Regulation Navigation
The pressures of climate change and modern slavery have never been more prevalent as they are today. 2023 has seen the hottest Northern hemisphere summer on record, and scientists predict this will be the hottest year in 100,000 years. The 1.5 degree temperature threshold that the Paris Accord is built around is likely to be reached as early as next year. Nearly all indicators show data points heading in the wrong direction even as we experience the early impacts of climate change.
Modern slavery statistics are similarly dire, with the ILO estimating 10 million more people were in modern slavery in 2021 compared to the 2016 estimates. The COVID-19 pandemic exacerbated the conditions for slavery, and it remains a largely hidden problem.
The unfortunate truth is that the actions taken so far by businesses, organisations and individuals have not been enough to turn the tide on these (and other planetary and societal) issues. The radical, systemic changes that are required to help us change course will require all the tools in our proverbial toolbox, including governmental regulation.
In Australia we’ve heard a proclamation by Minister for the Environment and Water, Tanya Plibersek at the launch of Seamless (Australia’s Clothing Product Stewardship Scheme), that the industry has one year to self-regulate the program otherwise she will step in and mandate. So far seven foundation members have signed up to the transition phase while Seamless is established, with the goal to have 60% of industry sign up to divert 120,000 tonnes of clothing from landfill by 2027.
In Australia, the Modern Slavery Act has been in effect since 2018. The Act currently requires businesses earning over $100 million annual revenue in Australia must report the risks of modern slavery within their operations and supply chains, and the policies and processes to address modern slavery, in a Modern Slavery Statement. The statements are publicly available, and at this time there are no penalties for non-compliance. The Act gets reviewed every three years, and the latest review highlighted that businesses are not taking modern slavery seriously enough. Thirty recommendations have been made to strengthen the Act, including lowering the revenue threshold to $50 million, introducing penalties for non-compliance, and requiring reporting businesses to have a due diligence system in place. It is likely reforms will be put forward in the near future, and the 2023-2024 federal budget included funding for the establishment of an independent anti-slavery commissioner.
While the Modern Slavery Act impacts large businesses only, some international laws impact any size business.
Take for example the Uyghur Forced Labor Prevention Act (UFLPA) in the United States. This Act prevents the importation of goods into the US that use materials or labour from the Chinese region of Xinjiang, where there are serious reports of human rights abuses including forced labour occurring on Uyghur Muslims and other ethnic minorities. Cotton is a high-priority sector for the Act, meaning fashion and textiles are closely monitored. According to a Business of Fashion update, $30 million worth of fashion imports have been stopped at the border. There does seem to be an exception/loophole for businesses sending direct-to-consumer due to the de minimis exception, which allows for shipments of $800 of less that are shipped direct to individual consumers are not subject to US tariffs, meaning little information comes with the package making it hard to enforce UFLPA. Due to the prevalence of these shipments, particularly in the fast fashion realm (think Shein and Temu), the US is now considering proposals to remove the de minimis exception – read more about it here.
In the EU, there is a lot of activity, primarily connected with the EU Strategy for Sustainable and Circular Textiles. The much-discussed Digital Product Passport was further defined in the Ecodesign for Sustainable Products Regulation (ESPR), which builds upon the existing Ecodesign Directive, which was initially used for energy-related products only. The ESPR sets a wide range of requirements including: product durability, reusability, upgradability and reparability; substances that enable circularity; energy and resource efficiency; recycled content; remanufacturing and recycling; carbon and environmental footprints; and information requirements including a Digital Product Passport. This will be a tool, like a barcode or QR code, which communicates information about a product, and is essentially a digital record of all environmental and circular data from design to end-of-life. It will help consumers make informed choices when purchasing based on raw materials, suppliers, environment footprint data, as well as information on repairs, recycling and transparency throughout the life of the product. The rules will apply to all products placed on the EU market, whether or not produced there. There is not yet a clear date when this will come into effect, but more reports suggest the regulation will start to come into effect in 2026/2027, with most product categories to be covered by 2030. Also in the EU, lawmakers have reached a provisional agreement on new rules to ban greenwashing – no generic environmental claims will be allowed without proof of a recognised excellent environmental performance relevant to that claim being made available.
In addition to the above, a report released just last week by Textile Exchange, Boston Consulting Group and Quantis, indicates that over the next 2-4 years, there are more than 35 pieces of significant new legislation expected to go into effect around the world. Read the report, Sustainable Raw Materials Will Drive Profitability for Fashion and Apparel Brands to learn more about the impact of this legislation, including why it is so important for brands to get their raw material mix sustainable now.
Our Research Director, Timo Rissanen, has also co-authored a report for Australia’s Cotton Research and Development Corporation titled Strategies for improving labour conditions within the Australian cotton value chain. This comprehensive report (which follows an initial report that mapped labour risk in 19 textile and garment producing countries) proposes seven solution approaches to the risks. There are 22 case studies in the report that highlight, among other things, best practice and emerging regulatory trends, to offer a variety of approaches to improve labour conditions throughout the cotton value chain, which is applicable to many Australian brands.
This has probably been our longest journal post to-date, and we’ve only just scratched the surface. The key message we hope you take away is: to the best of your ability know your suppliers, understand as much information as possible about your supply chain, and work with your suppliers to ensure the highest sustainability standards are put into practice. No one business can shift this system on its own, it will take consistent, sustained effort from all of us, and there is no time to delay.