Against the backdrop of recent elections in the UK, the transition to a new European Commission in the EU and a new administration in the US in January, key ESG legislation changes are afoot that will affect luxury brands, according to The ESG Policy Guide: The Future of Sustainability Legislation for Luxury, a new report released this week by global law firm Baker McKenzie and luxury sustainability experts Positive Luxury.

The report – now on its third edition – reviews a number of the pending legislative initiatives in these regions including the EU’s Green Deal decarbonisation efforts supported by the Circular Economy Action Plan and the Strategy for Sustainable and Circular Textiles. The Corporate Sustainability Due Diligence Directive (CSDDD) mandates comprehensive value chain due diligence and climate transition plans, while the new Directive on Empowering Consumers in the Green Transition and the proposed Green Claims Directive combat greenwashing by providing greater regulation around environmental claims. In the EU and UK, deforestation prevention regulation will potentially affect manufacturing processes for brands.

In the US, brands are anxiously watching developments on the proposed Fashion Workers Act in New York state, designed to improve labour protections, health and safety, and prevent exploitation of workers. In addition, the Fashion Sustainability and Social Accountability Act would require large fashion companies to map their supply chains and address human rights and environmental impacts.

“The fast-evolving legislation across key geographies for luxury brands requires comprehensive due diligence, transparent reporting and proactive adaptation to new standards,” said Katia Boneva-Desmicht, Baker & McKenzie’s global chair of consumer goods and retail, adding: “The need to be sustainable, socially conscious and protect our environment is now a further and fundamental part of the luxury offering.” 

She also predicts that brands will see stricter enforcement and higher penalties for non-compliance. 

Amy Nelson-Bennett, CEO at Positive Luxury, commented: “Rather than seeing [global ESG regulations] as mere compliance hurdles, luxury brands should view them as opportunities to get ahead by embedding sustainability into their operations.”

The report provides an overview of key ESG trends affecting the luxury industry as well as recommendations for luxury brands to adapt to ESG changes: 

• New EU legislation requires brands to be transparent throughout the product lifecycle, reassessing supply chains and meeting documentation requirements for ESG.
• Brands must adopt a climate transition plan to align with the 1.5°C target of the Paris Agreement and the EU’s climate objectives.
• With increasing scrutiny and greenwashing legislation, brands need to meticulously verify their ESG statements to ensure accuracy and compliance.
• Environmental strategies are driving innovations in eco-friendly materials, recycling capabilities and process improvements, opening new market opportunities.
• ESG issues affect all areas of a product’s lifecycle. Effective communication and alignment across departments are essential.
• Educating both internal teams and the public about ESG obligations, new materials, processes and recycling methods is crucial for a brand’s ESG journey.