Sustainable Fashion: How Retailers Can Prepare for Sustainability Regulation

By Saskia van Gendt, Chief Sustainability Officer at Blue Yonder

New EU regulations are set to revolutionise how fashion retailers and consumer brands manage their supply chains and report on the impact their business has on people and the planet. 

The upcoming Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) represent a paradigm shift in sustainability reporting – one that looks set to catalyse transformational changes around how clothing is produced, distributed and disposed of. Even though last-minute changes to the proposed CSDDD eliminated high-risk sectors – which included fashion—the regulation’s thresholds of 1,000 employees and 450-million-euro turnover will require many large fashion brands and their partners to comply. 

To address these new reporting obligations, which come into force in 2025, and prepare for increased scrutiny of their environmental practices, fashion firms will need to act decisively and fast. 

Step 1: Gain visibility of the global supply chain

Both CSDDD and CSRD elevate the crucial importance of transparency and accountability in global supply chains. 

While CSRD broadens the horizon of sustainability reporting and requires more detailed disclosures around a company’s environmental and social footprint, the CSDDD is focused on upscaling supply chain due diligence. Under the proposed rules, companies will be required to identify, prevent, mitigate and account for negative human rights and environmental impacts across their own operations and subsidiaries, as well as all direct business supply chain partners.

For apparel firms operating in EU markets the compliance challenge will be significant, especially if their value chains span multiple countries in multiple regions around the globe.

To cut through this complexity, organisations should begin by mapping their end-to-end value chain. That means going beyond Tier 1 suppliers to gain visibility across every tier of the supply chain down to the raw material level and all production processes. This will prepare the way for the collection of all required data.

Step 2: Unify sustainability and supply chain objectives

The upcoming EU regulations enforce both transparency and action. Firms that proactively start aligning and analysing sustainability metrics alongside their traditional commercial supply chain objectives will be better positioned to make data-led business decisions that accelerate their sustainability goals.

By analysing the full life-cycle environmental footprint of clothing items from production through to transportation and delivery to consumers, fashion firms will be able to identify where they can optimise supply chains and eliminate both waste and cost. 

Alongside identifying the most responsible and resilient partners to forge ahead with, organisations can leverage datasets to undertake ‘what if’ analytics to unearth the best roadmap for the company. This could include exploring local warehousing and transport alternatives and manufacturing nearshoring possibilities. 

By evaluating sustainability and supply chain performance as an integrated whole, companies can start to view supply chain sustainability as a commercial enabler and business enhancement opportunity.

Step 3: Embed due diligence

Having identified their direct business partners and mapped out their value chain, organisations can next start to prepare the way for undertaking ESG reporting and monitor progress towards CSDDD objectives. This includes preparing the proactive due diligence policies and processes that will be needed to monitor the practices of suppliers and identify, prevent and mitigate ESG risks across the global supply chain.

By embedding due diligence across their operations, companies will be able to take meaningful steps towards improved sustainability and demonstrate this progress to regulators, investors and consumers.

Preparing to transition

With the clock already ticking, fashion firms need to understand and digest the new EU regulations and assess their existing supply chain partnerships against potential risks posed by environmental and social factors.

By reviewing systems to ensure they can achieve deep visibility of the environmental impact of their supply chains, organisations will be able to optimise supply chain activities for both environmental and financial advantage. 

Ultimately, compliance with the new EU regulations is just the start. Companies that view the new legislation as an opportunity to adapt their supply chains for operational and environmental resilience will be able to strengthen their brand image, gain consumer trust, and generate long-term commercial benefits that include significant operational cost savings and growth.