Fashion is not ready for regulation

For the past two years, LVMH has been preparing to provide consumers with an unprecedented level of information about where and how its clothes and shoes are made.

Across its brands, from Louis Vuitton and Dior to Celine and Loewe, the French luxury titan is struggling to unravel complex supply chains, trace the origins of its products and determine the detailed data needed to meet the coming wave of regulation aimed at tackling fashion’s challenges. intervention in the environment. It’s a huge undertaking to track information across homes and products, and it’s still a work in progress.

“We have a gap in every house,” said LVMH’s deputy director for the environment, Alexandre Capelli.

The company is trying to comply with the new laws; On January 1, France quietly made it mandatory for the biggest fashion companies to provide shoppers with detailed information on environmental characteristics, such as the proportion of recycled material in a product, as well as where the clothes are sewn and the materials woven.

The law is the first salvo in a broad regulatory push building in Europe and the US to end years of lax scrutiny of the fashion industry’s environmental footprint and links to worker abuse.

Compliance is complicated and will require companies to control their supply chains much better than most currently do. And while some of the proposed new rules will likely take years to pass through the legislative process (and even longer to take effect), others — like France’s new law — will require companies to act now.

Fashion is not ready.

Test case

France’s new requirements fall under the country’s Anti-Waste for a Circular Economy, or AGEC, law, which aims to push companies towards more circular production and shoppers towards more responsible consumption habits. It requires brands to provide much more transparency to consumers 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 state the proportion that is recycled. If more than 50 percent of the garment is made of synthetic fibers, it must carry a warning that it sheds microfibers when washed. There are strict rules governing whether a company can claim an item is recyclable, and brands are required to disclose the country where the product is made, as well as where the base material it contains is processed and manufactured.

“This is the first time a regulation has required so much information across the industry,” said Baptiste Carriere-Pradal, co-founder and director of public affairs consultancy 2B Policy. He is also chairman of the Policy Hub, an EU interest group that represents the interests of fashion business groups. “The industry is not ready at all.”

Although the introduction of the law has been delayed to give smaller brands more time to prepare, it went into effect for the biggest brands this month. Just finding out if a company is covered can be complicated. This year, the law applies to businesses that sell more than 25,000 items a year in France and generate more than 50 million euros ($54 million) in revenue in the country. Does not apply to leather goods.

“It’s really complicated,” said Sophie Bonnier, head of environmental excellence and circulation at French luxury conglomerate Kering. “For each brand, we need to define who it concerns, when, and then we need to find the information to be published.” In Kering’s case, the terms mean 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 as they try to gather the information needed to comply. The law was passed in 2020, but details of the new requirements were not released until April, which they say leaves little time to process the huge volumes of data needed.

A quick scan of the French websites of many of the big players shows a mixed reception so far and highlights some complexity. A pair of leggings for sale at Nike is advertised as mostly recycled, but there is no percentage breakdown of the recycled content. The black polyester ‘skort’ for sale at Zara offers details of the manufacturing sites, but lacks any information about the risk of microfibre peeling in the wash. Louis Vuitton’s synthetic jersey dress does not carry a similar warning because the garment can only be dry cleaned, LVMH said.

Another challenge for many brands is the fact that the information about what is expected is largely in French and it has not yet been defined exactly how some of the data should be calculated and presented. The rapid turnover of many styles, which is somewhat inherent in the trend-driven nature of fashion, makes things more difficult.

LVMH expands partnership with traceability and data management platform Fairly Made to collect and track compliance information. This year, the luxury giant’s priority is to establish details for products that carry over from season to season, Capelli said. Zara owner Inditex and Kering both said they were working to ensure full compliance. Nike did not respond to a request for comment.

Across the industry, meeting the terms of the Act is a large and complicated task that requires fashion brands to make long-term commitments to improve supply chain traceability, a task that ultimately requires time and money to build capabilities and processes across the industry. business.

“This requires a change in the way you work,” said Carriere-Pradal. “At the same time, it reveals that a lot of this information was not at hand.”

Regulatory crisis

For brands, catching flat feet is becoming riskier as regulation, which is likely to require major changes to business operations, moves forward globally and brings with it the threat of financial penalties and legal action.

Certainly, the penalties associated with AGEC are not large (maximum €15,000); the bigger risk is reputational and legal, with NGOs, consumer protection agencies and shoppers themselves paying close attention to what brands are saying, said Joanna Peltzmann, partner in the Paris-based environmental practice at law firm Osborne Clarke.

Around the world, several brands are already facing lawsuits over allegedly misleading environmental claims. Other laws being considered globally could bring higher fines measured as a percentage of brands’ global revenue, with the range of measures covered expected to increase significantly.

The European Union is working on a number of policies 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 the impact of goods on the climate.

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.

In the past 12 months, New York and California have approved “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 subject companies to penalties of up to 2 percent of global revenue if passed.

The best-positioned brands will make strategic investments that 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. Companies are training teams from design to sourcing on sustainability requirements while hiring subject matter experts and public affairs specialists in senior roles to help them stay on top of the changing landscape.

“Sustainability management is clearly moving from a matter of ‘good practice’ or ‘guidance’ to hard law,” said Susanne Bullock, partner at Gibson Dunn & Crutcher. “Brands are advised to monitor these developments closely.”

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