When it comes to supply chain compliance in the fashion and textiles industry there is plenty of current and upcoming legislation to comply with. In this article, we look at how to solve the problem of the lack of clarity around what data must be captured and reported to prove legislative compliance. We consider how shared textile industry data collection standards could radically simplify the ease and transition towards compliant supply chains for all.
Regulation of fashion is coming thick and fast
Legislation currently in force in the UK and EU requires at least financial and sustainability disclosures for large businesses (UK Publicly Listed Company Disclosure, TCFD, CSRD). This increases the reporting burden, with either legal incentives to comply, or the prospect of financial penalties. Looking ahead, legislation is set to increase and cover more areas of concern.
“The fashion industry is transitioning from a blissfully unregulated mode of operation to a new world of complex legal requirements for management and disclosure of data on a wide range of environmental and social performance indicators.”
Lutz Walter, Textile Innovator, 2023
Although businesses have some breathing space before enforcement, they need to take action now and use this time to prepare. They need systems for supply chain data collection, reviewing and segmenting that data to create appropriate action plans, and reporting due diligence to the relevant authorities. But how should they get started, especially when the breadth of legislation is vast?
We’ve identified 25 active or pending pieces of legislation
From the UK, EU, individual European nations, the USA and Australia, there are and will be more requirements for reporting on risks, impacts (and in some cases opportunities) relating to, but not limited to:
- Deforestation
- Human Rights & Modern Slavery
- Use of hazardous chemicals, microplastics
- Product labelling and product lifecycle, circularity, recycling and disposal
- Packaging, including plastics, waste and recycling
- Climate Change
- Sustainability
- Greenwashing (misleading environmental claims)
All 25 pieces of legislation require visibility and traceability of a business’s supply chain.
As we’ve said multiple times over the years, supply chain traceability and transparency are the keys to compliance!
Many of these pieces of legislation overlap, but they are not aligned, so there are multiple standards and insufficient clarity about the data needed to prove compliance for each. Moreover, this is not just a case of data disclosure and reporting – in fact, it would be cynical to see the purpose as just box-checking. The purpose of the legislation, and the value for businesses, is about shoring up business and supply chain risks and reducing harmful business activity. It’s one thing to have visibility of the picture and another to make changes to improve it.
So, what data do retailers need to capture and disclose?
Unfortunately, guidance is often not expressly listed, or is broad and open to interpretation.
As an example, the EU Digital Product Passport (EU DPP), will show the life cycle of a product’s environmental impact and is due to take effect between 2026 and 2030. The requirements for disclosure for the DPP are woven into the Ecodesign for Sustainable Products Regulation (ESPR), which enters into force in July 2024. It is difficult to define what the EU DPP requirements are specifically without reading the full 90 page document. Given that the EU DPP is going to demand significant resources from retailers to comply, a simple methodology is needed. We’ve listed our interpretation of the data disclosure points we recommend for the EU DPP here.
The team at Segura has spent many hours investigating the information available for each of the 25 pieces of legislation, in an attempt to collate the key areas for data collection and show how these overlap. It is important to note, that this is based on our understanding and interpretation so that our clients and colleagues can start to move forward and make decisions on how they choose to prioritise. This has resulted in the Segura Legislation Matrix 2024, an ‘at a glance’ guide to understanding the supply chain data capture points retailers will need moving forward.
Who are the people that need to gather this data?
Most clothing, accessories and footwear retailers have teams which are focused on either Corporate Social Responsibility or Sustainability. These teams include people who are experts in the areas of managing supplier engagement to create more sustainable products, reduce waste, or monitor and drive up supplier standards. They are the people tasked with making change, but they are not lawyers and unlikely to be data analysts.
However, these are also likely to be the people who have to capture the relevant data from their supply chains for compliance. They will be the ones liaising with suppliers (usually overseas) to make data requests and ensure that their suppliers have provided the right information.
The suppliers are on the journey with you
Furthermore, it’s worth highlighting, that legislators don’t always consult with the suppliers within the global supply chains of the textiles industry. For retailers, this can result in a barrier to engagement due to a lack of understanding.
A huge advantage to engagement would be to help suppliers build their own understanding and knowledge of regulations that are being placed on their customers and why. The EU and other legislators could help with this by engaging with suppliers, highlighting the importance of the information retailers need to gather from them when they make data requests, and by making the information easier to review for those who have to comply with it.
As it is, the ‘on the ground’ reality of current and incoming legislation is that each customer will approach their suppliers, update their T's & C’s to try and cover legislative demand, and request what they think the legislation is asking of them. You can imagine that suppliers will be dealing with a plethora of requests, each being slightly different. Do you have sympathy for the suppliers yet?
Making legislation easy to understand
Legislative documentation technically gives businesses what they need, but the legal terminology and technical language make it very difficult for non-legal people to understand and relate to. Communicating an already complex regulatory language to non-native English speakers also increases the difficulty. Even if the legal wording is needed for legislation, an interpretation in simple language would be very beneficial.
As an industry, with regulators, we should aim to;
- Make it easy for suppliers to read and understand what’s being asked
- Make it easy for suppliers to do the job once, and to fully understand the expectation on them
- Make it easy for retailers to know they have collected the right data, and to know they’re compliant.
Create a level playing field for retailers
Depending on a retailer’s resources, they will have greater or lesser ability to manage incoming legislation. If we could have shared data collection standards, then globally retailers would know what they are being asked for, regardless of the resources available to them in their legal or compliance teams to interpret documentation. It would be great for retailers to comply with all items on a checklist, confident they are covering each piece of legislation, rather than guessing that they’ve done enough.
Why not make it really easy for suppliers...
...by giving them an agreed set of data requests so they can share with multiple entities with ease?
This is why we are advocating shared data collection standards. If we can agree on the data capture points that are required by each piece of legislation, then we can also make life much simpler, easier and quicker for all involved.
Shared data collection standards would result in suppliers becoming quickly familiar with the information that they need to provide to their customers throughout the supply chain because everyone is being asked for the same data. This would reduce confusion, and barriers to engagement and assist retailers in their efforts towards compliance.
Suppliers could be proactive and prepare a bundle of data for their customers. This would reduce workload, prevent supplier fatigue and speed up the process for all.
Here are some specific ideas of how shared data collection standards could work.
Let’s have a shared definition of Supplier tiers
Tier 1 suppliers ask Tier 2 suppliers for the same data every year, and up the supply chain it goes. But, in our experience, retailers have differing in-house definitions of what is Tier 1, 2, 3 etc. The Segura platform is configurable, so we are flexible and set it up to work with the specific retailers’ definitions, but wouldn’t it be better if, for ease of supplier compliance, there was a standard supplier tier methodology? This would mean suppliers would know where they fit in and what was expected of them.
We asked our CTO, Danny Seager, how he would standardise the definition of the tiers for the industry.
"If a retailer asked me to define them then, in general, I would say 'follow the purchase order', each order becomes a separate tier – the only exception I make to that is tier 1.
This table far from a definitive list, and different products will have more or less tiers (leather, for example, can have many more) but essentially as the products and services are sold then it moves through the tiers".
Standard tiers would support compliance throughout the chain and again help suppliers and retailers know they had done enough to be compliant.
Dear EU (and other Legislators);
Retailers are in desperate need of simple checklist guidance
In summary, we would advocate for a panel of EU legislators to be able to endorse shared data collection standards. And, if that is not forthcoming, we invite UK retailers to lead in collaborating on what data to request from suppliers, so that they can reduce the load on suppliers and speed up the process. A collaborative effort also lessens the risk that they fail to comply – as a significant group has agreed to interpret the rules in the same way.
We would recommend the legislation matrix as a huge help to get started in that direction. At Segura, we want to be a part of helping our clients and the wider textiles industry navigate the changes happening and empower them to meet supply chain compliance with confidence, so we would be happy to facilitate such collaboration.
If you would like to be part of this collective action, please drop me a line at laura.houghton@segura.co.uk to express an interest.
About Segura
Segura Systems is a UK-based SaaS company enabling ethical, sustainable and efficient multi-tier supply chains.
Segura provides n-tier mapping, transparency, traceability, visualisation, compliance and reporting. Segura sits in the centre of your supply chain management structure creating a central repository for all your supply chain, ESG-related data and evidence, including third-party data sources.
