By Sustainable legislation: How to prepare?
From greenwashing guidelines to extended producer responsibility, a wave of sustainable obligations is coming to the fashion and retail sectors. This presents a significant strategic challenge, but with advanced software, you can prepare effectively. This not only ensures compliance with regulations but often leads to better business outcomes.
FashionUnited asked software partners TCOG, Delogue, and tex.tracer for an overview. What regulations are approaching? How can you prepare? And how can technology assist you in becoming compliant?
Sustainable legislation: CSDD, CSRD, Green Claims, and the Product Passport
Many European laws regarding sustainable production are still in their infancy, but when it comes to transparency, it’s all hands on deck. The CSDD (Corporate Sustainability Due Diligence) and CSRD (Corporate Sustainability Reporting Directive) will demand the attention of every fashion and retail company in the coming years. In short, the CSDD imposes mandatory due diligence measures on companies concerning human rights and the environment. The CSRD is the instrument through which they must report on that process. It provides both consumers and businesses with honest insights into the sustainable progress being made.
Companies will need to dive deep into their supply chains to collect product data and communicate transparently about it. However, for now, the obligation applies only to large companies. “There is much uncertainty about the impact on smaller businesses,” says Anja Padget, who speaks from experience. As an expert in Environmental, Social & Governance (ESG) at PLM partner Delogue, she consistently advises her clients to start preparations as soon as possible. This sentiment is echoed at the traceability platform tex.tracer. Founder Jolanda Kooi states, “Smaller companies often work with clients who already need to be compliant by 2024 or 2025, such as Zalando, de Bijenkorf, and large retailers. They will need to pressure their smaller suppliers to provide the required data. Supply chain transparency is essential to future-proof your small or medium-sized business.” Eric van der Craats from Microsoft ERP partner TCOG adds, “To govern is to foresee. Whether you are a small, medium, or large organization, this legislation is coming, and you want to avoid falling behind. Not to mention the importance of good moral entrepreneurship.”
There are also regulations in the works regarding greenwashing, aimed at preventing misleading green claims within the European Union. At tex.tracer, they are already actively addressing this in conversations with clients, Kooi explains. “Instead of communicating assumptions about your product’s footprint, you can uncover precise information so that both businesses and consumers base their choices on facts.” Reliable product data is also needed for creating “product passports,” which are being launched well ahead of the official legislation in the form of QR codes and online data about the product journey. Companies may find it daunting to be open about their actual footprint, but according to Kooi, it always pays off. “You can also share your progress. This way, you can strongly demonstrate that you are on a serious sustainable journey in line with your green claims.” Van der Craats agrees, stating, “I fully support that. By taking these steps now, you can distinguish yourself in the market. The technology to facilitate this exists; it is truly a matter of wanting to do it.”
Waiting leads to firefighting
As long as sustainable legislation is not mandatory, many companies adopt a wait-and-see attitude. This is risky, says Padget, as it creates an incredibly stressful work environment. “From my experience as a buyer, I know how it can go: suddenly all the problems hit you at once, and you have to work sixty hours a week.” Significant steps need to be taken. Many companies, both large and small, are still using separate Excel sheets for different styles, but the new reporting requirements demand aggregated data to calculate, for example, the CO2 emissions of an order. “Someone on the team suddenly has to combine 1,200 sheets,” Padget points out. “Wouldn’t it be easier if you could extract impact information directly from your IT system with your product lists, integrate this with the PO ordering system, and create your reports based on that?” “Exactly this is a great example!” Van der Craats responds.
How impact data can be centrally managed is a rhetorical question that platforms like Delogue, tex.tracer, and TCOG are ambitiously addressing. Through the Delogue platform, designers, buyers, suppliers, and technicians can input the impact data needed for the new reporting methods. After PLM, the purchase orders for sampling are sent to Microsoft’s ERP (Business Central), which processes the order and manages the entire process of procurement, logistics, sales, and ultimately financial settlement. Tex.tracer can guarantee that all steps in the process are traceable and verifiable through timestamps and geolocations, allowing claims to be substantiated with facts. Since the tex.tracer platform is built on blockchain, the data is immutable. With such an ecosystem of advanced software solutions, you position your company at the forefront of the sustainable movement.
Start Today: Map, Define, Mitigate
Due diligence is not an end goal, but a process that you control, states Kooi. Developing your due diligence policy is the very first step towards a transparent supply chain and making your offerings more sustainable, ensuring immediate compliance with new legislation. It begins with mapping the supply chain to identify all negative impact categories. Then, you determine the hotspots: which footprint needs to shrink the most. You set goals and plan targeted actions aligned with those goals. Finally, the progressive collection and verification of data begins, and the process repeats.
In recent years, cases of greenwashing against major retailers like Primark and H&M Group have shown that it can end badly if green claims are not substantiated with verified data. With the right tech stack, that risk is eliminated. Padget states, “Let’s stop asking, ‘Do we have to comply with this?’ and start thinking about the future we want to see. What tools can we provide to help companies create an even stronger fashion ecosystem?” Van der Craats adds, “Integrate sustainability—and thus data—into the core of business processes. As an ERP provider, we play a crucial role in this. Not only to improve operational efficiency but also to provide the foundation for the journey towards a transparent and green future.”