The premise of extended producer responsibility has become a major feature in ESG legislation of late. The crux of this push is to force fashion to reduce waste and foster circularity by designing for durability and reuse, collecting and recycling post-consumer goods, and eventually disposing of items safely. It’s a huge about face for an industry that has famously burned overstock and exported a glut of unwanted garments to Africa. And though lawmaking bodies around the globe are proposing—and in some cases passing—policies to hold producers responsible for garments throughout their lifecycle, it is far from a coordinated effort.
Rather than one blanket law, different regions, countries and even states are drawing up their own rules about what this should look like. For example, there’s the Anti-Waste for a Circular Economy Act in France, the new EPR law for textiles in Sweden and a slate of others winding their way through their respective legislatures. Plus, the EU Corporate Sustainability Due Diligence Directive, which will be fully phased in by 2029, has related environmental line items. (Find an overview of EPR policy here.) This piecemeal approach is daunting, particularly for manufacturers and suppliers who feel the onus has disproportionately fallen on them to implement and fund climate action, as it relates to environmental concerns, broadly, and EPR, specifically. Without meaningful support from retailer and brand partners, some of these vendors are already getting squeezed out by crushing demands while those that survive say to expect a fractured supply chain.
“Factories, suppliers and producers are at the forefront of EPR compliance,” Mithileshwar Thakur, secretary general of India’s Apparel Export Promotion Council (AEPC), told HGI. “So, the burden is huge and there is a long road ahead.”
Just accounting for the current regulations in India, which today primarily focus on plastic and battery waste, he said vendors are responsible for materials selection, post-consumer waste collection, achieving recycling goals and reporting. Using that as a template, Thakur said it’s clear this industry needs to ramp up sustainable product design, develop comprehensive data management and create recycling infrastructures in order to be ready to comply with any forthcoming textile-specific regulations.
And that’s just to keep up with local laws. Exporters face even bigger challenges as they navigate a slew of frameworks.
“EPR regulations can be fragmented and uncoordinated, making it difficult to implement and enforce them effectively. This can lead to inconsistencies in requirements and undermine the overall effectiveness of the system,” Thakur said.
When it comes to environmental regulations, the EU is often seen as the tip of the sword but even countries within that region have their own policies. The result is “a patchwork quilt of regulations,” said Rick Horwitch, vice president & global retail lead and supply chain strategy for testing, inspection and certification firm Bureau Veritas Group.
To help its clients comply, Bureau Veritas onboards brands and retailers by asking where the company distributes and how it handles purchase orders to determine how they should approach compliance. For companies that issue blanket purchase orders, they must comply with the toughest regulations globally because the goods could be sold anywhere they do business. If the client issues purchase orders for individual countries or individual regions, then they need to meet the most stringent local requirements.
Horwitch admits there’s a lot to keep track of. “If you address EPR or these regulations as one offs, you can then become overwhelmed with all the regulations.”
The better approach, he said, is to take a step back and look at them from a holistic point of view to understand the overarching goals and where there’s overlap. For instance, he points to traceability, circularity and decarbonization as reoccurring themes in EPR laws. If your company is working toward those goals, it will be easier to determine what to do to comply—and what you might already be doing that meets the standards, he said.
“Factories, suppliers and producers are at the forefront of EPR compliance. So, the burden is huge and there is a long road ahead.”
—Mithileshwar Thakur, Apparel Export Promotion Council of India
Platform fatigue
On the supply side, the fragmentation doesn’t end with the laws themselves. Factories and suppliers say each brand and retailer captures, analyzes and reports data differently and on an increasingly varied number of mandatory platforms.
For Pakistan-based apparel and textile factory Kay and Emms Global, that’s meant staffing up just to handle the analysis, documentation and reporting. To date, the company has increased its sustainability team by 10 percent.
So far Kay and Emms Global has absorbed the added expense, but Barry Tariq, director of product, sales and marketing, said this overhead on top of the other investments could prove too much for some production companies. “I believe there is going to be a domino effect on both sides. Some guys going out of business, and some guys becoming big, or some guys merging with each other and acquisitions,” he said.
Already, Tariq has seen some manufacturers opting out of regions altogether or ending relationships with retailers in certain distribution channels because they can’t meet their stringent requirements.
For Pakistan-based Sapphire Mills, it’s becoming harder to choose suppliers because it can only work with those that can afford to adopt the necessary platforms.
Sustainability, HSE and compliance senior manager Raffay Bin Rauf said the company has watched its own compliance audit line item balloon from $50,000 annually to a possible $90,000 this year thanks in part to an escalating number of compliance companies, a slew of new tools and fees that continue to climb.
Some vendors simply can’t afford it. The result is a smaller pool to choose from and higher prices for all.
“When I have to map my entire supply chain on a particular platform, then I can only work with sophisticated suppliers,” Rauf said. “The sophisticated suppliers are inherently more expensive compared to the ones that are not that well educated, do not have very good setups and all that.”
He estimates that up to 70 percent of the market is no longer an option, which limits capacity. To help ease at least the educational burden inherent in keeping up with regulations, Sapphire Mills has begun offering training to upstream partners, which of course is another time and financial investment. Even here there are limits though because many of them are small and their operations are less sophisticated.
“There are people that don’t even know how to use cell phones. They can’t read. They can’t write,” Rauf said. Often times, Rauf himself can’t communicate with some factories or farmers in his supply chain because they speak local dialects but not Urdu, the national language of Pakistan. “The grassroots level education is not there for them to be able to give me the data that I require.”
Beyond that, internet availability is spotty, making the connectivity needed to operate each brand’s preferred platform another challenge.
It all adds up to a huge responsibility for manufacturers—one that small and midsize brands and retailers are typically unaware of, Tariq said.
Risk without reward
As a result, suppliers and manufacturers feel “stranded” by what they see as a lack of cooperation from their partners downstream.
“Open dialog and understanding root cause is not there as it should be. It should be a much more collaborative effort from the brand side as well,” Tariq said. Instead, many brands and retailers just lay down the law without participating in the transformation. Brands are only typically active when it comes to auditing, which he said is only helpful to a point. “Auditing does not resolve the issue. Auditing just highlights the problems.”
Tariq said production companies are on their own to navigate meager margins and continuous headwinds.
That’s exactly the position Sapphire was recently left in when a brand partner pulled an order at the last minute that represented 50 percent of the factory’s capacity. Beyond the financial impact, the company also felt duped. According to Rauf, Sapphire had met all of the brand’s requirements in terms of investments in technology and sustainability and had even been rated their top supplier in Pakistan.
“When something like this happens to us it really shakes us internally. It makes us wonder if it’s worth investing so much,” Rauf said. The question looms larger still when he sees competitors in the market with lower audit and sustainability scores winning bids. It’s the opposite of what he was led to believe would happen. “We still do not see the trend of getting more orders due to my sustainability. It’s still a price war.”
Ultimately, the problem is, you can’t serve two masters.
“At the end of the day, unfortunately, buying and commercial is completely disconnected from sustainability and from compliance. And everybody has its own KPIs.” Tariq said, adding it will remain that way because brands have to report to shareholders. “There’s a battle between higher margins every quarter versus the reality of impact.”
Manufacturers say orders stop and start depending on where brands and retailers can find the most favorable costs, which maybe works for them but it makes it almost impossible for factories to invest in the equipment, processes and transparency called for under EPR. It’s also a breeding ground for bad actors. “As a result, there will be greenwashing. There will be fake compliances. There will be shortcuts,” Tariq said.
Thakur of AEPC said things can’t change until brands and retailers look beyond costs to consider “the long-term sustainability and ethical implications of their choices.” This includes assessments that takes social and environmental risks into account, supplier selection that puts those same criteria at the forefront, true partnerships across the supply chain and data analytics capabilities to allow for continuous improvement.
“At the end of the day, unfortunately, buying and commercial is completely disconnected from sustainability and from compliance. And everybody has its own KPIs.”
—Barry Tariq, Kay and Emms Global
Partnership dynamics
Horwitch said vendors often express that they need true partnerships. “[They say] all we need is a commitment that we know that we can bank on. [Then] we can go and make the investment,” he said.
But commitments are hard to come by—at least these days.
The story of one particular brand-manufacturer partnership is lore in the Horwitch home. In the 1960s, Sears brought together 15 midsize soft-goods suppliers—including one operated by Horwitch’s father—and created a publicly traded holding company with Sears as the anchor client. As the story goes, the idea was, “We will guarantee you a continuous supply of orders for whatever it is that you make; you will give us known costs.”
The result was predictability, the holy grail for sourcing. The factories had a set capacity and Sears could count on desirable margins. Eventually that concept fizzled out when global trade picked up steam. But decades later, it may be time to see what aspects of that deal could be applicable today, as consolidation overseas is changing the landscape yet again. “The world in some way, shape or form has gotten smaller,” Horwitch said. “And so, running around and chasing the lowest possible costs out there has pretty much gone away.”
Horwitch recently ran the idea of committing to continuous production by the chief sourcing officer at a major U.S. retailer. The executive was skeptical. Ultimately, he said it probably wouldn’t get past legal “because if we didn’t live up to our commitments then it would be a big PR thing.”
Which is exactly the situation Sapphire could find itself in, Rauf said. If the company had to do a massive round of layoffs because of canceled orders, an NGO would almost certainly find out and both the factory and the brand would face reputational damage.
But companies could also face “a big PR thing” if consumers learn how many of their favorite brands and retailers have punted EPR responsibilities up the supply chain, Tariq said.
Rather than operating from fear, Rauf would like to see more companies signal to their procurement teams that sustainability is the priority. The best way to do that, he said, is through the wallet. For instance, one of Sapphire’s clients offers its team bonuses whenever the factory lowers its CO2 emissions. That’s the only type of commitment that will drive lasting change, he said. “When you know your KPI is getting a good product with a lower price, then you would focus on that. Why would you focus on sustainability, unless you have something tied to it?”
