This article is part of Glossy’s “Earth Month” series, highlighting the fashion and beauty brands leading in sustainability and regulatory compliance. The series explores the challenges related to sustainability, including marketing initiatives, preparing for legislation and reporting on commitments.
The fashion industry is undergoing a significant transformation as new sustainability-linked regulations demand greater transparency and sustainability. From global initiatives to country-specific laws, these rules are reshaping how companies operate, forcing them to disclose detailed information about their supply chains and minimize their environmental impact.
Regulations significantly vary by country, adding complexity to compliance. They include the E.U.’s Corporate Sustainability Due Diligence Directive and its Deforestation Regulation, which affect all brands selling there, as well as the Uyghur Forced Labor Prevention Act, affecting brands using specific materials in imports to the U.S.
“We generally see any regulation that is out there as a good thing as it’s leveling the playing field,” said James Rogers, vp of sustainability at Rothy’s who leads the brand’s advocacy around plastics regulation.
Brands can expect many challenges when it comes to the actual reporting of their sustainability metrics and supply chain measurements.
“The first challenge is just the number of regulations. It’s been difficult and challenging for brands to know what to prioritize,” said Pauline God, policy manager at traceability platform Trustrace. The platform has been helping brands analyze the vast swathes of data needed for brand reporting.
Among the regulations global apparel brands will need to manage is the Corporate Sustainability Due Diligence Directive (CS3D) which includes provisions for both direct and indirect suppliers, requires comprehensive risk assessments from brands, and establishes enforceable grievance mechanisms. These are to be implemented in annual phases starting on July 6, with each country adapting its version of the directive.
“All companies will have to go through the requirements [of CSRD reporting] and figure out the data points that make sense for them to report on,” said Mads Twomey-Madsen, vp of corporate communications and sustainability at the Denmark-based jewelry brand Pandora. “There’s a list of more than 1,000 [possible data points].” These include everything from incentive programs tied to sustainability goals to material descriptions.
However, there are a lot of overlaps between all the varying regulations, which is set to streamline reporting. “In many countries, there are a lot of things in common,” said God. “So if you do start mapping and de-risking your supply chain, you will be able to reuse lots of that work that you’re investing in for other compliance.”
For now, God recommends figuring out how internal budgets are allocated across sectors dealing with the reporting, which can extend from legal to manufacturing. Companies should also enhance IT systems for better data management and use strategic risk analysis to address potential supply chain vulnerabilities, she said.
Brands with the option may also find it beneficial to expand their involved teams. For its part, Pandora has doubled the size of all of its teams to accommodate the changes over the last three years. “[The reporting requirements] are causing us to disclose much more information than we did earlier,” said Twomey-Madsen. “We need to have more people in place to gather new data and provide that in a systematized way. That’s a big effort. So we’ve built out several teams — in finance, in the sustainability organization, in procurement, in manufacturing and elsewhere in the company — to deliver on this.”
Regulation breakdown
Some impactful regulations will be enforceable soon. In the United States, the Uyghur Forced Labor Prevention Act focuses on eradicating forced labor in industries such as cotton, leather and natural rubber, with enforcement starting in December 2022. The European Parliament has recently approved similar legislation aimed at eradicating forced labor, which will affect rubber, cotton and leather imports starting in 2027.
In the U.S., the rigorous checking process for the UFLPA can be a headache for brands that don’t have the necessary documentation. Imports into the U.S. can be held at the U.S. border by customs control for up to six months. “As of June 2022, brands shipping to the U.S. must provide customs with chain of custody documentation from the beginning of the supply chain [if the goods have been detained],” said Angela Santos, partner at law firm ArentFox Schiff leading customs. “As a result, there has been quite a shift away from sourcing from China and a shift away from cotton products, because they’re risky.”
Brands can expect heavy fines for failing to meet regulations. The European Union’s Deforestation Regulation, effective from January 1, 2025, will mandate traceability to the farm level to ensure products have not contributed to deforestation. Non-compliance could lead to fines up to 4% of annual turnover and a prohibition on sales.
“The majority [of brands] are not that prepared [for reporting requirements], but they’re getting there,” said God. “Everyone has different portfolios, different materials and different sourcing strategies, so everyone is doing it in the way that’s relevant for them.”
Collaboration can also be helpful. For example, The Policy Hub, which includes over 700 brands, serves as a platform for brands to share best practices and solutions.
Brands are realizing that having more control over their supply chains and sourcing can help avoid breaches of regulation. Utilizing certifications can help companies meet recycled content and recyclability requirements more effectively, but this can also have setbacks, as demonstrated by Better Cotton this week.
A report published on April 11 by Earthsight, a U.K.-based investigative non-profit, revealed that H&M and Zara owner Inditex are sourcing cotton through Better Cotton, an NGO aimed at improving cotton farming and conditions. But cotton sourced through Better Cotton was linked to cotton farmers SLC Agrícola’s and Grupo Horita’s operations in Brazil’s Cerrado region.
The report stated that Inditex and H&M are, therefore, complicit in the deforestation, environmental degradation and human rights abuses associated with SLC and Horita’s practices in the Cerrado. Meanwhile, an independent audit from Better Cotton published on April 23 showed no breach of its standard to assess cotton quality.
So bringing reporting in-house, in the name of maintaining control, is a common goal.
At the moment, Pandora works with undisclosed third parties to analyze select data, but it plans to transition to its own systems in the future.
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