The European Commission has introduced several legislative acts as they attempt to improve the sustainability and environmental performance of supply chains and operations across key major industries.
The Commission’s objective is to achieve a fully circular economy across the EU by 2050, which will see several technological and operational mandates enforced for businesses that wish to continue selling physical goods within the European market.
Several key industries have been earmarked as the first to be overhauled by this new legislation – including textiles, batteries and electronics/ICT.
Under the Ecodesign for Sustainable Products Regulation (ESPR), Digital Product Passports (DPPs) have been classed as a key piece of infrastructure to enable the circular economy. The specific technical requirements are still being determined (as of July 2023), but we will see DPPs implemented across the textiles industry and others in the coming years.
But why textiles?
The global textiles industry is huge, with a market cap of $1.53 Trillion in 2022. Although the global COVID-19 pandemic led to an industrial slump between 2020-1 due to uncertainty within the fashion and apparel markets, the industry CAGR between 2023-2030 stands at 7.5% representing unrelenting future growth.
There is an increasing demand for the end products that require textile manufacturing, and this has been the case for some time as the world’s clothing production doubled between the years 2000 and 2015.
With the dynamics of supply and demand in full force, ‘fast fashion’ brands launched en masse, producing a constant supply of clothing at a low cost, resulting in the production of low-quality items that were designed to be discarded and replaced, rather than recycled or reused.
It is estimated that 92 million tonnes of textile waste is generated annually on a global scale. By 2030, that number of expected to grow to 134 million tonnes annually. This is indicative of a linear economic model, and a direct contributor to climate change.
To illustrate the amount of resources needed to produce textile products, in 2020 the estimated textile consumption per person in the EU required on average:
- 400m2 of land
- 9m3 of water
- 391kg of raw materials
In terms of the industry’s carbon footprint, textile production emits more greenhouse gases than the international flight and maritime shipping industries combined. Cotton farming and cultivation, which comprises 38.9% of the raw material demand within the sector, is responsible for emitting 220 million tonnes of carbon dioxide every year.
These figures have caused the industry and its established practices to come under fire from critics, policymakers, and environmental organisations for years.
However, businesses and consumers have started to awaken to the damage that textile production and consumption in its current form is doing to the environment, and we’re seeing a marked shift in both business practices and consumer trends to address these issues.
Building the Circular Economy
The circular economy is a model of production and consumption that focuses on the recycling, reuse and remanufacturing of products and raw materials to minimise the environmental impact of their disposal and extraction.
This model focuses on restricting waste production by ensuring product lifecycles are extended, and the product’s materials or components are recycled as much as possible, whilst finally returning these recycled elements onto the supply chain for reuse and remanufacturing.
This is all to serve an underlying ambition to reduce the use of natural resources, limit the habitat destruction wrought by years of industrialisation, and both protect and regenerate the environment.
Another key element in maintaining, and even increasing, value for stakeholders within the value chain is to incentivise them to engage with the new circular economic model willingly and enthusiastically. Key stakeholders include consumers, manufacturers, retailers, and specialised recycling companies.
International legislation
To aid the transition from a linear economic model to a circular one, national and supranational organisations the world over are beginning to collaborate on setting rules and standards for the trade in goods.
The EU parliament delivered its Circular Economy Action Plan (CEAP) in 2020, which comprised strict guidelines that must be followed by organisations looking to place physical products into its market – one of the largest markets in the world, drawing $484 Billion in revenue for the apparel market alone for 2023.
There are several key elements to this framework. It imposes new measures to ensure that products are designed and manufactured with sustainability front of mind and to ensure the end of planned obsolescence.
There are guidelines included to reduce waste throughout the manufacturing and shipping processes whilst promoting recycling. Consumers are also being empowered to hold brands accountable for their ‘green’ claims as important stakeholders within the circular economy model.
The CEAP is the main, overarching piece of circular economy legislation within the EU. It has been amended and updated several times since the year 2020 and has had more than €10 Billion of public funding allocated towards ensuring the success of its initiatives (as of the time of writing).
In 2021, a particular resolution was adopted to bolster the CEAP, consisting of additional measures on achieving carbon neutrality, more restrictions on the production of toxic waste, and a general tightening of recycling rules. This is in an attempt to reach more stringent targeted emissions reductions and other benchmarks by the year 2050.
The first wave of CEAP measures was activated in 2022, boosting the sustainable manufacturing of all new products in select sectors. Additionally, later in the year, the EU-wide rules on packaging went into force to improve design, reduce plastic wastage, and clarify labelling instructions on recycling.
The EU Strategy for Sustainable Textiles
As part of the EU CEAP, the EU Strategy for Sustainable Textiles will govern how textiles are manufactured, sold and recycled within Europe going forward. The new textiles strategy was adopted in March 2022.
The objectives of the legislation are to ensure that all textile goods within the EU are durable, repairable, and recyclable. It also heavily recommends that textile manufacturers and retailers take more responsibility for the products they create.
In terms of actions, the EU Strategy for Sustainable Textiles proposes setting design requirements for textile-based products to make them last longer and make them easier to repair and recycle. It also aims to introduce an initiative called the Extended Producer Responsibility, a set of rules for all textile producers within EU member states.
This initiative incentivises businesses to implement the mandated design requirements and to tackle any need to try and subvert the legislation to maintain profits, whilst restricting the export of textile waste to the rest of the world.
There are several pieces of regulatory support for this, including:
- Ecodesign for Sustainable Products Regulation
- The Empowering Consumers in the Green Transition Directive and Green Claims Directive
- The Waste Shipment Regulation
- Transition Pathway for the Textiles Ecosystem
Concerns about the regulations and legislation have been raised by some European industry voices. Euratex, “the voice of the European apparel and textile industry”, raised concerns about keeping the European textile and fashion industries competitive with the rest of the world.
It suggests that the sustainable textiles strategy regulation doesn’t contain an appropriate balance between sustainability and competitiveness and that it doesn’t account for the impact of high energy prices, losses in consumer confidence and assertive trade partners outside of Europe.
However, these concerns have not dissuaded the EU from going full steam ahead with the reforms in earnest. While the EU legislation is binding for all internal and external actors selling goods in the region, the EU is collaborating extensively and closely with industry leaders and other relevant stakeholders, to ensure that all impacted parties have input into planned changes.
Another key element that has garnered attention and fostered many discussions is the amount of data that’s going to be created as part of these new initiatives, and the need for collaboration between multiple links in the supply chain.
To implement the directives of the legislation and provide proof that all parties are complying with the new regulations, there will need to be the appropriate IT infrastructure in place that provides access to granular information at scale.
The EU wrote the concept of Digital Product Passports into the legislation as a key piece of infrastructure on which to base the circular economy’s informational needs. DPPs will be a solid requirement for most (if not all) industries engaged within the circular supply chain.
The first industries that’ll need to actively start implementing DPP solutions will be those that are specifically highlighted by the EU legislation as having an outsized effect on the environment – including batteries, electronics/ICT, and textiles.
Digital Product Passports in Textiles
Under the ESPR, the European Commission is mandating the use of DPPs in textiles – although specifications and guidelines are still being developed. They have, however, stated that all textile products within the EU must have a form of DPP by the year 2030.
Digital Product Passports are a tool for collecting and sharing a product’s data throughout its entire lifecycle, used to illustrate a product’s sustainability, environmental and recyclability attributes.
Recorded product data from across the supply chain is captured on the DPP and shared amongst several stakeholders and participants – unlocking benefits, use cases and value across entire ecosystems.
What kind of data could a DPP capture?
DPPs have the capacity to capture a variety of data – for instance, general product data such as the product ID, batch number and reference number could be made available which would help to prove the authenticity of the product on resale markets.
The raw material source data would reveal what the product consists of (e.g. composition percentages), and the record of extraction for the materials used. This would provide proof that the raw materials were extracted ethically. As an example, the DPP for a t-shirt could show that it is made of 75% cotton and that the cotton was sourced from a sustainable farm in Brazil.
Consumers would be able to track the carbon footprint of the product they’ve purchased, including the amount of energy and water used, the volume of greenhouse gases emitted into the atmosphere, and whether or not the manufacturer has offset these emissions utilising carbon offsetting markets, for example.
Access to the DPP is not restricted to a singular method. It’s possible to provide access via a QR code attached to the item, or a specialist barcode. Businesses may even opt to incorporate NFC or RFID technology as an access gateway for the DPP of certain products.
Benefits to business and consumers
Although businesses could be wary of implementing DPPs due to perceived complexity, manufacturers and retailers should consider a wide range of tangible benefits.
DPPs can increase consumer trust. Consumer trends have started to heavily favour sustainability in the clothing markets, and fast fashion has garnered a bad reputation. In fact, according to a study by Nielsen, 75% of Millennials would change their buying habits in favour of environmentally-friendly products.
Brands would be able to use DPPs to prove to their customers that their products are sustainably produced, and customers can rely on a trustworthy, regulated information system to assuage their concerns around false ESG claims and ‘greenwashing’.
The audit trail that DPPs provide will help organisations prove their compliance, not only with these new EU regulations, but with any further regulations that may follow from inside the EU and the rest of the world. Aside from compliance, the information within DPPs can help businesses gain granular insight into their supply chain and improve them from an operational, efficiency and ethical perspective.
Equally, this granular insight doesn’t just end with the supply chain and manufacturing side. Consumer interaction with the DPPs attached to their purchases can be a channel to provide an enhanced customer experience – as is the case with Breitling watches.
Retailers can use the glut of data to gain better insight into consumer behaviours, needs and consumption trends. This can provide new opportunities to forge stronger relationships with customers on an individual and group basis, and ultimately has the potential to garner new revenue streams as a result.
Conclusion
The EU’s Circular Economy Action Plan (CEAP) is a truly revolutionary piece of legislation, with lofty goals aimed at replacing the environmentally degrading linear consumption model that has been prevalent over the last century, with a circular economic model focused on recycling and sustainable manufacturing practices.
Textiles has been identified as a key contributor to the climate crisis, and therefore earmarked as one of the first industries to be overhauled within the EU bloc. Through the EU Strategy for Sustainable Textiles, the industry has been thoroughly mandated to make significant changes.
One of the key pieces of infrastructure to be implemented is Digital Product Passports, which record product data, from raw material composition to manufacturing credentials and beyond, to provide insight into the circular economic structure at a granular level.
To achieve the goals set by the legislation in the allotted timeframe, DPPs are to be fully required by the year 2030 across all textiles being entered into the EU market. This will require significant investment, planning, and execution on the part of stakeholders in the textile industry. For organisations that want to future-proof their operations and gain a first-mover advantage, it would be best to start considering your DPP solution now.