Hey fashion, it’s time for a new look!
The CSRD: A Game Changer for Fashion Transparency
The fashion industry is about to get a major overhaul in transparency thanks to the Corporate Sustainability Reporting Directive (CSRD), introduced in January 2023. This game changer requires brands to shed light on their social and environmental impact alongside their usual financial reports (i.e. resource usage, emissions, labour practices, and diversity). How much water goes into a new dress, or how ethically the workers who made it were treated is the kind of information brands will soon have to share.
The CSRD applies in phases, with larger companies reporting first (starting in 2024). This regulation pushes fashion brands to be more sustainable and accountable, giving consumers and investors clearer information to make informed choices.
Who has to comply with CSRD?
Large EU Companies that meet at least two of the following:
• Balance Sheet Total > €20M
• Net Turnover > €40M
• Average number of employees > 250
Large Non-EU Companies that have:
• EU Turnover > €150M for 2 consecutive years
Plus at least one of the following:
• An EU branch with turnover > €40M or;
• Large EU subsidiary
Small and Medium Enterprises (SMEs) that have:
• Balance Sheet Total > €0.35M
• Net Turnover > €0.7M
• Employees > 10
Why CSRD Compliance Matters
1. Shine a Light on Sustainability Efforts: By reporting transparently, brands can showcase their commitment to environmental and social responsibility, attracting eco-conscious consumers and investors.
2. Boost Brand Reputation: Transparency builds trust. Consumers appreciate knowing exactly what they're buying, and strong CSR practices can lead to positive brand image and increased brand loyalty.
3. Big Bucks: EU fines for non-compliance can be hefty, reaching up to 5% of a company's annual turnover in some cases. Ouch!
4. Lawsuits: Shareholders or stakeholders who lose money due to misleading sustainability reports could take legal action.
5. Stay Ahead of the Curve: Sustainability is no longer a niche concern, it's the future of fashion. The CSRD ensures brands are prepared for this evolving landscape.
Ace the CSRD: A Fashion Brand's Guide
Here's what fashion brands can do to navigate the CSRD smoothly:
✓ Know Your Stuff: Get familiar with the specific reporting requirements covering environmental impact (emissions, resource usage), social impact (labour practices, diversity), and governance practices.
✓ Data, Data Everywhere: Develop a system to collect and manage all this sustainability data across your operations. This might involve investing in new tools or processes.
✓ Sustainability Reporting 101: Integrate sustainability reporting seamlessly into your existing financial reporting. Present both sets of data clearly and consistently for easy understanding.
✓ Get That Third-Party Stamp: Consider having your sustainability report reviewed and verified by an independent expert. This adds an extra layer of credibility and transparency.
✓ Spread the Word: Clearly communicate your sustainability efforts and CSRD report findings to all stakeholders (investors, consumers, regulators) through various channels.
Harmonise Your ESG Data with CircKit: The Key to Efficient Reporting
By embracing the CSRD, fashion brands can demonstrate their commitment to a more sustainable future, gain consumer trust, and stay ahead of the curve in this new era of transparency.
With CircKit, you can leverage 'Data Harmonisation' for all your ESG Data across the organisation and teams, for ease of management, and ability to manage reporting cycles, compliance, and impact monitoring. Generate high-level accuracy LCAs (LifeCycle Assessments) at product-level, range, or category, in turn helping you to create accurate reporting that complies with the CSRD - whilst also freeing up your time to focus more on the creative side of your business. Create your CircKit account today to get started!
