Ask Marissa Brock, who ponders supply chains for a living, whether the fashion industry has girded its loins sufficiently for the deluge of transparency and traceability legislation coming down the pike from Europe, and her answer would be a resounding “not at all.”
While most apparel brands have by now come to grips with the provenance of their most commonly used raw materials—think cotton, polyester, wool, silk and cashmere—this is only the starting point, said Brock, senior director of policy and government affairs at New York-headquartered Sourcemap, which develops enterprise software for end-to-end supply chain visibility.
The “real risks,” she noted, lurk deeper in the supply chain with component makers, finished-goods manufacturers and brand licensees, whose diffuse and complex global networks make tracking metals, plastics and trims a heavier lift.
As sweeping EU sustainability mandates like the Corporate Sustainability Due Diligence Directive, the Forced Labour Regulation, the Ecodesign for Sustainable Products Regulation and the Packaging and Packaging Waste Regulation transition from policy ambitions to compliance non-negotiables, that readiness gap can easily escalate into a material business threat.
“What is evident is the cumulative effect for the industry: a system-wide change across every stage of the value chain, with multiple pieces of legislation landing at once,” said María Luisa Martínez Díez, vice president of public affairs at Global Fashion Agenda, the sustainability think tank that convenes the Global Fashion Summit in Copenhagen every June.
It’s a reality check that brands may not be ready to confront, particularly when the more distant 2028 and 2029 deadlines for headline-grabbing directives like the CSDDD and Digital Product Passports can whip up a false sense of security.
More easily overlooked, then, is the cluster of near-term regulations that Martínez Díez said will demand immediate supply chain data and proof of compliance far sooner: the Packaging and Packaging Waste Regulation, which began applying in August; the Empowering Consumers for the Green Transition Directive, which enters into full enforcement in September; and the Deforestation Regulation, which will mandate full, farm-level traceability by the end of next year.
That’s not to say that some of the industry’s wait-and-see approach isn’t justified. Plenty of key implementation guidance is still missing, she said.
“We see real progress from leading players in specific areas such as traceability and supplier mapping, alongside ongoing development in others, such as work on the interoperability of the data at the manufacturer level,” Martínez Díez said. “For some requirements such as ecodesign performance requirements under the ESPR, the industry may be holding off until there’s more legal certainty before committing to build new systems or integrate existing ones.”
But of all the measures arriving in rapid-fire succession, it’s “hands down” the EUFLR that poses the greatest and most immediate risk to fashion, Brock said. Unlike reporting-focused frameworks that simply ask brands to publish annual statements, the legislation gives regulators the power to investigate forced labor allegations at any point in the supply chain and, once substantiated, publicly name the companies involved.
“The EU has already indicated that it will target large brands and retailers for forced labor enforcement,” she said. “Products that don’t comply with the EUFLR will have to be taken off the market by the brands or retailers.”
And therein lies the crux of the regulation: supply chain ignorance will no longer be a credible defense.
Still, there’s a thin silver lining for those who go looking for it. The “good news,” Brock said, is that the EUFLR will likely reward many of the same strategies companies have developed in response to U.S. forced-labor bans, including supply chain mapping down to raw materials and order-level traceability.
But while rooting out forced labor relies on backward-looking supply chain audits, turning that visibility into usable, product-level information is an entirely different beast, said Iris Skrami, CEO of Renoon, an Amsterdam-based sustainability-data management company that works with retailers such as Tod’s and Mugler. That challenge is further amplified by the fact that the EU’s DPP provision, which falls under the ESPR, applies to any product placed on the single market, regardless of where it’s made.
“What a DPP does is that it adds a requirement where the product comes first, so it’s not a reporting that you do once a year, but it’s a living infrastructure that needs to stay on the product,” she said.
It’s a distinction that Skrami said highlights a major misconception circulating among brand executives: that DPP compliance requires complete supply chain mapping from the get-go, rather than direct supplier data and standardized product disclosures.
“A lot of the companies that come to us fear that data is going to be their biggest hurdle, when in fact it’s actually governance and non-siloed collaboration that are crucial,” she said, adding that a DPP spans functions from material sourcing and legal compliance to digital infrastructure and consumer-facing marketing. “Some companies can respond faster because they’re leaner and used to cross-department collaboration. But those with very little or no cross-departmental collaboration are the ones having a much harder time.”
Another disconnect concerns who actually bears the regulatory workload. Brands may shoulder the legal compliance obligation under EU law, Martínez Díez said, but it’s the suppliers who are saddled with the operational and financial burden of producing the underlying data their buyers need.
“This does not absolve brands of certain responsibilities but demands close collaboration between brands and suppliers,” she said.
The ability to adapt to these pressures will play out differently across fashion’s market segments, Skrami said.
Though fast-fashion purveyors are often pilloried for their social and environmental impact, their agile, highly digitized supply chains will give them an edge in integrating DPP systems. Ultra-fast-fashion models, however, will be more vulnerable because their speed-to-market hinges on low-cost manufacturing and quick product turnarounds that leave little room for the product-safety checks, chemical-compliance reviews and material-composition audits that DPPs will require.
A recent European Commission-backed testing campaign found, for instance, that 37 percent of clothing labels did not accurately reflect the garment’s material composition. EU authorities, Skrami said, are likely to intensify their scrutiny of such discrepancies.
But luxury companies may also struggle with DPP compliance because few rarefied supply chains have transparency beyond Tier 1, Brock said. Not to mention that their vendors may face greater difficulty adopting newer sustainability technologies.
Recent labor-exploitation investigations in Italy have also exposed shortcomings in the oversight of outsourced production by boldface names such as Armani, Dior, Valentino and Loro Piana, whose Italian operating units or subsidiaries were placed under judicial administration by Milan courts.
“Every industry has a subcontractor problem,” she said. “Supply chain mapping and traceability are a process that our customers use to root out unauthorized subcontracting, and they work by making sure that every product that comes out of a factory can be traced to a raw material that went in, and that there is capacity at every tier for the volumes produced.”
At the same time, luxury stands to gain the most from digital product infrastructure if it’s implemented strategically, Skrami said. Instead of viewing a QR code as a compliance burden, high-end brands can leverage the technology to verify authenticity, support post-sale repair services and power resale channels, each of which can deepen customer engagement.
“The question is, how will luxury brands want to use it?” she said.
Martínez Díez is certain that the cost of inaction is steep regardless of a brand’s price point. For her, the real inflection point comes when DPPs are combined with wider EU measures, including extended producer-responsibility obligations, ecodesign criteria and the recently enacted ban on destroying unsold goods. To avoid being inundated by this regulatory tsunami, she advises brands to focus on the operational basics within their control today.
“What is undeniable is that the EU has taken strong steps towards creating a more accountable fashion system,” she said. “The practical starting point that doesn’t depend on final rules is to begin mapping suppliers and organizing existing product data now, so it’s ready to plug into whichever systems the European Commission ultimately requires.”
This article was published in Sourcing Journal’s Fall Summit report. Click here to download.