CSRD and the fashion industry: compliance exercise or business opportunity?

What is the current picture of sustainability in the fashion industry, and in what direction do you see the industry moving? (E.g., the EU CSRD regulations are soon becoming an integrated part of the fashion industry for all company sizes)

I see the fashion industry today as being in a very mixed state.

On the one hand, the global growth of the industry is amazing. Fashion consumption has nearly doubled over the past 15 years, driven mainly by growing demand in emerging markets. The winners in the industry capture unprecedented profits.

On the other hand, a significant part of the market is either losing money or undergoing financial transformations.

So, a big part of the industry is under pressure, and an increasing number of companies are filing for Chapter 11 (going bankrupt).

We just convened 1,000 people in Copenhagen for the Global Fashion Summit, the most prominent conference for sustainability in fashion globally. The sentiment of sustainability in fashion was clear:

The industry is not on track to meet the global sustainability goals. Progress is too slow, both collectively and by the company.

Regulations, especially in Europe, will put a lot of pressure on the industry to make changes. We need strong, globally aligned regulations to ensure a level playing field for all companies, whether from Europe, the US or Asia.

But this is not enough! Accelerating individual and collective action is also needed to get on a path to net zero.

How can fashion companies prepare for a greener future? What initiatives can they implement to accommodate the CSRD?

Frankly, it will be challenging for most companies to report according to the CSRD regulations, especially detailed reporting on impact in their value chain, biodiversity matters, and scope 3 emissions based on primary data. The fashion industry is special, because almost all sustainability matters are material in fashion.

Are there any low-hanging fruits?

I really like the double materiality assessment as a great first step in creating awareness and defining priorities. But in my opinion, there are low-hanging fruits – easy achievable benefits - in all CSRD reporting areas:

1. On environmental matters: take stock of and understand the CO2 footprint across all three scopes.

2. On resource use and circular economy: for design teams to start consequently designing products according to circularity principles.

3. On own employee-related matters: low hanging fruits include assessing diversity and equality in one’s own operations.

4. On management of sustainability matters: establishing a sustainability committee within the board and a sustainability taskforce across functions is another quick win.

What are the most challenging aspects?

It is challenging to work on your Scope 3 CO2 footprint by yourself or with your suppliers and to establish recycling concepts that are more sustainable than your current virgin material sources.

A great example is the use of recycled polyester.

Many fashion companies pride themselves on using recycled rPET from post-consumer plastic bottles. Frankly, this is a joke! These bottles are in a closed loop in the consumer goods industry and in high demand. Fashion “steals” them away to produce a new one-way product because we cannot recycle them indefinitely.

Depending on the energy source and production set-up, the CO2 footprint is not necessarily better than that of virgin polyester.

A hairy topic on social matters is the minimum wage in production. Defining a fair living wage and implementing it successfully when you do not own your supply chain is not easy.

In terms of investments, what can fashion companies do to meet sustainability regulations and expectations?

At the Global Fashion Summit in May, collective investments were one of our most significant topics. The biggest need to invest is in the supply chain.

No brands have full ownership of their supply chain, and manufacturers at all levels are challenged to invest the amount of money needed. Take the issue of renewable energy: most production (fibres, material, garments) is still done with fossil-based energy.

Entire countries need to decarbonise their energy sector. Otherwise, fashion will never become net zero. This is an opportunity for fashion companies to get together and start the decarbonisation process.

Our team at Global Fashion Agenda has worked with Copenhagen Infrastructure Partners (CIP), Bestseller, and H&M to develop an offshore wind farm project in Bangladesh as a collective investment. CIP will deploy € 1.5bn into a 500-megawatt project, with € 100m coming from fashion brands so far.

Now that we have reached political intervention on the green transition, how can we make sure that the sustainable movement flows through both companies and consumers? And who is responsible for this?

Clearly, the sustainability flow in companies is management’s responsibility.

I have now been involved in fashion sustainability for more than ten years. I can reassure you that the topic has become increasingly relevant in the boardroom.

It is, however, a very different story for the consumer.

There is so much lip service from consumers to how relevant it is to buy sustainably. However, by and large, price and fashionability generally are the key buying factors.

Please keep in mind that most of the market research we debate is from developed countries. The volume growth comes from developing market consumers, where sustainability is pretty irrelevant so far.

Reports and numbers from the fashion industry reveal that consumers still value price over sustainability (i.e., fast fashion retailers such as Shein and Teemu are gaining prominence). What is your view on this?

I admire Shein’s and Teemu’s innovative use of AI and technology to identify consumer needs earlier and deliver against them. However, this type of business model is far away from the sustainability direction we are taking in Europe.

Therefore, I am really irritated that we do not have a level playing field for all fashion players in Europe. The pressure on European companies to play sustainably is significantly higher.

It really disturbs me that the very high product standards we have, especially regarding chemical usage, are not being consistently enforced with these major Chinese players.

Many fashion companies might view the CSRD regulations as a compliance exercise, e.g., ‘something they must do’ rather than a business or growth opportunity. How do you perceive this?

I agree; many companies still see it as a compliance exercise.

Do you think transition requires a mental shift as well? Do we have to adjust our way of thinking to the new future?

This is an opportunity for a mental shift. However, it does not come automatically and definitely not for free. The more a company embraces the opportunity to rethink the value chain end-to-end to become more sustainable, the bigger the improvement will be.

As always, it starts from the top. Top management needs to fully embrace the opportunity to use the sustainability angle as a way to redefine their business and capture new growth opportunities.


Are you optimistic about our progress so far and about the road ahead for the fashion industry?

I would call myself a realist rather than an optimist.

I see more and more fashion leaders realising the size of the problem the fashion industry is facing and engaging in ways to resolve it.

However, I also know how complex fashion is and how many stakeholders need to align for any developments to take place. This realism tells me that change will be significantly slower than we all hope or expect.


In your view, what would truly get sustainability moving in the fashion industry? What does it take?

Today, all solutions to making fashion sustainable are available. However, it requires money and regulation to make it work.

Money to invest in technologies that make fashion more sustainable and regulations to make these investments more attractive to investors. Let me give you two examples:

1. Today, not enough investments go into renewable energy to power the supply chain. If regulators put a higher price on emissions from fossil-based energy, investing in renewables would become really attractive.

2. The same applies to recycling capacities. As long as there is no price for overproduction or end-of-life consumer waste, we will not find enough money to scale up recycling concepts.