ESG in fashion: Your guide to navigating reporting regulations

The fashion industry holds a substantial impact upon climate change, from influencing CO₂ levels to posing wider environmental threats. With approximately 4-8% of global greenhouse gas (GHG) emissions being attributed to the apparel and footwear industry there is widespread concern about the impact of the fashion industry upon climate change. Meanwhile, the extent to which the fashion industry is intertwined with human rights issues, such as fair wage payment, is increasingly being questioned. 

The environmental and social impact of fashion 

Unsustainable ‘fast-fashion’ trends have further accentuated the carbon footprint of the fashion industry. The excessive consumption and short-spanned life cycle of clothing that is promoted by fast fashion sees the mass production of low-priced clothing, with the number of garments produced annually doubling since 2000. Fast fashion trends have seen the industry grow to account for a fifth of annual plastic production globally.

Meanwhile, fast fashion accelerates the use of microplastics, energy consumption and water consumption, thus accentuating non-renewable resource dependence and climate change. Polyester - a ubiquitous form of plastic that is derived from oil - has overtaken cotton as the backbone of textile production. Garments made from polyester and other synthetic fibres are a prime source of microplastic pollution, which is especially harmful to marine life.

Finally, the environmental risks of fast-fashion and its contribution to climate change is underlined with projections showing the production of fossil fuel-based clothing will continue to grow in the next two decades. 

Meanwhile, increasing social awareness around the destructive effects of fast fashion has underpinned a shift towards individuals placing a greater emphasis upon sustainability when making decisions related to fashion.  This involves considering the environmental footprint that is associated with garments; such as ensuring textile-usage does not involve microplastics, steering away from polyester which depends on oil, ensuring garments are made to last, and the production of items does not require excessive energy or water usage. Furthermore, there have been growing considerations for social factors, such as whether fair labour practices were used within the production of garments. The growing focus upon sustainability in the fashion industry can be exemplified through Zara, who committed to ensuring that 50% of items it sells in 2022 will be made with recycled materials and “ecologically grown cotton”. 

However, fast fashion remains a prominent trend within the consumer market, causing widespread environmental destruction. This ultimately raises the question of:

• What regulations will be actioned to shape a low-carbon fashion economy?
• What will such regulations mean for fashion businesses around the globe?

Which ESG regulations are set to influence the fashion industry?

The inevitable acceleration of climate change and environmental damage associated with unsustainable fashion necessitates the implementation of policies and regulations that pave the way towards a more sustainable fashion industry. Meanwhile, ensuring that the fashion industry is socially responsible requires laws which ensure workers are not subject to exploitation. As such, there are several new laws that have been proposed on a global-scale in response to increased attention surrounding ESG and fashion. 

Within the European Union (EU)

1. Extended Producer Responsibility on Textiles: The Extended Producer Responsibility (EPR) aims to reduce industry waste. The regulations also aim to hold brands accountable for the environmental impact of their items.‍
2. Corporate Sustainability Due Diligence Directive: The Corporate Sustainability Due Diligence Directive (CSDDD) ensures that environmental and human rights due diligence is enacted across the whole supply chain of businesses.‍
3. Corporate Sustainability Reporting Directive: The Corporate Sustainability Reporting Directive (CSRD) mandates that businesses of all sizes report their environmental and social activities, which are then subject to audits. ‍
4. Eco-Design for Sustainable Products Regulation: The Eco-Design for Sustainable Products Regulation (ESPR) aims to maximise sustainability through a focus upon the areas of resource use, repairs and circularity. This regulation mandates a ‘Product Passport’ being included with items to ensure consumers are able to make informed decisions. 

Such actioned and proposed regulations within the EU inevitably mean that greenwashing will no longer be an option for fashion businesses. The EU’s holistic strategy will transform the way in which clothing is produced, distributed and disposed; thus paving the way to a circular, and more sustainable fashion industry. 

Within the United States (US):

Within the United States there have been ESG regulations recently introduced that further aim to shape a more sustainable fashion industry.

1. Fashion Sustainability and Social Accountability Act: This proposed legislation focuses upon larger companies and mandates that fashion companies map their supply chains, whilst addressing the broader environmental and social impacts of their operations. ‍
2. Fashioning Accountability and Building Real Institutional Change Act (FABRIC Act): The FABRIC Act is federal legislation that focuses upon protecting workers within the US textiles and fashion industry through fair working conditions, fair pay and safe working conditions.
3. ‍Garment Worker Protection Act: The Garment Worker Protection Act is a landmark step towards ending worker exploitation and ensuring fair pay within the fashion industry. The act works to incentivise brands through legal liability to tackle workplace violations, and also eliminate the by-the-piece payment used to underpay workers 

5 steps fashion businesses must take to ensure compliance with ESG regulations

The resource-intensive and wasteful nature of the textile sector ultimately makes it one of the least sustainable industries globally. With the production of textiles doubling between 2000 and 2015 - and expected to double by 2030 - the introduction of such ESG legislation is critical to provoking a genuine shift away from fast fashion trends, and paving a more sustainable fashion industry.  Whilst these laws will definitely aid in the industry’s transition towards sustainability, fashion-oriented businesses must take it upon themselves to re-shape, or improve, their current business models through implementing sustainable policies and practices. 

In order for fashion businesses to mitigate the detrimental effects of climate change, bolster their ESG performance to meet growing regulatory requirements - they must:

1. Utilise sustainability software

Leveraging the vast opportunities and benefits associated with sustainability software. Plan A’s comprehensive sustainability solutions platform takes a holistic approach to ensure businesses within the fashion industry can mitigate the non-financial and financial risks that will inevitably increase with forthcoming policy implementation, with studies showing that high to severe ESG incidents lead to a 6% loss of market capitalisation on average. Furthermore, sustainability software can improve ESG performance to ensure businesses within the fashion sector can harness the long-term benefits of sustainability.

2. Map out the supply chain

Supply chain analysis allows businesses within the fashion industry to identify any risks or opportunities related to sustainability and ESG; such as incentivising key areas of the wider supply chain to utilise green energy. A highly useful component embedded within Plan A’s decarbonisation software is a suppliers module, which allows businesses to map out their supply chain and identify key opportunities and risks related to sustainability.

3. Undergo a life cycle analysis 

A life cycle analysis (LCA) is a valuable scientific environmental impact assessment method that allows fashion businesses to measure the footprint of their products. A life cycle assessment assesses the environmental impact of a product throughout every phase of the product life-cycle. This includes analysing the environmental footprint across every stage, such as the production of raw materials, the production processes that take place at a manufacturer, the transportation of materials and of the product to consumers, the use of the product, and how a product is disposed of- or recycled.

4. Implement more circular practices

Following a life cycle analysis, fashion businesses must prioritise the implementation of circular practices - with a key focus on reusing and recycling. For instance, fashion businesses may take action to use less materials when producing individual items - thus increasing their recyclability. Fashion businesses should also focus on eliminating non-recyclable materials and pollutants from their supply chain. Lastly, fashion businesses should consider recapturing all unused material for reuse; such as garment offcuts and packaging.

5. Utilise more sustainable packaging

Growing consumer awareness surrounding the detrimental environmental harm which single use plastics hold has resulted in 72% of consumers being willing to pay more for a product that is packaged in a sustainable way. Meanwhile, the European Union’s ban on single-use plastic packaging means it is ever-so vital for fashion businesses to integrate sustainable packaging alternatives into their value chain. The Sustainable Packaging Coalition offers a criteria for sustainable packaging that fashion businesses should follow.

The fashion industry’s substantial impact upon climate change, from influencing CO₂ levels to posing wider environmental threats, ultimately necessitates businesses to reshape their practices to not only reduce their carbon footprint, but also ensure compliance with new policies and regulations within the fashion sector. By following the aforementioned steps; fashion-oriented companies will ensure they are compliant with policies whilst being transparent with both internal and external stakeholders; thus enabling them to unlock long-term strategic value through sustainability. 

To ensure compliance with upcoming ESG regulations, and realise the benefits of implementing sustainability within your business, book a demo with Plan A.