The fashion industry is often in the global spotlight for its innovative designs and trendsetting appeal. But behind the glamour and creativity lies a significant environmental footprint and a complex web of labour issues. In a world struggling with climate change and social inequality, the need for sustainable and ethical practices within the industry is not only evident, but urgent.
This is where Environmental, Social and Governance (ESG) enters the scene, not as a trendy buzz word, but as a fundamental reform in the way businesses operate. ESG encourages companies to operate sustainably and make ethical decisions. For the fashion industry, ESG is more than an obligation – it is a unique opportunity to evolve and thrive in an increasingly conscious world.
Are you curious about the future of fashion being reshaped by ESG regulations? This article aims to give you a better overview of the ESG fashion agenda in 2023. But before we get into the details, let’s explore why ESG has gone from being a nice-to-have to an absolute necessity in today’s fashion industry.
Fashion’s sustainability headache
Climate change is not some future threat. It’s here, manifesting itself in extreme weather and record-breaking temperatures around the world. And it’s clear that we need to focus on areas where we can make the most significant and rapid changes to tackle the problem.
Where does the fashion industry fit into this narrative? It finds itself in an uncomfortable position as a major target. After fossil fuels and agriculture, the fashion industry is the world’s third largest polluter. To put this into perspective, fashion is responsible for 10% of the planet’s annual carbon emissions – putting it ahead of the carbon footprint of all global shipping and aviation combined .
What is driving fashion’s sustainability problems? The answer lies in an impulsive consumer culture, supply chain inefficiencies and overproduction driven by unpredictable consumer demand and seasonality. As a result, an average of 30% of the world’s clothing goes unsold each season, creating a massive €500 billion annual inventory surplus .
The uncomfortable truth called fashion destruction
So where does all this unsold stock end up? The uncomfortable truth is that a significant proportion is destined for destruction. In the United States alone, a staggering 13 million tonnes of textiles are discarded each year, the equivalent of about 40 kg per person. Most of this waste is dumped in landfills or incinerated, with only 13% recycled .
The practice of destroying unsold stock is especially common among luxury fashion labels. Case in point: in 2018, luxury giant Burberry confessed to incinerating €40 million worth of stock . The rationale? Brands see destruction as the only way to protect their intellectual property and maintain brand equity.
Growing consumer pressure for more sustainable fashion practices
The fashion industry’s pressing sustainability concerns have sparked a wave of consumer activism. Fashion brands are feeling the heat as customers loudly demand a shift towards greener, more sustainable practices.
At the forefront of this activism are young, urban fashion consumers from the eco-conscious Millennial and Gen Z cohorts. For these generations, ESG is not a choice, but a necessity.
This rising tide of ESG awareness is putting significant pressure on fashion companies to step up their game, while providing an opportunity for brands to demonstrate leadership on this important issue.
Global Regulatory Action Towards ESG in Fashion
In the United States, Congress is currently debating the Fashion Sustainability and Social Accountability Act – or the Fashion Act – in short. If passed, it will be the first US legislation to explicitly set sustainability requirements for major fashion companies. The Act calls for full disclosure of environmental and social impacts and encourages improvements in sustainability practices.
Meanwhile, on 1 June 2023, the European Parliament adopted recommendations for the new Strategy for Sustainable and Circular Textiles with 600 votes in favour . The strategy aims to transform the textile industry towards a more sustainable and circular model, in line with commitments made in the European Green Deal and the Circular Economy Action Plan.
EU’s new Strategy for Sustainable and Circular Textiles
The Commission’s 2030 vision for textiles includes:
all textile products placed on the EU market are:
durable, repairable and recyclable
to a great extent made of recycled fibres
free of hazardous substances
produced respecting social rights
“fast fashion is out of fashion” – consumers benefit longer from high quality textiles
profitable re-use and repair services are widely available
producers take responsibility for their products along the value chain
circular rather than throw-away clothes have become the norm
ban on incineration and landfilling
To achieve this, the EU outlined key actions, including setting design requirements for textiles, introducing a digital product passport, discouraging the destruction of unsold textiles, and limiting the export of textile waste.
Many of actions outlined by the EU are already underway, with others still being debated in the European Parliament, where they are strongly supported by many members.
Just recently, on 5 July 2023, the Commission proposed new rules to make producers responsible for the entire life cycle of textile products and to support the sustainable management of textile waste across the EU. This initiative includes the introduction of a mandatory and harmonised Extended Producer Responsibility (ERP) for textiles in all EU Member States. It will require producers to cover the costs of textile waste management.
Finally, on 12 July, the European Parliament adopted its negotiating position for talks with EU governments on the Ecodesign for Sustainable Products Regulation (ESPR), a cornerstone of the overall strategy. The proposal received 473 votes in favour, 110 against and 69 abstentions, demonstrating immense support by the European Parliament . MEPs strengthened the measures proposed by the Commission to ensure longer product life and better informed consumers.
Once an afterthought, ESG is now at the heart of the fashion narrative. As consumers turn up the heat on brands, regulators, particularly in the EU, are taking the lead in swift and comprehensive responses to fashion’s sustainability challenge. These regulations are set to redesign the fashion landscape and it’s vital to prepare for what’s coming, whether you’re a fashion brand, wholesaler, retailer or e-commerce company.
In our next blog post, we will take a closer look at the Ecodesign for Sustainable Products Regulation and explore the potential risks and opportunities it presents. We will also share a roadmap to help you navigate the upcoming ESG regulatory changes in the fashion industry.
In the meantime, if you’re intrigued by our circular B2B marketplace, do pay a visit to our website. Until next time 👋