with a net turnover in the EU of more than €150 million (in each of the last two consecutive financial years) and with at least one subsidiary or branch in the EU.

3. French Anti-Waste for a Circular Economy Law (AGEC)

France adopted in 2020 an ambitious law to shape a system-wide transition towards a circular economy. The French Decree requires to have verified environmental labeling starting 2024 and applies to all fashion producers, importers, distributors, or other parties with an annual turnover above €50 million, who are responsible for placing at least 25,000 pieces of waste-generating consumer products on the French market. Environmental label requirements are being enforced progressively over the coming years, starting with the biggest companies, and working down to SMEs.

The information that must appear on the labels of textile products is as follows:

• Sustainability
• Reparability and durability
• Recycled material content
• Recyclability
• Re-use (for packaging)
• Traceability (Country of manufacturing operations)
• Presence of plastic microfibers
• Use of renewable resources

4. EU Product Environmental Footprint (PEF)

The European Commission adopted the use of Product Environmental Footprint (PEF) method in March 2022, helping companies to calculate their environmental performance based on a science-based standardized framework. The PEF method measures impact across 16 environmental indicators such as carbon emissions, water use, freshwater ecotoxicity, and land use. The PEF methodology supports the objectives of the EU’s “European Green Deal” and circular economy ambitions.

The European Commission is adopting category-specific rules for the apparel and footwear industry. PEF Category Rules (PEFCR) for the apparel & footwear1 industry are designed to ensure that all fashion brands follow a common framework to calculate and share the environmental impacts of their products. PEFCR is based on globally accepted International Organizations for Standardization (ISO) standards, e.g., 14040 and 14044. We also covered the importance of PEF in making fashion sustainable in an earlier blog.

The PEF Category Rules (PEFCR) for the apparel & footwear industry are developed by a multi-stakeholder working group, called the Technical Secretariat, and completed with inputs from two public consultations and several industry expert reviews. The PEFCR, once enforced, will also drive a wider adoption of product footprint labels and digital product passports.

• Specific rules tailored to 13 apparel & footwear categories such as shirts, pants, dresses, boots, swimwear, etc.
• Increases the consistency and comparability of the environmental impact of two items in the same product category.
• Allows scalability with a standardized set of calculation rules with pre-defined, validated assumptions to do product footprint calculations at scale, reducing cost and improving accessibility for the fashion industry.
• Informs and encourages eco-design approaches for product designers by focusing innovation efforts on identified areas of improvement, and by including durability and repairability metrics.

5. European Green Deal

The EU has launched the European Green Deal, an ambitious plan aimed at transforming Europe into a more sustainable and climate-neutral economy. The implications of the European Green Deal on the fashion industry are significant:

• Carbon Neutrality: The European Green Deal aims to achieve carbon neutrality by 2050, which means that the net greenhouse gas (GHG) emissions will be reduced to zero. The fashion industry, known for its significant carbon footprint due to its energy-intensive production processes, transportation, and use of fossil fuel-derived materials, will need to reduce its emissions to align with this goal. This may involve adopting renewable energy sources, improving energy efficiency in production, and promoting sustainable transportation and logistics.
• Circular Economy: The European Green Deal promotes the transition to a circular economy, where products are designed to last longer, waste is minimized, and materials are recycled and repurposed. This has significant implications for the fashion industry, which has been notorious for its "fast fashion" model of producing cheap, disposable clothing that contributes to overconsumption and waste. The circular economy approach encourages fashion companies to adopt sustainable practices such as reducing waste in production, promoting clothing repair and maintenance, and increasing the use of recycled materials.
• Sustainable Materials: The European Green Deal emphasizes the importance of using sustainable materials in production processes. This includes reducing the use of virgin resources and promoting the use of recycled or upcycled materials. The fashion industry, which relies heavily on natural resources such as water, energy, and raw materials like cotton and leather, can benefit from adopting sustainable materials. This may involve exploring innovative materials such as organic cotton, hemp, and recycled polyester, as well as implementing certification systems for sustainable materials.
• Consumer Awareness: The European Green Deal places a strong emphasis on consumer awareness and empowerment. This means that consumers are encouraged to make informed choices, demand sustainable products, and engage in circular economy practices such as repair, reuse, and recycling. The fashion industry will need to respond to this shift in consumer behavior by providing transparent information about its sustainability efforts, offering sustainable choices, and educating consumers on responsible consumption habits.

Fashion companies will need to keep up with evolving regulations and adapt their business practices accordingly to remain compliant and stay ahead of the sustainability curve. The various environmental regulations present both challenges and opportunities for the fashion industry. These regulations call for a paradigm shift towards circular economy practices, sustainable materials, carbon neutrality, social responsibility, consumer awareness, and policy and regulatory compliance.

The fashion industry needs solutions that are automated to do calculations with limited resources, scalable to cover their entire collection, and accurate to represent the real situation in the supply chain. Sustainability platforms like Carbon Trail empower sustainability teams, even with limited expertise, to comply with various environmental regulations and accelerate their decarbonization journey.

If you are curious to learn more, please do reach out.