Unpacking Greenwashing, Compliance, and Trade: Why Labels (and Standards) Matter?
More and more people are becoming aware that the fashion industry has a high environmental and social footprint. Consumption patterns are very different from the past and brands are producing as much as twice the amount of clothing today as in the year 2000. This is leading to overproduction and to overflowing of textile waste, which becomes a huge problem. Most of the time the overflow of textile waste is linked to a lack of facilities to recycle different fabric blends or to the lack of schemes/platforms available for reselling the stock materials in place. However, there is a growing demand for sustainability in production and consumer trends clearly reveal that sustainability is a key consideration for various consumer segments when making purchasing decisions.
If businesses want to stay competitive in local—as well as global—markets, they need to start addressing new market demands, be it by introducing resource-efficient solutions or going beyond: introducing circular business models.
What will guide customers to purchase textile products? Labels.
Currently, there are 20 different certifications and standards for the textile industry businesses and over 100 eco-labels worldwide. Their purpose is to confirm the human-ecological safety of textile products, as well as to ensure a fair and decent environment for workers and responsible use of resources.
The common standards for quality management are developed by the International Organization for Standardization (ISO), where the family of “14,000” standards relates to environmental management. These standards act as effective tools for implementing a framework in a company or organization for an effective environmental management system (EMS). The benefits are numerous. Implementing an EMS helps organizations improve the management of emissions and waste, improves their energy efficiency, and helps them save costs. A set of new EU regulations, that is being transposed to many Western Balkan and Eastern Partnership regions, can facilitate access to EU markets for textile companies in the Western Balkans and the Eastern Partnership regions, with significant benefits in terms of revenues for these companies.
There are other standards that are specific to the textile industry, some of the best known are the Global Organic Textile Standard (GOTS), Fair Trade, or ECO PASSPORT by OEKO-TEX. To be certified, a company needs to submit its application to the certification body (for the case of the Western Balkans and the Eastern Partnership countries, it is often abroad), which then leads to an on-site audit. In case of any non-compliance, the company has a chance to do correction in a prescribed timeline and once all is correct, the company will officially be certified and will be able to showcase the commitment to sustainable and ethical textile production on their products.
What is considered a sustainable production?
The issues in the textile production general are: (1) use of toxic chemicals, (2) consumption of water, (3) consumption of energy, and (4) generation of waste. All of them can be tackled by introducing solutions such as recycling (e.g. use of rainwater or recovery of materials) or energy-efficient equipment (especially important during the current energy crisis). Many of the opportunities already exist and are cost-effective, but there is a lack of knowledge on the market on how to implement them. Putting them in place, however, would not only contribute to an accelerated green transition but also boost the performance of the businesses which then leads to further job creation. Sustainable production is, therefore, among other things, resource-efficient – with right system of resource management, it can keep resources and materials in the productive use and at high value, and lessens the impact of processes such as dyeing on the environment.
Emergence of new (green) skills, and the social dimension
Necessary compliance with international standards will lead to the emergence of new (green) occupations and skills in the fashion and waste management sectors. Skills development will be needed to avoid the gaps and make sure all workers, especially those from socially disadvantaged groups, can benefit from the economic growth. The social dimension of the circular economy must be considered with utmost priority, ensuring that “good for the environment” also means “good for the people.”
Regulations vs. greenwashing risks
While the green transition offers plenty of opportunities, small and medium enterprises (SMEs) will need support to transform their business models and comply with new regulations and requirements. Greenwashing, together with other green-related terms such as green hushing, green botching, and green wishing pose great reputational risks, and businesses will need to take serious action to mitigate them. Apart from suffering reputation damage, the impact of regulations on companies will be significant: in case of non-compliance with the regulatory frameworks, there might be legal consequences resulting in fines, penalties, or depending on the degree of misconduct, suspension of business operations. In order to do the right thing, businesses will need to invest in capacity building of their own staff, as well as bring more experts on sustainability and carbon accounting on board, including third parties performing audits and verification of sustainability claims.
New standards from the International Sustainability Standards Board (ISSB) were launched at the end of June 2023 and will apply to all global enterprises starting in 2024. The objective of their introduction is to enable companies to have access to common standards (so they cannot overstate their climate credentials and for all companies to use the same methodology for calculating environmental footprint – so far there is no agreed framework for that) and mitigate the harm associated with poor data quality. They also include a penalty mechanism for making misleading environmental claims (up to 4% of their annual revenue).
The European Commission also proposed the Green Claims Directive to combat greenwashing and promote transparency. The regulations would serve as guidelines for companies to follow when making green claims, including substantiation requirements, prohibitions on misleading claims, and the use of standardized environmental labels. What is important in the context of RECONOMY, if ratified or implemented, the regulations would apply to all products and services marketed in the EU, regardless of the company’s origin. Therefore, countries outside the bloc that target EU customers with green claims would be affected by the directive, and failure to do so could result in fines, sanctions, and product recalls. For now, however, it remains the proposal and it is not yet enforceable. Another good part of the “Green Claims Directive” is the provision of help and support to ensure compliance mechanisms for SMEs.
A study commissioned by the European Commission in 2020 found that over half of green claims made by companies on their products and services were vague or misleading, and 40% of these claims lacked evidence to support them. “Eco-friendly” or “sustainable” became buzzwords without much substance and verification, and it clearly highlights the need for clear and common environmental labeling standards as proposed in the Green Claims Directive.
With increased consumer confusion and concerns on whether the claims are substantial and regulatory framework requirements, all stakeholders have their own interest in monitoring the sustainability claims of businesses. Companies that fail to comply will find themselves at a competitive disadvantage and will lose significant margin of profit over other companies who will follow the regulations. They can also lose opportunities for additional external investment and in the long-term face legal consequences. For true transformation to happen, the industry must do its part, and consumers need to do their own. Many consumers are now aware of the meaning behind the labels, but certainly not all. An informative media campaign would be needed to ensure that everyone has access to the same information and for everyone to recognize the greenwashing claims of businesses not willing to align themselves with sustainability-centered values and understand the benefits of a circular approach. The narratives present in social media still emphasize the pursuit of novelty, the desire to replace things as quickly as they break down. However, by recognizing and showcasing best sustainability practices, more people can become aware of the alternatives and get engaged in social dialogue, whereas companies driven by profit can get more incentivized to do good.
What does this mean for RECONOMY?
RECONOMY is involved with the textile and apparel sector, recognizing its role in the local economies of the Eastern Partnership countries and opportunities therein for shaping global sustainability efforts and contributing to further transformation in alignment with the Paris Agreement. RECONOMY is committed to fostering positive change by implementing initiatives that will not only transform the way clothing is produced, traded, and its end-of-life but also leave a positive impact on the environment. This positive change demands new business models, that are more responsible and offer more employment perspectives for women and youth, including the most disadvantaged and excluded. With a clear vision to promote sustainable clothing trade across the entire Eastern Partnership region and facilitate links to EU markets, RECONOMY envisions a future where garments are not just commodities, but rather symbols of ethical and responsible production. In this ambitious pursuit, the importance of compliance frameworks cannot be overstated. By staying aware of key developments, RECONOMY fosters knowledge sharing and information flow not only among different market actors in the private and public sectors but also among people who are affected and who advocate for change to the current status quo. Through its dedication, RECONOMY strives to set a benchmark for responsible business practices, inspiring not only its immediate stakeholders but also the broader industry to adopt sustainable approaches.
RECONOMY builds on the experience of Helvetas with certification processes and sustainable labels in projects related to sustainable agriculture, fair trade, and responsible supply chains (Mali, Burkina Faso, Benin, Kyrgyzstan, and Tajikistan, as well as Vietnam). These projects bring extensive expertise in promoting sustainable practices and facilitating better market access for SMEs. Through exchanging with other projects in Eastern Europe, RECONOMY is well-positioned to facilitate capacity-building activities and support businesses in their green transition.