EU's ill-fitting suite for 'greener' norms

Changes to EU’s Ecodesign Directive banning destruction of unsold textiles – and footwear – purportedly to establish sustainability requirements, will have its biggest impact on Asia, where these are made. Distribution and retailing of textiles have less than 5% contribution to emissions. The rest are on account of all the steps that go into production and transport. Emergence of fast fashion favours overproduction, and EU’s attempt to discourage it will have a bearing on export earnings of several Asian economies, including those of India. The EU ban provides carve-outs for small exporters. However, these may not be adequate safeguards against trade dispute challenges. But has the EU pushed all its policy levers to curb fast fashion before imposing the hard action?

Since material and labour costs in the textiles industry are low relative to design, marketing and retailing, fashion brands have an incentive to overstock. This is encouraged by economies of scale that push production costs further down. There is the added effect of economies of scope, where variety, instead of volume, tends to lower costs. All of this ends up in higher unsold stocks. However, banning their destruction – or, for that matter, their re-export to poorer countries – doesn’t adequately address the force driving fast fashion: booming online sales, backed by legal assurance in EU of return of clothes that don’t look or fit or feel right. Offline sales don’t have this legal remedy, but competitive intensity makes it an industry-wide practice.

The EU, and its trading partners, would have benefited from upstream interventions that raise awareness over fast fashion. It could have required brands to disclose more about their unsold inventories before it moved on banning textiles destruction. It could also have behavioural policy to guide fashion-purchasing behaviour. In a way, simultaneously hard and soft policy actions send out a stronger message of intent. EU will have to work intensely with its trading partners to adjust to its new ecodesign rules.