The European legislature has addressed issues related to overproduction and product waste in the fashion and textile industries by passing EU Regulation 2024/1781 on the ecodesign of products (the "Regulation"). The Regulation, which came into force on July 18, 2024, provides new obligations for companies to curb the damage caused by overproduction of textiles. With this Client Alert, Curtis analyzes the key points of the Regulation, indicating its objectives and future steps. Given the international context of the textile lifecycle, it is also necessary to know and take into account the Chinese and U.S. legislative frameworks, two of the largest players within the global textile industry.
Objectives of the Regulation
The main objective of the Regulation is to promote sustainable production and consumption patterns in the fashion and textile industry. In particular, the EU tends toward environmentally sustainable design that aims to reduce environmental impact throughout the entire product value chain, from the design and production phase until the end of the product's lifetime. Help can come through the promotion and use of sustainable materials such as organic cotton, linen, hemp, tencel, and recycled polyester.
The Regulation also aims to facilitate the recycling of materials, fostering a circular economy in the sector, while also promoting trade in durable, high-quality products to reduce the need for frequent purchases. To this end, to enable consumers to make informed and responsible choices, it is essential to provide transparency and comprehensive information on the sustainability of textile products, which includes details on materials used, production processes, and company policies.
Another crucial objective of the Regulation is to counter the destruction of unsold materials. Thus, the Regulation introduces specific provisions regarding the management of unsold consumer products, starting with the imperative principle that economic operators must implement all necessary measures to prevent the overproduction and subsequent destruction of such goods.
Scope of the Regulation
The Regulation applies to any new physical asset placed on the market1 or put into service.2 In particular, it extends to all operators acting in the EU market, without distinction between those incorporated in Member States and those incorporated in nonMember States. The aim is to avoid discrimination between economic operators from Member countries and those from non-EU countries by applying the Regulation indiscriminately and equally to both categories resulting in uniformity of application of sanctions as well.
On the other hand, with regard to released but unsold products, the Regulation establishes a general ban on destruction as of July 19, 2026 for consumer products listed in the annexes, which include footwear, clothing, and accessories. However, this general rule is subject to important exceptions. The ban does not apply to micro3 and small enterprises.4 On the other hand, for medium-sized enterprises,5 the application is deferred until July 19, 2030.
Obligations introduced by the Regulation
Before examining the newly introduced obligations, it should be noted that the Regulation does not merely establish new burdens, but also provides protection against operators who diligently comply with its provisions. In other words, Member States cannot impose bans, restrictions or barriers to the introduction of products into the market that comply with the requirements of the Regulation and related information obligations.
- Sustainability from design to disposal
The Regulation states that only products that comply with ecodesign requirements may be placed on the market. While the Regulation does not define specific requirements, it provides guidance on aspects to be improved including, inter alia, durability, reusability, and reparability. This approach gives the Regulation significant regulatory flexibility by empowering the Commission to introduce product-specific requirements and information obligations through delegated acts. To protect economic operators,6 Article 4(4) of the Regulation requires the Commission to allow a "sufficient period of time" for adaptation. However, it remains to be clarified what is meant by a "sufficient period of time."
The legislature clearly manifests its intention to maintain this regulatory flexibility in order to stay in line with technological developments and constantly increasing environmental protections, but the economic burden involved cannot be overlooked, given the corresponding need to redefine business strategy and economic planning each time. Obligations arising from the Regulation or delegated acts involve the intervention of economic operators throughout the production chain, and this causes a significant impact on their financial situations. Consideration should also be given to the absence of a minimum deadline between the issuance of one delegated act and another and the resulting risk of constantly having to implement changes in the production chain, which translates into a constant expense for fashion and textile industry operators, who are obliged to comply with new directions in order to avoid the application of penalties.
Finally, it is necessary to identify who will actually have to bear the increased costs for all these added charges. An empirical assessment suggests that economic operators tend to pass on this increased expense to end customers. As a result, the green transition turns out, in practice, to burden the consumers themselves.
- Digital passport
In addition to the obligation to comply with certain design features of products to be introduced to the market, among the requirements for economic operators in the fashion industry is the requirement to prepare a digital passport.
The digital passport should contain the information specified by the Commission through the delegated acts. Based on the provisions already provided by the Regulation, the digital passport shall have the following characteristics:
- interoperability with other digital passports, so as to make easier data transfer and communication;
- free and easy access for consumers, producers, distributors, retailers and competent authorities;
- maintaining access to data throughout the life of the product, even if the operator has financial problems or ceases operations in the Union; and
- protection and security of personal data, with restrictions on unauthorized use.
The information requirements, in order to make consumers more aware, include at least the obligation to submit the above requirements for the product's digital passport and the obligation to lend information concerning substances of concern as defined by the Regulation itself.7 In addition, detailed information regarding product characteristics, performance, installation, use, maintenance and treatment shall be provided.8 Examples include detailed instructions on how to wash and store garments to maximize their durability or information on the proper disposal or recycling of footwear or clothing accessories. Information should be clear, understandable, and tailored to the specific recipients and products. Again, ample room is left for the Commission to define the information requirements through delegated acts.
Finally, in order to achieve a broad scope of the obligations provided, the Regulation specifies the different obligations on the various operators involved in the supply chain of products placed on the market: (i) manufacturers,9 on whom the greatest number of burdens are placed, including, inter alia, the obligation to comply with ecodesign requirements, information obligations, and digital passport preparation requirements; (ii) importers,10 although having less heavy burdens, are required to check that the manufacturer of imported products has acted in accordance with its obligations; (iii) distributors,11 who are required to check that the obligations on upstream actors in the supply chain have been fulfilled and all the required information elements are in place; and finally (iv) retailers,12 who are required to ensure that their potential customers have access to all the information that shall come along with the products and that the respective digital passport is easily accessible.
The next steps
The Regulation does not provide for penalties to be imposed in case of non-compliance with its provisions, and places the onus on Member States to implement domestic legislation aimed at sanctioning violations of the Regulation. In implementing this activity, Member States will have to comply with the minimum requirements of the Regulation. Specifically, sanctions are required to be effective, proportionate and deterrent, including at least fines and temporary exclusion from public procurement.
But what happens elsewhere?
- Circular economy in China
The government of the People's Republic of China is enacting measures to combat waste and pollution at home and to encourage sustainable business practices. This move toward greater sustainability in the various sectors including, inter alia, fashion and apparel portend that, in the future, sustainability governing provisions will become the norm and no longer merely exceptions.
The Chinese legal system in recent years has seen the enactment of a variety of laws that focus on the protection of the environment and natural resources. Among these – which particularly affect the textile industry – are the Environmental Protection Law of 1789, as most recently amended and in force since January 2015, and the law in the area of emission taxation, in force since January 2018.
The Environmental Protection Law has become a pillar in Chinese law, giving environmental protection priority status by establishing an obligation to coordinate with economic development. The law establishes the principles behind environmental protection, and specifically, as far as the textile industry is concerned, the government promotes, inter alia, resource recycling and the use of purification and filtration systems (by way of example, think of the reuse of unsold or returned products and the purification of water used in textile production, respectively).
On the other hand, with regard to the law in the area of emission taxation, environmental protection is implemented by taxing those identified by the law according to the volume of pollutants released into the environment on Chinese territory.
In addition, in March 2021, the Chinese government issued the 14th Five-Year Plan, which presents as one of the main pillars that of the green transition, indicated as indispensable for building an ecological civilization.
In light of this plan, the China National Textile and Apparel Council ("CNTAC") has introduced guidelines and policies that aim to elevate the People's Republic of China to the position of a global leader in apparel technology and a pioneer of sustainable development in the industry by 2035.
A concrete example of the implementation of the above sustainable orientation within the textile industry is "30:60 Carbon Neutrality Acceleration Plan": a project launched by CNTAC in June 2021 with the aim of supporting 30 brands and 60 key manufacturers in carrying out activities that are carbon-neutral and offer an example to their competitors. As of September 2023, 21 brands, 42 manufacturers and three textile hubs have joined the plan and are actively supporting low-carbon products and technologies.
- Circular economy in the U.S.
Despite the enactment of some state laws to regulate the fashion industry – such as, for example, the Massachusetts Textile Waste Ban and the California Garment Worker Protection Act – federal legislation has not enacted the necessary legislation to impose a sustainable direction in accordance with the evolution of the textile industry.
In order to adopt a more sustainable approach, textile industry players must self-regulate by introducing their own sustainable development solutions. These decisions are mainly based on "Higg Index," a self-assessment standard of the apparel and footwear industry created by the Sustainable Apparel Coalition – a non-governmental organization, in order to assess environmental and social sustainability throughout the supply chain. The absence of a clear legal framework results in clothing business operators reluctant to put in place changes in the area of Corporate Social Responsibility (CSR).13
However, some laws and projects supporting sustainable fashion and the circular economy can be found in the U.S. legal system. For example, according to Internal Revenue Service Publication No. 526, U.S. residents may qualify for tax relief on the value of donated used clothing.
In the United States, there is no shortage at the state level of the proliferation of legislation and various plans to facilitate the green transition in the textile industry including, inter alia, the construction of garment recycling facilities, the implementation of filters that detect microplastics in laundries, establishment of specific task forces, such as the Apparel Industry Task Force (AITF) established in New York to monitor textile industry factories.
The first proposed law that covers all three pillars of sustainability, i.e., environmental, economic and social aspects, is the New York Fashion Act, still under discussion and not officially passed. This act has many points in common with the EU Directive CS3D.14 As an example, consider that the Fashion Act, like the EU CS3D Directive, imposes on large vendors in the fashion industry that exceed specific turnover thresholds15 an obligation to map the entire production chain. These entities are also required to assess the risks of negative impacts on the environment and human rights associated with the various steps in the production chain and to prioritize action on those aspects that present a higher risk.
The proposals presented in the Fashion Act were also reintroduced at the federal level in the Fashioning Accountability and Building Real Institutional Change Act (the "FABRIC Act") in the U.S. Senate. The FABRIC Act aims to strengthen the U.S. position as a global leader in responsible apparel production by seeking to make the U.S. increasingly independent of textile material produced in China through textile reuse and bringing such processing and production back to the United States.
Comparing systems
A brief analysis of the legal systems of major international players in the textile industry, such as the European Union, the United States and China, shows that the ecological transition is a common goal today. However, the degree of implementation varies significantly among different legal systems.
Prominent among these is the European Union, which stands out for its commitment through the adoption of detailed legislation in line with the issues of textile overproduction. European legislation not only provides penalties for violators, but also extends beyond European borders, aiming for comprehensive and non-discriminatory enforcement that includes non-European economic operators.
In the United States, New York's Fashion Act reflects a similar approach to that in Europe, albeit at the state rather than federal level. On the other hand, China takes a more limited approach, applying green provisions only to textile operators deemed responsible for negative environmental impacts and within the limits of its national borders.
This analysis also shows that the Chinese system, as well as the U.S. system, still bases its approach on the adoption of generic objectives or obligations, unlike the EU, which provides concrete rules directed at economic operators in the sector.
Footnotes
1 The Regulation defines "placing on the market" as: the first making available of a product on the Union market.
2 The Regulation defines "putting into service" as: the first use in the Union of a product for its intended purpose.
3 In the SME category, a microenterprise is defined as an enterprise that employs fewer than 10 persons and has either an annual turnover or an annual balance sheet total not exceeding EUR 2 million - Commission Recommendation 2003/361/EC of May 6, 2003, concerning the definition of micro, small and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36).
4 In the SME category, a small enterprise is defined as an enterprise which employs fewer than 50 persons and has an annual turnover or an annual balance sheet total not exceeding EUR 10 million - Commission Recommendation 2003/361/EC of May 6, 2003, concerning the definition of micro, small and mediumsized enterprises (OJ L 124, 20.5.2003, p. 36).
5 The microenterprise category of small and medium-sized enterprises (SMEs) consists of enterprises which employ fewer than 250 people, have either an annual turnover not exceeding EUR 50 million or an annual balance sheet total not exceeding EUR 43 million - Commission Recommendation 2003/361/EC of May 6, 2003, concerning the definition of micro, small and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36).
6 The following qualify as economic operators: the manufacturer, agent, importer, distributor, retailer and logistics service provider.
7 For example, substances involving unacceptable levels of reproductive toxicity, carcinogenicity, and endocrine disruption to the environment.
8 That is, how products should be treated by the manufacturer to facilitate their appropriate use, how they should be treated for preservation of product value, and appropriate treatment at the end of life.
9 A "manufacturer" qualifies as the natural or legal person who manufactures the product, or has it designed or manufactured, and markets it by affixing its name or trademark to it.
10 A natural or legal person established in the Union who places a product from a third country on the Union market qualifies as an "importer."
11 A "distributor" qualifies as the natural or legal person in the supply chain, other than the manufacturer or importer, who makes a product available on the market.
12 A "retailer" qualifies as a distributor or any other natural or legal person who offers products for sale, rental or installment sale, or who displays products to end users in the course of a business activity, including through distance selling; this definition also includes any natural or legal person who puts a product into service in the course of a business activity.
13 Model of corporate self-regulation that helps a company be socially responsible to itself, its stakeholders and the public.
14 For more on the EU CS3D Directive, see: https://oltreilgreen.it/promuovere-la-sostenibilita-lue-mira-aresponsabilizzare-le-grandi-societa/.
15 For example, in the case of New York law, the limit is set at $100 million in annual gross receipts worldwide.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
