As the application phase of sweeping EU environmental and social policies draws closer, the burden of compliance is falling most heavily on the manufacturers and suppliers expected to rewire their operations. New rules governing everything from emissions and energy use to human rights due diligence demand long-term planning and capital-intensive upgrades. For mills and factories already navigating volatile demand, tariff shocks and shrinking forecasting windows, preparing for this regulatory moment requires more than encouragement from the brands they serve. It requires consistency, partnership and a clear business case that links sustainability progress with commercial stability.
Yet that alignment is still far from the norm. Even suppliers that have earned high ratings, meeting preferred-supplier criteria and completing the audits brands say they value can find themselves without the long-term commitments needed to underwrite further transformation. Ultimately, it shows that the industry’s climate ambitions hinge not just on legislation but on whether brands are willing to match their stated climate goals with their buying actions.
Today, the challenge seems to be that too often that isn’t the case, which leaves upstream partners confused and powerless to meet their own commitments, particularly when they feel they’ve fulfilled all of the stated requirements.
That was the position Sapphire Mills, a division of Sapphire Group, a Pakistan-based textile processing company, found itself in at the start of 2025. Throughout the previous year, the company had been told by brand partners that they would be doing the majority of their business with those manufacturers and suppliers that met their sustainability standards, thereby positioning them to comply with the EU legislation. For Sapphire Mills, this was welcome news. The company, which has prioritized improving its environmental stewardship, was happy to conform, ultimately earning platinum-rated and green-rated recognition from various brands. But when the calendar rolled over to the new year, and the anticipated orders did not materialize, according to Raffay Bin Rauf, Sustainability, HSE and Compliance Senior Manager at Sapphire Mills.
“We were expecting that we would get more business [because] the brands would be more inclined towards working with more progressive suppliers that are better in terms of sustainability, social compliances, and all these things. But unfortunately, what happened was somewhat opposite,” he told HGI.
Instead of more business, things took a downturn—and not just because of sagging consumer demand. From Bin Rauf’s perspective, price, not sustainability progress, ranked higher in the decision-making matrix for these companies. Ultimately, he said the situation illustrated that “the sustainability people still did not have that much importance at the table to influence that decision [on behalf of] one of our good suppliers.”
In the end, when the company didn’t see a reward for its investments, the decision had to be made to take a step back. “Our sustainability goals that we had set for ourselves for 2027, 2030, we had to really delay those projects,” he said.
While Bin Rauf acknowledged that Sapphire Mills could win out over competitors who are less advanced when the legislation heads into the application phase, he’s not particularly optimistic.
Jimmy Summers, VP of Environment, Health & Safety and CSO at Elevate Textiles, which comprises premium fabric and thread companies like Cone Denim and A&E, called the situation Bin Rauf described “a fundamental disconnect” between buyers and sustainability teams that’s not uncommon. While, he said, some companies are doing a great job in this regard, too often silos still exist, making sustainability a nice to have not a core tenant of the business.
He said the solution is establishing a business case for the necessary environmental overhauls.
“This is a lot of the discussions we’ve been having [about] how do we link these two so that sourcing groups and sustainability groups aren’t disconnected, that they have mutual KPIs, so we have a better chance of the business case always being considered,” said Summers. “As we start to look at deeper decarbonization and other things, that’s probably the main issue of why we’re not making progress is because the business case isn’t there.”
According to Summers, approaching sustainability from a business perspective also insulates companies from falling victim when the topic becomes a political hot potato, as it has in the U.S. While he said the country’s about-face on climate issues coupled with costly tariffs on imports has made sustainability progress more difficult, Elevate Textiles hasn’t strayed from its commitments because they’re baked into the company’s ethos.
“The pathway for us to reach our goals now is different and timelines might be different,” he said. “But I think overall what we see is the direction is still correct. It just may not go as fast. It may shift the areas where we invest, so that has very practical and real impacts, but the direction is still the same.”
Summers feels that single-minded focus isn’t possible if the motives are external. Market volatility will come, politicians will come and go and legislation will evolve, so if those dictate why a company is taking action, we can’t expect consistency in sustainability progress.
“What the changes in regulatory stances by different countries and delays and other things are showing us is there always has to be a business case for any improvements and any movement on the sustainability front—just like any other initiative—or else we’re at risk that whenever the regulatory push falls out, then everything falls apart,” he said.
But even conviction alone isn’t enough. Every bit of remediation and stage of transformation adds up, and the costs are difficult—if not impossible—to swallow when upstream partners don’t know when their next order might come in. And that’s exactly the predicament both Sapphire Mills and Elevate Textile are often faced with. And despite that uncertainty, manufacturers and suppliers are expected to underwrite long-term projects.
“For deep decarbonization, we have to make investments and commitments that are many times five to 10 years, and if you think of a purchase power agreement, sometimes longer than that. And we’re being asked to make those commitments, but some customers their commitment to us is the current P.O.,” Summers said.
The situation has gotten worse since Covid, Bin Rauf added. The tariff war, in particular, has made it so his company can only forecast two to three weeks out.
“Part of the business case is brands and us together coming up with relationship models that give us the confidence because that’s worth something,” Summers said, adding knowing your brands are in it for the long haul and not just until a better price comes along makes all the difference. “There’s economic value there, so that’s what we have to look at going forward in that relationship between the buyer and the seller.”
While it’s not common, Bin Rauf said he works with some brands that recognize that their support is key to facilitating policy compliance and progress. One in particular, he said, holds its sourcing team accountable for meeting sustainability objectives, and it also maintains a steady flow of orders, landing it in Sapphire Mills’ top five vendors for nine years running.
“The supply chain people in the brand that are actually responsible to source from different suppliers, they themselves have sustainability KPIs. So, they are incentivized if they source more from sustainable suppliers that have lower carbon footprint, lower water footprint, better social ratings,” he said.
In this case, the buyers’ incentives are tied to how well their factory partners are doing on metrics related to social compliance, clean energy and greenhouse gas emissions, with the expectation that 70 percent of the overall business is performing up to standards. This customer also works closely with the Sapphire Mills team and co-funds some initiatives. Beyond that, the brand also assesses sustainability by country, with those with the lowest carbon footprints winning more business.
“That’s a very good example of how sustainability is closely linked with sourcing,” Bin Rauf said.
Summers too works with brands that tie their sourcing activities to their sustainability commitments.
In this case, the customers only work with suppliers that meet minimum requirements, are members of Higg or other social compliance audits or share their data. Having these rules applied evenly across the board is helpful. “We know they’re not going to require that of a certain number of suppliers, but then if they need [to hit a] price, they’re going to go get a low cost from a competitor that’s not doing these things,” he said.
This direct acknowledgement that the partnership isn’t built on price but on a shared dedication, means vendors like Elevate Textiles can confidently make the necessary investments going forward.
“As long as we’re on this road together,” Summers said, “that helps make the business case.”
This article is derived from the HGI Parsing Policies, Progress & Promise on the Road to Sustainability Call on November 17. Watch the full Call here to dig more into how the data requirements related to incoming legislation is affecting efficiency and how the compliance and reporting mandates are likely to reshape the supplier landscape.
