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Sustainable Strides in Fashion: The Big Picture

Updated: Nov 13, 2023

Dangling the carrot of a sustainable competitive advantage didn’t work for fashion; so now the EU is using the metaphorical “stick” through legislation - with legal, monetary and consumer implications for brands that don’t comply.

While the US has recently received attention for its “Inflation Reduction Act” and the subsidies and incentives it provides for green technology development, the EU continues to lead a massive shake-up in the textile industry - a sector that has long stayed in the sustainability and innovation shadow of faster moving industries such as automobiles and energy.

The EU policy is being spearheaded by the Corporate Sustainability Reporting Directive (CSRD) and Digital Product Passport. These pieces of legislation are making environmental reporting mandatory. This will have a big impact on fashion brands we all know - and soon after, smaller and mid-sized ones too - who will need to report their much more detailed environmental data publicly allowing comparison.

In this short blog post, I’ll guide you quickly through the headlines of these two pieces of legislation and our thinking at Smartex on how this will catalyze innovation in the supply chain.

Let’s get into it…

Imagine you are a senior environmental or compliance figure at a big fashion brand right now…

The aforementioned CSRD has been incorporated into EU member national law and kicks off this year for a number of EU fashion brands - and by 2026, this will include all SMEs and large international firms operating in the EU.

Timeline: Carbon Trust

From a sustainability viewpoint, fashion brands will require a lot more detailed environmental data in order to comply:

  • Public, science-based targets of Scope 1, 2 and 3 with evidence-based progress reports

  • Provide more accessible, in-depth, and verifiable non-financial data to investors that will allow for improved informed (ESG) decision-making.

  • Clear reporting on the climate risks to their supply chain and business

And there is a much higher expectation on the quality of data than previously. The EU Commission expects “high quality” data - truthful, comparable and verifiable.

As a reminder, the CSRD was adopted by EU members back in November 2022, which means 2023 is kick-off year for the largest EU companies. This means we’ll be seeing this data being publicly shared by many European fashion brands in Q1 2024. One year from now.

Cue a gulp from fashion brands

99% of Public Companies Expect to Invest in ESG Reporting Tech & Tools in the Next 12 Months: Deloitte Survey

Source: ESG Today

And it doesn’t stop there. On top of the CSRD, the Digital Product Passport is coming down the pipeline, which requires much more granular data collection - or as the EU Commission calls “product-specific data set”.

The exact “data set” - or data model - is still being determined but the intentions are clear - map the journey of a garment with verifiable data on its sustainability impact - greenhouse gases, water use, and chemicals. And this is becoming relevant quick with France jumping ahead and implementing their own requirements sooner than the EU. Through France’s AGEC Law - which is already in effect since January 2023 - brands with over €50m in revenue will need to inform consumers of the environmental qualities and characteristics of their products, such as the incorporation of recycled material, use of renewable resources, sustainability and repairability.

Allez La France 🇫🇷 but where’s this data coming from?

From a brand’s perspective - in one phrase - “we’re in trouble”.

Because the vast majority of the Textile Industry’s environmental impact - and thus the fashion brands that lead this market - happens in the supply chain before it ever reaches brands, and there isn’t much good data coming from the supply chain right now. Mostly because brand-supplier relationships are very transactional in the textile industry with little loyalty or co-investment but that’s been well documented.

However, the supply chain data will come - innovators such as Textile Genesis, TrusTrace, Infinichains, Fairly Made and Made2Flow are working on it and more are joining. Legal requirements focus the mind - and brands are scrambling to partner with the best current and upcoming innovators to fill the multitude of data holes - from production information like material tracing, process tracking, quality assessment, and wastage to macro information such as production country energy mix.

No innovator does it all. This is a patch job right now.

But the establishment of a patchwork of data will start the next revolution. The true sustainable innovation revolution. The innovation that is 40% of fashion’s net zero solution.

With data, innovation will show up in data through a reduction in product environmental impact. Once you measure, you can manage - and invest behind relevant innovation with a ROI.

Suddenly, innovation that promises 50% reduction in water, GHG and chemicals is a lot more attractive because the data can prove it and fashion brands can include it in mandatory annual company reports - satisfying compliance, providing a marketing edge and expanding fundraising opportunities from the fast growing pool of ESG cash.

With data at a product level, there’s a competitive advantage for brands to invest in renewable energy and innovation with their supply chain partners, not running away to the next cheapest manufacturer.

This data revolution is a catalyst for innovation - and given the supply chain is where all the impact is - we need to build “The Modern Textile Factory”. This starts with the better collection, organization, and communication of textile history and quality - and ends when garments are made with renewable and recycled materials, dyed, and finished by dry processing machinery with zero waste capability.

So let’s get on with it.

Welcome to the data revolution in the Textile Industry.


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