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 [1].

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 [2][3].

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 [4].

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 [5]. 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.





United States – Federal


The bill requires employers in the garment industry to pay at least the minimum hourly wage, prohibits piecework, and requires garment manufacturers and contractors to register with the Department of Labour


United States – New York

Fashion Act

Requires fashion sellers to adhere to standardised environmental and social due diligence policies, while establishing a fashion remediation fund to implement projects that benefit workers and communities affected by industry-related environmental and labour issues


United States – California

Garment Worker Protection Act

Requires garment manufacturers in California to pay their workers the minimum hourly wage, while also introducing incentive based-bonuses

In effect

European Union 

Strategy for Sustainable and Circular Textiles

Requires the textile industry to make textiles last longer, use more recycled materials, reduce the use of hazardous substances, improve transparency and discourage overproduction and overconsumption



Anti Waste and Circular Economy Law

The law requires the shift to circular practices, eliminating single-use plastic, promoting reuse, addressing planned obsolescence, improving resource management, and enhancing consumer information for a waste-free, circular economic model.

In effect


Supply Chain Act

Requires the establishment of a risk management system to identify, prevent or minimise the risk of human rights and environmental abuses, as well as mandatory complaint procedures and regular reporting, extending responsibility to a company’s entire operations, contractors and suppliers

In effect

Global Regulatory Action Towards ESG in Fashion

Regulators around the world aren’t standing on the sidelines as the fashion industry grapples with its ESG issues. Powerhouse economies such as the European Union and the United States are leading the way with robust action plans to address these pressing concerns and reduce fashion’s environmental footprint.

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 [6]. 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 [6]. MEPs strengthened the measures proposed by the Commission to ensure longer product life and better informed consumers.

Final Thoughts

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 👋

Want to receive our latest deals?

Sign up for our newsletter now and never miss any deals!
Wir melden uns innerhalb von 24 Stunden bei Ihnen zurück.
Unsere Beratung ist kostenfrei & unverbindlich.
Willkommen bei smatch!

Intro mit Dr. Max Groberg, Managing Director

Play Video