New European Rules for a More Ethical and Responsible Fashion Industry

On June 1, 2023, the European Parliament voted in favor of the Corporate Sustainability Due Diligence Directive (CSDDD), which establishes rules regarding the sustainability of businesses along the supply chain.

This directive, with 600 votes in favor, 17 against, and 16 abstentions, introduces the concept of corporate responsibility in respecting human, social, and labor rights, the environment, and animal welfare throughout the supply chain.

The majority of the Members of Parliament voted in favor of these regulations that hold companies accountable in the fight against child labor, exploitation, and environmental pollution along their global supply chains.

This vote demonstrates the commitment of the European Parliament to put an end to the so-called “fast fashion” and enable consumers to make more environmentally-friendly and ethically sound choices when purchasing textile products.

The directive’s text stipulates that textile products sold in the EU should be more durable and easier to reuse, repair, and recycle.

Which companies are affected by these new rules?

The legislation applies to companies based in the EU with over 250 employees and an annual turnover exceeding 40 million euros worldwide.

Companies based outside the EU will also have to comply with these new regulations if their turnover exceeds 150 million euros or 40 million euros within the EU.

The new directive also imposes legal responsibility on corporate executives.

Member States will be required to establish a supervisory authority responsible for monitoring compliance with the regulations and imposing sanctions in case of violations.

Fines can amount to up to 5% of the non-global net turnover of the non-compliant company, the names of offenders will be made public, company products can be withdrawn from the market, and companies can be excluded from EU public contracts.

What are the key points of CSDDD?

• The directive covers all activities related to the supply chain, including sales, distribution, transportation, storage, and waste management of company products.
• Companies are required to address the negative impacts on human rights and the environment, including those related to climate and corruption. 
• The text introduces the concept of a risk-based approach. 
• It also calls for the establishment of a complaint mechanism and continuous monitoring of the effectiveness of the due diligence policy.

Next Steps

In the coming months, discussions will be held with Member States to reach an agreement on the final text before the next elections on June 6, 2024. Once an agreement is reached, each Member State will incorporate the new regulations into their national laws.