"Seam-ingly" Compliant or Creating Consciously: A Comparative Survey of Fashion Industry Targeted Sustainability Laws in the European Union and the United States

Introduction

In the advent of the conscious consumer, the main concern on any fashion lover’s mind is no longer who they are wearing, but how what they’re wearing was made. Consumers and governments alike have fixed a captious gaze on sustainability practices concerning apparel design and creation. Global companies are at risk of, and are currently being subjected to, a variety of international and local sustainability laws which can affect their production and sale capacities at home and abroad. In analyzing both proposed and adopted laws, lawyers and legal scholars can better understand the distinct objectives that jurisdictions prioritize to provide legal advice, corporate governance strategies, and aid in business development for major fashion corporations.

This note will go as follows. Part I will describe the origins of sustainability laws and their legal background, and Part II will analyze the objectives that sustainability focused regulation seeks to achieve and the corresponding issues that inspired those objectives. Next, Part III will summarize and provide background on current and proposed regulations and how they seek to achieve the objectives described in the previous section. Finally, Part IV will set out best practices for compliance to highlight the importance of data collection, and how effective data procurement is essential to comply with the new regulations.

I. Sustainability and Fashion

Sustainability refers to business policy decisions relating to environmental, social, and corporate governance impact. The main aim of sustainability is “to preserve and strengthen the quality of human and natural resources over the longest possible time.” Provided that the global apparel industry has a value of almost three trillion U.S. dollars, accounting for two percent of the world’s GDP, it is essential to address the environmental and social issues created by its actors. By addressing these concerns, a “$192 billion overall benefit to the global economy” could be felt by 2030.

Increased frequency of climate-caused catastrophes is directly attributable to rising global temperatures from greenhouse gas emissions and pollution. Because fashion creation and consumption are responsible for between three and eight percent of total greenhouse gas emissions, environmental concerns are at the forefront of legal sustainability movements in the apparel industry. Climate disasters directly impede the well-being of the global economic system, increasing in cost by seventy-seven percent since the 1970s. Now, with more than sixty-five billion U.S. dollars of apparel exports at risk of being wiped out by climate events such as flooding and extreme heat, corporate actors must take prompt action to minimize the risk of severe profit loss.

Sustainability also acknowledges social costs, such as the human cost of production. One in six of the world’s workers are employed in the fashion industry, and many of these workers live in underdeveloped countries due to labor outsourcing. Lack of regulatory oversight and increased consumer demand leads to unethical labor practices such as long hours without compensation, unsafe working conditions, and inhumane treatment by management.

Stakeholders in the apparel community are taking notice of consumers’ cries for more sustainable production practices. Twelve percent of fashion executives cite sustainability as “a principal opportunity,” and seek to use self-imposed initiatives to reach environmentally and socially conscious audiences. Yet, twelve percent also describe it as a “top challenge” as governments impose mandatory sustainability requirements.

As supply chains come under increased scrutiny, new sustainability rules have been proposed in the European Union (“EU”) and the United States (“U.S.”). These rules would require brands and manufacturers to protect both natural resources and the people who make the apparel. Because these laws are wide-reaching and will impact every stage of the apparel manufacturing process, it is unsurprising that eighty-seven percent of fashion executives believe sustainability regulations will impact their business.

A. Legal Background

Although laws pertaining to the environment and worker welfare have been around for decades, recent actions by global intergovernmental organizations brought the apparel industry into the regulatory and statutory fray. The United Nations Alliance for Sustainable Fashion (“Alliance”) was established in an attempt to influence the fashion sector on a worldwide scale. During the 2018 High-Level Political Forum on Sustainable Development (“HLPF”), United Nations (“UN”) officials stressed how “the fashion industry needs to change gear,” and that the complexity of the fashion supply chains makes it apparent that increased collaboration is needed to reach sustainability goals. The Alliance was designed to effectuate the UN’s Sustainable Development Goals through coordinated action in the fashion sector. It seeks to implement policies and projects to mitigate the harmful widespread impacts of the fashion industry’s rapid growth.

Asserting itself as the most climate-active regional intergovernmental organization, the EU seeks to establish Europe as the first climate-neutral continent. To do so, it adopted the “European Green Deal” (“The Green Deal”) in 2019, which sets out action plans and industry-specific initiatives to counteract the growing problem of climate change and imposes new requirements for stakeholders operating in the region. Although it does not specifically target the apparel industry, the Green Deal covers sectors relevant to fashion manufacturers such as textiles.

The EU has a strong track record in reducing emissions: In 2018, emissions were twenty-three percent lower than in 1990, and during that time the Union’s GDP grew by sixty-seven percent. Since the Green Deal was put into effect, more than seventy directives and regulations have been agreed to or adopted, and “there is no evidence of a slowdown.”

II. Sustainability Regulatory Objectives

To understand why certain laws are being proposed or implemented, it is important to first give context to the issues they seek to remedy. As the fashion supply chain is incredibly complex, problems arise at every part of the manufacturing process and even in the marketing and sale of finished goods. Prevalent issues in the apparel industry include waste management, greenwashing, the human cost of production, and corporate responsibility, specifically in traceability throughout a company’s supply chain.

A. Waste Mitigation and Management

The increased rotation of trend cycles and low quality of garments means “clothing is disposed of at a disastrous rate.” According to The Business of Fashion, “less than one percent of fashion textiles are recycled.” Even more disturbing is that a “truckload of [apparel] products are sent to landfill or are incinerated . . . every second.” In the U.S., Americans throw away “approximately eighty pounds of clothing” per year. Those tons of discarded clothing occupy almost five percent of the space in landfills and can sit there for up to 200 years.

Most of this waste is also toxic. “Fast fashion” companies that produce clothes at alarmingly quick rates and sell at below market prices use cheap materials that are toxic or are dyed using toxic materials. To mitigate the massive impact the apparel industry has on ground waste, global warming, water waste, and pollution, prudent governments seek to launch textile collection programs, mandatory repair laws, and even ban the destruction of unsold goods.

B. Greenwashing

“Greenwashing” occurs when a brand attempts to garner media attention, social media engagement, and profit by using sustainability-related declarations in their advertising and marketing. Specifically, it is the “use of marketing tactics to make a product appear environmentally friendly when it is not.” To do this, a company uses “buzzwords”—such as organic, green, eco-conscious, and clean—to mislead consumers. Brand reputation is critical for apparel companies, particularly luxury houses that depend on consumer loyalty and notoriety to remain desirable. Therefore, they often selectively disclose certain information to attract consumers and establish a comparatively more “environmentally friendly” reputation amongst their competitors.

Greenwashing is a longstanding issue. In 1992, the Federal Trade Commission issued “Green Guides” that companies must comply with to substantiate their claims. Even though these laws are updated periodically, current apparel companies still find ways to advertise that make it appear that they are more sustainable than they are. Looking to the future, consumer advocacy groups and governments alike are trying to prevent potentially misleading claims and require statements to be specific, backed by evidence, and verified by independent sources.

C. The Human Cost

Employment in the garment industry has increased rapidly since the 1990s—but primarily in developing countries. Today, “one in six of the world’s workers are employed in the fashion industry.” Outsourcing labor in less developed nations allows apparel companies in high fashion consumption countries like the U.S., U.K., France, and China to maintain low production prices and costs. A majority of the outsourced laborers in low-income nations are vulnerable women and children who are underpaid and subject to harsh working conditions. This inhumane and unsustainable structure survives primarily due to low liability.

Outsourcing allows companies to avoid strict labor laws in their home countries and use workers in poorer countries that depend on external capital to improve their economies. Therefore, state actors benefit from foreign investment and companies benefit by reappropriating earnings to business expansion efforts that originally would have been used to fairly compensate local workers and comply with local regulations.

Lack of oversight results in gross mistreatment and abuse. In Bangladesh, female workers reportedly developed bladder infections due to the lack of bathroom breaks. Managers were reported to force female workers to consume contraceptive pills, which would increase working hours and productivity by lowering job abandonment due to motherhood. Worker abuse is not unfamiliar in more developed nations: In the U.S., American garment workers suffer from the second-highest wage theft of all workers. Some earn as little as $2.68 an hour, far below the federal minimum wage of $7.25.

The Business of Fashion reports that up to eighty percent of a product’s sustainability impact is determined in the design phase, and new regulations will thus have widespread cost ramifications. But even minor changes to the structure of production could have exceptional outcomes for workers. For example, paying garment makers a living wage would only increase the retail price of a given garment by one percent, but could substantially improve the quality of life for these impoverished populations. Many would argue that one percent is a fair price to pay for dignity.

D. Corporate Responsibility

While textile and garment manufacturing factories located in more developed nations like the U.S. are subject to strict regulations, unsustainable practices allow most companies to avoid responsibility for how they make their clothes. Thus, dominant fashion companies headquartered in first-world countries can escape laws that would require them to limit emissions, improve worker welfare, and ameliorate waste production by moving their manufacturing efforts to countries with less stringent protections.

A main issue that regulations seek to remedy is the lack of corporate responsibility—specifically traceability. Traceability refers to full supply-chain visibility that allows consumers and governments to effectively monitor brands at every stage of production. It is the ability to identify and monitor the history of finished goods to understand the practices relating to its creation.

Consumers want to know the origin of the product and its environmental and social impact. Even though some brands tout full transparency and circular fashion practices, which operate as garment “buy-back” or recycling schemes, many of them fail to disclose the ultimate destinations and life cycles of their garments. Without further transparency, a consumer is not able to make adequately informed decisions about where to buy their clothes or how to deal with them when they wish to discard them, called the “end-of-life” stage.

III. Summary of EU and U.S. Approaches

This portion of the case note will summarize notable current, upcoming, or proposed laws that may have the largest impacts on the objectives described above. In doing so, it will provide information to compare the trajectories and priorities of the EU and the U.S. to guide internal and self-imposed compliance plans for companies active in both jurisdictions.

A. European Union Sustainability Regulations and Directives

1. Corporate Sustainability Reporting Directive

Entered into force on January 5, 2023, the Corporate Sustainability Reporting Directive (CSRD) is an EU law that mandates certain companies to disclose information about their environmental, social, and governance (ESG) impacts. It seeks to expand upon pre-existing rules that delineate what information companies must report, and also broadens the number of the companies affected by the laws.

Approximately 50,000 companies will have to comply with the CSRD’s reporting requirements. It generally affects three types of companies: (a.) all companies with securities listed on an EU-Regulated market, both EU and non-EU entities; (b.) “large” EU companies or subsidiaries that are not listed that exceed a certain asset, revenue, and workforce size threshold; and (c.) EU companies that are part of a larger group and not listed.

Perhaps the most significant impact of this directive is that non-EU companies will have to report their ESG data, even if they do not have a headquarters or a subsidiary in Europe, if they generate over €150 million on the EU market. Furthermore, consolidated sustainability reporting will be required for non-EU companies at a global level if a company generates a certain amount of revenue in the EU. The CSRD is implemented on a “state-by-state” basis, with enforcement overseen at the state level as well with the CSRD instructing EU member states to “establish effective systems of investigation to monitor [compliance].”

The CSRD will ensure that investors have access to the necessary information they need to assess the impact of certain companies, and essentially fact-check a company’s statements and marketing regarding ESG. This paper proposes that this Act will eventually improve the EU’s environment and social structures, as a necessary consequence of honest declarations by a majority of firms. Even more promising is its possible wide-reaching effects across the world, as apparel companies that are not headquartered in the EU but do a substantial amount of business there will have to adapt to these laws and formulate concrete disclosure methods or risk non-compliance in a significant market.

As ESG compliance is considered a fundamental valuation tool of any firm, the CSRD allows stakeholders within the fashion industry to base their investment decisions on financial risks and opportunities considering a company’s sustainability issues. Importantly, standards of compliance are not only imposed on a company’s operations but extend to direct and indirect relationships in its value supply chains. Apparel companies that use subsidiaries and contractors to hire employees, reap raw materials, or transport goods are obligated to disclose ESG data for every single step in the creation of their goods, even those outside of their control.

2. Waste Framework Directive

The EU Waste Framework Directive (“WFD”) is a series of regulations and standards issued by the EU to establish a waste management system. It provides definitions, concepts, and priorities concerning waste and seeks to protect human health and the environment by reducing its impact on the European continent and forcing members to take control of their waste management.

The waste hierarchy is foundational to the WFD, which ranks the method or management practice of waste from most desirable to least desirable. The priority categorization is listed in order of best to worst, considering factors such as (a.) prevention, (b.) preparing for re-use, (c.) recycling, (d.) other recovery, and lastly, (e.) disposal. Notably, under the WFD member states must take “appropriate measures” to ensure waste that underwent either recycling or recovery operation complies with certain conditions to no longer be waste, such as that the object be used for a specific purpose, a market or demand exists for it, or that the use of the substance or object will not lead to overall adverse environmental or human health impacts.

The WFD was amended in 2023 to include textile waste management, which directly impacts most of the major players in fashion that are located in the EU, such as iconic design houses Chanel and Dior. Under this amendment, member states are required to set up separate collections of textiles. For this to occur, there will have to be a substantial increase in re-use and recycling capacities within the EU member nations. Huge monetary investments in infrastructure and technology are expected, but with similar effective payoffs as well.

Through the amended WFD, companies in the apparel industry are subject to meaningful standards. These comprehensive laws tailored to focus on textiles subject producers of clothing in all price ranges to be held accountable for where their clothing goes. It encourages them to make items that last longer, and “even more importantly, are easier to recycle when they reach the end of their useful life.”

3. Eco-design For Sustainable Products Regulation

It’s an open secret that unsold clothing inventory goes to the incinerator, excess watches and shoes are sent to the landfill, and designer bags are mutilated to avoid being subject to discount. Companies either destroy returned or unsold goods, which has direct negative impacts on the environment. Destruction contributes to greenhouse gas emissions, as the destroyed products are either incinerated or sent overseas to landfills. It is estimated that destroying perfectly marketable clothing and accessories contributes over 5.6 million tons of CO2 or equivalent gasses. This equates to over one million gas-fueled cars or the net emissions for the entire country of Sweden in 2021.

The EU’s “Ecodesign for Sustainable Products Regulation” entered into force on July 18, 2024. It enables member-nations to set performance and information conditions for material goods, including textiles and footwear. Two years after the regulation goes into effect, the destruction of these goods will be banned entirely.

This ban and other Ecodesign rules are examples of the EU’s hard-policy instruments recently employed to achieve sustainability objectives of waste management and traceability. A proverbial stick in the carrot-stick framework of private sector regulation, it restricts consumer choices and alters financial incentives that effectively increase the price of production. Consequently, “overproduction becomes a financial liability for brands,” and incentivizes them to engage in redistribution practices instead. At the risk of a negative branding image from noncompliance, apparel companies must either redistribute or reduce.

Nevertheless, this ban is an opportunity for brands to be more intentional in their product production. The rationale behind destroying perfectly sellable goods is to maintain exclusivity by reducing the number of available products. Yet, this can be achieved even more efficiently by decreasing production. Vogue Business reports that this directive should inspire brands to discard the unsustainable wholesale business model and use preorder and on-demand manufacturing practices.

With the advent of artificial intelligence forecasting technology, brands can be more intentional with the both the amount and type of apparel they make and prevent masses of unsold goods from remaining in a warehouse after a trend cycle or season. By predicting what clothes they should make, companies could increase desirability and demand by strategically limiting the amount available in the market and make more profit by inflating the price of their limited supply.

4. Green Claims Directive

In March 2023, the EU Commission proposed the Green Claims Directive (GCD) to target greenwashing in marketing, advertisements, or labeling of major corporations’ goods and services. The GCD would require any sustainability related declaration to be connected to specific verified evidence to prevent consumers falling for false claims and being fooled into purchasing non-green products.

Under the GCD, Member States would have to ensure that any company generating explicit environmental claims carries out assessments to substantiate them with “widely recognized scientific evidence, use accurate information, and take into account relevant methods and international standards.” Independent third-party experts then verify the claim or label before it is published. In summary, the companies must use clear criteria and the latest scientific evidence to back up their green claims in a manner easily understood by consumers. Anti-greenwashing laws may hold companies accountable for other sustainability objectives. Free riders are stripped of their social clout and forced to effectuate their statements before reaping the benefits of operating as a sustainable entity.

Even though the GCD is not yet adopted, preemptive compliance would be in an apparel company’s best interest. Studies show that consumers who receive inoculation messages, or statements warning that sustainability-related claims were subject to third-party verification, are more likely to purchase that product. Therefore, apparel companies should review their ESG communication and communication strategies, impose fact-checking standards, and disclose that their products’ claims would be subject to potential substantiation under this proposed law.

B. U.S. Sustainability Laws

1. Fashioning Accountability and Building Real Institutional Change Act

The Fashion Accountability and Building Real Institutional Change Act (“FABRIC Act”) is a proposed federal law that seeks to amend the Fair Labor Standards Act and invest in domestic production by improving workers’ quality of life. Specifically, it will prohibit employers in the apparel industry from paying their employees at a piece rate, or by unit of garment they complete, and requires both manufacturers and contractors in the garment industry to register with the Department of Labor.

If passed, companies must revisit their contractual relationships with their manufacturers and contractors, as they would be held jointly liable for workplace wage violations. Yet the transition to a more ethical and sustainable workforce may not be as detrimental as apparel companies may think. The FABRIC Act includes a $40 million grant program that would help U.S. manufacturers with costs associated with improving worker conditions, such as safety improvements. If the bill is passed, companies can use the fact that their products are sustainably and ethically American-made to bolster their credibility as a brand, as their production would directly benefit the American economy and ongoing social equality efforts.

2. New York Fashion Sustainability and Social Accountability Act

Introduced in the New York State Legislature in 2022, and later reintroduced in 2023, the New York Fashion Sustainability Accountability Act is a state law that mandates certain environmental disclosures for apparel companies conducting business in New York that have an annual global revenue of $100 million.

The law would require companies to improve their self-imposed due diligence procedures, which would include “the implementation of public global supply chain maps, the integration of science-based greenhouse gas emissions reduction targets and published details on the management of chemical usage.” Therefore, any apparel, footwear, or handbag brands that fail to comply and ameliorate their procedures relating to both environmental and human rights issues would suffer a penalty of up to two percent of the company’s annual revenues generated in the state of New York. New York would then use the funds to benefit environmental or human rights programs, such as worker protection or recycling.

3. California SB 253

Starting January 2026, California will require businesses to disclose their carbon emissions and climate-related financial risks. Senate Bill 253, also known as the Climate Corporate Data Accountability Act, mandates publicly traded and private U.S. companies operating in California who meet specific thresholds of annual revenue to report emissions.

If a company doing business in California generates revenues greater than one billion USD it must provide comprehensive reports of scope 1, 2, and 3 emissions and get third-party assurance of those reports. This not only covers emissions firms themselves generate, but also those from up and down their value supply chains. Therefore, thousands of companies will have to reorganize their reporting policies to provide assurance-ready carbon emissions data. This law signals a shift from voluntary climate reporting to mandatory reporting. California is one of the first states to raise the bar for corporate climate action and reach beyond its borders to impact companies not located or headquartered in the state.

IV. Conclusions

A. Overview

The EU has remarkably more rules regarding sustainability than the U.S. Notably, no U.S. law has been passed. This is because the EU has a more unified approach to environmental issues and widespread popular support of preventative regulation. This is due to differences in political structure and social capital. Whereas the EU has a centralized policy-making structure and social capital that prioritized the well-being of their fellow citizens, the U.S. is subject to state-level variations and political polarization, fueled by a hyper-engaged citizenry that either vehemently supports sustainability or denies climate change’s existence.

Despite many forthcoming rules, we cannot rely on the legislative processes to save the Earth. Climate change is not a long-term project, but an immediate concern; apparel companies must share the burden of de-risking and act promptly to revisit their standards to address environmental and human concerns.

B. Data and Blockchains: Proposals for Reporting

Industry actors must have the ability to provide climate data to comply with current and upcoming rules and become more sustainable. Blockchains are decentralized ledgers of information that stakeholders use to protect confidential information. When used in apparel company supply chains, they can “manually or automatically record the locations the product has passed through while protecting this information from manipulation.” In doing this, companies can minimize a lack of traceability and allow outsiders to “reliably view the product throughout its life.” Blockchains inhibit companies from publishing dishonest information and also demonstrate areas where they can improve.

Accountability on sustainability compliance is paramount, and companies must use the tools at their disposal to reflect on their unsustainable practices, build trust with their investors and consumers, and comply with the rules their governments impose upon them. Blockchain technology makes required disclosures easier, enables companies to demonstrate their positive practices, and holds stakeholders to complete transparency—encouraging all those within the fashion sector to build a stylishly sustainable future.