Fashion is not ready for the regulation that is coming for it

For the past two years, LVMH has been gearing up to provide consumers with unprecedented levels of information about where and how its clothing and footwear are made.

Across its brands, from Louis Vuitton and Dior to Celine and Loewe, the French luxury titan seeks to unravel complex supply chains, trace the origins of its products and establish the detailed data needed to comply with the coming wave of regulation aimed at addressing fashion’s environmental impact. It’s a huge undertaking to track information across houses and products, and it’s still a work in progress.

“We have a void in every house,” said LVMH’s deputy environmental director, Alexandre Capelli.

The company is in a hurry to comply with the new laws; On January 1, France quietly introduced an obligation for major fashion companies to provide customers with detailed information on environmental characteristics such as the proportion of recycled material in a product, as well as where garments are sewn and materials woven.

The law is the first salvo in a broad regulatory movement taking shape across Europe and the US, which should end years of lax oversight of the fashion industry’s environmental impact and links to workplace abuse.

Compliance is complicated and will require companies to have much more control over their supply chains than most currently have. And while some of the proposed new rules will likely take years to go through the legislative process (and even longer to take effect), others – like the new French law – will require companies to act immediately.

Fashion is not ready.

A test case

France’s new requirements fall under the country’s anti-waste law for a circular economy, or AGEC, which aims to encourage companies to produce more circularly and customers to adopt more responsible consumption habits. It requires brands to provide consumers with much more transparency about the countries they come from and the environmental impact of the materials used.

For example, if a brand says a t-shirt is made from recycled material, it will have to disclose the proportion that is recycled. If more than 50 percent of the garment is made of synthetic fibers, it must contain a warning that it will leave microfibers when washed. There are strict guidelines governing whether a company can claim that an item is recyclable, and brands must disclose the country in which the product was made, as well as where the base material it contains is processed and produced.

“This is the first time a regulation requires so much disclosure across the industry,” said Baptiste Carriere-Pradal, speaking in his capacity as co-founder and director of public affairs consultancy 2B Policy. He also chairs Policy Hub, an EU advocacy group representing the interests of fashion trade groups. “The industry is not ready at all.”

Although the legislation is being phased in to give smaller brands more time to prepare, it came into force this month for the biggest brands. Just determining if a business is covered can be complicated. This year, the law applies to companies that sell more than 25,000 items a year in France and generate revenue of more than 50 million euros ($54 million) in the country. Does not cover leather goods.

“It’s really complicated,” said Sophie Bonnier, head of environmental excellence and circularity at French luxury conglomerate Kering. “We have to define for each brand who it is, when, and then we have to find the information to release.” In the case of Kering, the terms mean that Gucci and Balenciaga are covered this year, but other big labels, such as Bottega Veneta and Saint Laurent, are not.

Brands expect a grace period while they try to gather the information needed to comply. The law was passed in 2020, but details of the new requirements were only released in April, giving little time to process the huge amounts of data required, they say.

A quick scan of the French websites of many of the big players shows mixed reception so far and highlights some of the complexities involved. A pair of leggings for sale at Nike is advertised as mostly recycled, but there is no percentage analysis of the recycled content. The black polyester “socket” for sale at Zara offers details of production locations, but lacks any information about the risk of microfibres disintegrating during washing. Louis Vuitton’s synthetic jersey dress does not carry a similar warning because the garment is dry-clean only, LVMH said.

Adding to the challenge for many brands, the information on what to expect is mostly in French, and it has not yet been defined exactly how some of the data should be calculated and presented. The rapid changing of many styles, somewhat inherent in the trend-driven nature of fashion, also complicates matters.

LVMH is expanding its partnership with traceability and data management platform Fairly Made to collect and track the information it needs for compliance. This year, the luxury giant’s priority is to nail down details for products that carry over from season to season, Capelli said. Inditex and Kering, the owner of Zara, said they were working to fully comply with the requirements. Nike did not respond to a request for comment.

Across the industry, meeting the requirements of the law is a large and complicated task that requires fashion brands to meet multi-year commitments to improve supply chain traceability, a task that ultimately requires time and money to build capabilities and processes across the industry. job.

“It requires a change in the way you function,” said Carriere-Pradal. “At the same time, it reveals that a lot of this information was not available.”

Regulatory crisis

For brands, being caught flat-footed is becoming riskier as regulations that are likely to require major changes to business operations move forward globally, bringing with them the threat of financial penalties and legal action.

To be sure, the fines associated with AGEC are not high (€15,000 at most); there is greater reputational and legal risk, with NGOs, consumer protection agencies and consumers themselves very focused on what brands are saying, said Joanna Peltzmann, partner who leads the environmental practice in Paris at law firm Osborne Clarke.

Around the world, several brands are already facing lawsuits over alleged misleading environmental claims. Other laws being considered globally could bring higher fines measured as a percentage of brands’ global revenue, with the scope of what is covered increasing significantly.

The European Union is working on a package of policies intended to reshape the way fashion works by the end of the decade. The planned regulations include new design requirements to make products more durable and reduce their environmental impact, and to provide consumers with greater transparency about products’ climate impact.

Countries including France and Germany have already tightened due diligence requirements, making brands more accountable for bad behavior in their supply chains; regulation that is also being considered by the European Union.

Over the past 12 months, New York and California have enacted “forever” bans on toxic chemicals commonly used in waterproof outerwear. New York’s proposed Fashion Law, which combines strict due diligence and transparency requirements, could expose companies to fines worth up to 2 percent of global revenue if passed.

The best-positioned brands will make strategic investments that will position them to comply with the likely new rules now. Many large companies have already increased spending on traceability tools in anticipation of demands for more data and disclosure, similar to LVMH’s efforts with Fairly Made. And companies are putting teams from design to procurement through training on sustainability requirements, while also hiring subject matter experts and senior public relations specialists to stay abreast of the changing landscape.

“Governing sustainability issues is clearly moving from a matter of ‘good practice’ or ‘guidelines’ to strict law,” said Susanne Bullock, partner at law firm Gibson Dunn & Crutcher. “Brands are advised to monitor these developments closely.”

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