The EU CSRD directive requires the fashion industry to use ESG indicators based on defined standards
Author: House of Eden
Since January 2023, the EU has passed sustainability reporting with the Corporate Sustainability Reporting Directive (CSRD). This requires the fashion industry to publish ESG indicators according to defined standards. The CSRD is intended to close existing gaps in the reporting regulations and expand sustainability reporting overall.
This not only ensures more controls, but should also put a stop to greenwashing. However, this has prompted some retailers, such as Decathlon and H&M, to stop using SAC (Sustainable Apparel Coalition) labels to avoid sanctions.
France as a pioneer for eco-labels
Certain public interest entities in the EU are already required to follow the Non-Financial Reporting Directive (NFRD) and report on their sustainability. This reporting obligation is to be expanded considerably with the CSRD. According to estimates, the number of reporting companies in the EU has increased from 11.600 to 49.000.
France is going a step further and is working on a law that would require brands to put "carbon labels" on their fashion items. These are to be given environmental grades A to E. In addition, EU policymakers hope that the EU strategy for sustainable textiles in global value chains will have an impact. Because brands that want to continue selling in a single market need to act accordingly.
There is also sustained regulatory change outside of the EU. In England, for example, the Competition and Markets Authority (CMA) has already investigated the "green" claims of fast fashion retailers such as Boohoo and Asos. In the USA, the Californian Garment Worker Protection Act, the New York Fashion Sustainability and Social Accountability Act, and the Federal Fabric Act are campaigning against greenwashing and the like.
Traceability: Law and USP
It is also becoming increasingly important for consumers that fashion companies act sustainably and transparently. According to a survey by Euromonitor, "Voice of the Consumer: Lifestyles Survey 2022" this is a crucial factor in purchasing behavior. Companies must therefore proactively plan their supply chain. In particular to minimize environmental and social risks and to ensure compliance with relevant laws.
Supply chain traceability is therefore becoming increasingly important. In the short term, this will likely drive the adoption of blockchain technology and end-to-end supply chain mapping. Spanish fashion retailer Mango has already dropped its Committed label launched in 2017 to prepare for the EU's new environmental requirements.