Fashion Sustainability Legislation and the Digital Product Passport | Marks & Spencer | PI Apparel

Hello, good afternoon everybody, welcome. My name is Rebecca Cooper, I'm the Technical Lead for Product Regulatory Affairs at Marks Spencer, and this is Sandra Samolsky, who's our Product Manager on sourcing and sustainability. I'd like to thank you first of all for coming to our presentation and forgoing the lovely sunny weather and the banks of Lake Maggiore out there. We appreciate it, so please sit Stick with us. Okay, so looking at 2024, obviously last year in 2023 we had an awful lot of regulation coming at us, really groundbreaking new regulation in the world of sustainability, and 2024 is going to be another year of change. As you're aware, half the world is, is going to the ballot box in elections, so that will give the opportunity for more political debate on these countries' strategic options. It's really quite a tense moment for these nascent regulatory sustainability efforts, particularly in the EU. We have elections in June and in the UK we have them later on in the year as well. I love this quote here from George Harding-Rolls, who's Director of Policy and Advocacy at EcoAge, which is a UK-based NGO. 2023's pioneering policies could be thrown onto 2024's legislative bonfire. But hopefully that isn't the case and actually We know that 93% of global GDP has signed up to net zero targets, so really the results are more likely to impact the velocity rather than the actual direction of travel. So right now we know that there's a sustainability policy crackdown on fashion that's well underway.

Why?

Well, we know that textile consumption in Europe is one of the fourth— is the fourth highest impact, sorry, on the environment after food, housing, and transport, and so arguably The industry cannot be left to self-regulate. We're so heavy with social and environmental footprint, clothing going into landfill, modern slavery, polluted water courses, and chemically overtreated clothing. We know that 92 million tons of textile waste globally is produced annually, and that is only projected to rise to 148 million tons by 2030. And that's the equivalent of one truckload into landfill every second. I always find that a horrific stat, and less than 1% of that is currently recycled into new clothing, and that's from McKinsey. So really, we as retailers are now in a position of trying to decide what do we have to do by legislation, but also what do we want to do, what should we do, how do we practice what we preach, and how are we going to appeal to this new empowered consumer who is going to be the consumer of the future and will demand that we do more. So looking from a worldwide perspective, This isn't just an EU thing. And to take a few examples, this is by no means exhaustive, but just a few examples recently in the press. The Americas Trade and Investment Act, or the Americas Act, you may have heard it referred to, is all about reshoring, nearshoring of US supply chains, building those ties between the US and Latin America in terms of a production site. That's very well incentivized or planned, proposed to be incentivized by US government, both in loans for businesses involved in circular business models and also in R&D and grants for reuse and recycling programs. The New York Fashion and Sustainability Act is about creating accountability for fashion manufacturers and sellers in fashion industry supply chains, and that they need to adhere to supply chain mapping requirements and also report on that and their due diligence process. And again, in California, similar bills, climate bills, and the Responsible Textile Recovery Act. In Australia, on the other side of the world, in the reporting area, they're coming up with their own Australian reporting standards, and companies will need to prepare climate-related financial disclosures and sustainability reports for annual periods starting July '24. Zooming into the EU, we're obviously all well aware of the EU Green Deal, but just to remind everybody of the key tenets of that, no net emissions of greenhouse gases by 2050 relative to 1990 levels. Economic growth should be decoupled from resource use. That's quite an important topic. And no person and no place to be left behind. And just to note there that France is often on the front foot with follow-up on these, these broad directives before delegated acts come into, into place. And so they've actually put their AJEC law decree in place, which requires, amongst other things, an online product sheet containing sustainability information, sorry, sustainability information which is accessible via a unique product identifier. That's already in place. I'm sure some of you are already complying with that who are marketing in France, and that's based on your turnover annually. So anybody who is compliant with that is already well on the front foot to compliance with Digital Product Passport when that comes in. Okay, so looking at regulatory law for products and packaging in the EU and the UK, I know this is quite a busy slide, but it's almost helpful in a way because there is so much and it illustrates that. But to give you a bit of a guide to this, the parts in green are still going through the legislative process, the parts in black are adopted and enforced, and as you can see, sustainability regulations form the bulk of regulatory law affecting retail products outside of safety and international requirements. So I'm not going to talk through every single one here, but just to remind you, so we talked about the Green Deal, which is 55% reduction in greenhouse gases by 2030, net zero by 2050. The Fit for 55 package is a package of legislation aimed at hitting the 2030 target. The Circular Economy Action Plan aims to create a market for products that are sustainable. And then UK Net Zero, just alongside that, actually has slightly more ambitious aims of 68% reduction in greenhouse gases by 2030 and 75% by 2035. But those have now been shifted back under the current administration. So the new consumer agenda— on the left-hand side, we're looking at consumer legislation, product legislation, and then global sustainability and reporting and financing on the right-hand side. Under the consumer piece, Empowering customers for green transition, that's about enhancing the consumer's rights to sustainable products, clear marketing, and the right to repair. As part of the marketing piece of that, the CMA Green Claims Code in the UK underpins the consumer protection from unfair trading regulations, broadly avoiding greenwashing, being very clear about exactly what is and what isn't being offered. And we must neither greenwash or omit information and that the customer would need to make an informed choice. The, the EU Green Claims Code may well follow similar lines to that. It's about eliminating greenwashing, minimum criteria for comms, and science-based explanation of what those claims are. Moving into the central area, the Waste Framework Directive is the legal framework for treating and managing waste in the EU. You may have heard of Extended Producer Responsibility schemes, So those sit under the Waste Framework Directive, and currently we have EPR packaging schemes enforced in the UK and the EU, and EPR textiles are already in place in France and the Netherlands and coming soon in Spain and Sweden, and the UK is currently consulting on our own textiles EPR scheme. So lots coming at us. The EU-DR is the European Deforestation Regulations enforced since the end of last year, and that is where we are producing products containing certain commodities including cocoa, soy, beef, palm oil, wood. We have to prove that they're deforestation-free, and to do that we need to provide GPS traceability of those commodities, and that information will be fed into a certain— a central access point, and that's still under development. The Waste Shipment Regulations, just to pull that one out there. That's about banning illegal shipments to the Global South, which currently, as we all know, is where a lot of the excess textiles end up and ending up going into the landscape there and landfill. So, lots to digest there, I appreciate. Just to zoom in on a couple of ones there, the EU Corporate Due Diligence Directive, the CSDDD as it's known, is about fostering sustainability and responsible corporate behavior and anchoring human rights in environmental and corporate governance. That's actually just been rejected by the EU Council, so that will now move into the next parliamentary mandate. So we remain keeping an eye on that one, but not currently in force. And then the Product Environmental Footprint methodology is about trying to develop testing protocols to prove product durability and lifecycle assessments. On products. Okay, so how is the EU going to land and finance all of these initiatives? Well, they've put quite a bit of thought into that, as you'd expect. So on the left-hand side, we can see how that's kind of arranged under the EU Green Deal. On the right-hand side, I've split this out into public sector funding and private sector investment. So the, so the EU has set aside a third of its 7-year budget for supporting green initiatives. And the Commission will mobilize €1 trillion in sustainable investments over the next decade. 30% of EU funding has to be for green investments, and EU countries are to devote at least 37% of the financing they receive to climate objectives. And the Commission intends to raise 30% of funds through issuance of green bonds. So lots there, but then to foster the investment side from the private investment, you'll have heard of the EU Corporate Sustainability Reporting Directive perhaps, that's in force. The broad aim of that is to provide a level playing field and clear digital reporting mandate and taxonomy so that investors can see clearly who is performing better than, than anybody else in their sustainable ventures. All of the data that is fed into the corporate sustainability reporting is going to be tagged, and again, that will feed into a central European single access point. The EU taxonomy regulations are about defining environmentally— sorry, environmentally sustainable activities, and these have to align to the EU climate and environmental objectives. Okay, so that's all quite dry, I appreciate that. What does it mean for the sustainability framework for apparel and textiles and the strategy. So as I say, in 2023 it yielded regulatory intervention for creating systemic change in the production and disposal of products. And so the EU strategy for sustainable and circular textiles sits under that Green Deal Circular Economy Action Plan, and you can see there how it's structured. So everything in blue are proposed initiatives that are still going through legislative process, But the strategy broadly holds that all textile products are durable, repairable, and recyclable, and to a greater extent made from recycled fibers, free from hazardous substances, produced in respect of social rights and the environment, and consumers should benefit longer from higher quality affordable textiles, and profitable reuse and repair services are widely available, and producers take that end-of-life responsibility as well. So what are the key pieces of Sustainability legislation for fashion, as we've touched on, it's EPR, ESPR, and the Green Claims Codes. So EPR, as we said, sits under the Waste Framework Directive, and we're looking at systems in place in France and in the Netherlands and coming to various member states near you very soon. ESPR, Sarah is going to talk to a little bit more, but that's where we first see— or we see the main mention of the Digital Product Passport. It also is mentioned in the toy safety regulations, cosmetic regulations, amongst others too. But ESPR is what we're waiting for. That's now looking to be published in 2024, 2025, and then delegated acts to follow. And the Green Claims Directive. What do we mean by Green Claims Directive? Well, a bit more detail here. If the EU decides to follow the UK, essentially the key tenets are it must be truthful and accurate, must be clear and unambiguous, and must not omit or hide important information. So there's already a lot of legislation around protecting consumers in the UK and the EU, as you can see listed out there, but the Green Claims Code and the Green Claims Directive underpin all of those in the sustainability space. Essentially what it might look like is if you're using recycled polyester, for instance, you might actually need to say this uses recycled— this uses bottles to create the polyester, or if you've got synthetic fibers in your product, you might need to say this will shed microfibers into the watercourse when it's washed. It doesn't sound that attractive, but it's the truth, and that's what this regulation is getting at. The reason we need to comply— well, the penalties, as you can see, certainly under the UK's CMA Green Claim Code, unlimited fines and up to 2 years imprisonment for responsible persons. So They're not messing about. And if the EU is similarly stringent, then obviously we all need to take notice of that. And it's the right thing to do. Just to note, in addition, France, Netherlands, Norway, Denmark, and the US have all come up with their own green claims guides already. So worth having a look at all of those as well. Okay. So what does an EPR scheme look like? Well, that's an example of the Netherlands EPR scheme there. The producer is responsible for the end of life reuse, repair, recycling, as we mentioned. They have an aim of 50% reuse and recycling by 2025, and that's rising to 75% by 2030. It's currently at 35%. The fees are low, around €0.06 per piece, but obviously that will mount up dependent on your turnover in that particular territory. What's interesting to note is eco-modulations like take-back schemes or verifiably durable products or repairs offered in a member state may go some way to mitigate those costs in future EPR schemes that are under development. So if you're a retailer, you're well to start looking at how you might start to input into some of those, some of those processes. Okay, so just wanted to leave you before I hand over to Sandra with an overview of some of what's coming at us. The red parts relate to Digital Product Passport, and obviously as you can see, they're the first ones we're expecting on products on textile products 2027 and battery products by 2027 as well. But with that, I'll hand over to Sandra. Thank you.

Yeah, thank you, Rebecca. Hi everyone, I'm Sandra Smolski. I'm the product manager for sourcing and sustainability at M&S. I look after our tech roadmap for anything related to sustainability for clothing and home at M&S. So whether it's around how we get to net zero, any kind of tools that we need to deliver that, whether it's around how we gather all of the data that we're going to need to comply with all of this legislation at scale. And then also digital product passport is something that we've, we've started looking into. So yeah, I think we, as Rebecca mentioned, the digital product passport sits as part of the ESR, the Eco-Design for Sustainable Product regulation. There's some sort of similar legislation already in place in France. Again, as you've already mentioned, in the form of the Anti-Waste Law, which is often called or is abbreviated AJEC. So what is it? It's around having a unique identifier for a product and then having data which gets connected to that identifier using a data carrier. So that's something like a QR code or an NFR, which will allow making that data available to the customer or other interested parties. That data will need to be available throughout the lifecycle of the product. and the carrier itself needs to be physically present on the product. Um, and so for textile, we're expecting that the requirement will be to have that as part of the care label of the product. Um, yeah, so let's go into that a bit more. So in terms of the aims of the ESPR, it's around how can we create sustainable products by design, um, and also support better customer decision-making when it comes to making sustainable choices. Um, so some of the key goals are around supporting the transition to the circular economy, Reducing how much waste we send into landfill with that horrific stat that you mentioned. Supporting sustainable production, extending the product lifespan, so promoting resale or reuse and making that easier. Also supporting some of the authorities around verifying compliance. Yeah, so from a brand point of view, do we have to do this? I think the answer is yes. I think you touched on some of the fines and penalties, which for EU level haven't been defined yet. But we're expecting to be in place. And then more generally, EU market access will be linked to complying with this requirement. So we're expecting the EU to set up a central registry of these unique IDs. And if you want to trade in the EU, that will basically be linked to their customs system. So you won't be able to trade those products in the EU market if you're not complying. From a product scope point of view, the way the EU's gone about this is to look at the impacts along a number of different metrics of different product categories. And as you can see, textiles and footwear score really poorly, as in very impactful. And so that's why it's going to be one of the first product categories that's going to be impacted by that. It will then be rolled out across other product categories, including cosmetics or furniture and toys as well. But yeah, we're definitely one of the first given the impact. From a consumer point of view or use case point of view, it's fairly straightforward. You scan the QR code or the NFR, whatever it is. It will take you or receive this information on the website when you're making your purchase, and then it brings you to this product sheet which provides the information. That product sheet needs to be available not just at the point of purchase, but actually throughout the lifecycle of the product, and that could differ depending on the product itself. So in the French legislation for textiles, that's 2 years from the end of that product being sold, but for toys, it's something like 10 years. So yeah, and that informs also then how you might set that up. So you'll see some of the tech providers in this space creating some really nice or compelling customer experiences where you're weaving some of that information into the customer selling journey, but then you also need to think that you're going to have to maintain some of that for longer. From a data point of view, don't worry, I'm not going to read out all of these attributes. And actually, we don't know what all of them are yet because I think, as Rebecca mentioned, we've got that overarching legislation which is cross-sector, and then we've got the delegated acts which go into specific requirements for particular product types, so textiles. And the delegated acts haven't even been drafted yet. We haven't seen the proposals yet. So from an overarching point of view, this is the kind of data that has been mentioned. So things like product identifiers, GTINs, trading compliance information such as commodity codes, then some of the traceability information around manufacturing. But even there, at EU level, we don't know how far back that's going to go. So in France, the legislation goes to sort of weaving, dyeing, finishing, sort of fabric level. But we don't know whether the EU legislation could potentially go further back than that. Back. We don't know that. And then end-user information. So again, supporting that decision-making by customers, but also interested parties. So providing things like manuals, repair information, other instructions. And then, yeah, potentially sharing some of the— that eco-label. We think that will be voluntary, but again, it's not known. So that eco-label will have things like carbon impacts or other environmental impacts. And then around making that end-of-life journey easier. So containing recycling information, disassembly or disposal information. From a— yeah, so some of the other bits of uncertainty I should highlight is around what's mandatory versus optional. We don't know that. And then we also don't know yet at what level of detail some of this information will need to sit. So some of it will be at product level. Some could be at batch level or some could be sort of unique item level. So especially some of the resale information, and that has quite a big impact on what tech tools then support this. So it's hard to make a firm decision at this point without understanding what those requirements are. And then I mentioned this element around that connection to the custom system that will be in place. Oh, sorry. So from a tech point of view, the EU has been collaborating with a number of partners as part of a consortium called SURPASS. I'm not going to do the joke and ask whether anyone knows what SURPASS stands for, because it's quite a mouthful. But basically, they— some of the things that are coming out of that trial, which we think will inform the legislation, is that the data will probably be held in a decentralized manner. So probably the brands or maybe some of the providers will host that data. But then there will be a central element where all of these unique IDs that have been approved for sale in the market will be held, and that will be centralized. So it'll be interesting to see how that comes about in more detail. So from a timeline point of view, the ESPR legislation itself is reasonably far along. So we're quite close to adoption now, we think, potentially before the election in May. So hopefully, yeah, that will give us a bit more certainty that it's definitely coming. And then we'll be waiting for the delegated acts to hear a bit more detail around what the specific specific textiles requirements are. So there we should hopefully see a draft later in the year. And then once it's adopted, which we're expecting late next year, we'll then have about, yeah, have 18 months to implement that. That's what we've been, what our current understanding is. And then I've called out the French legislation there, which is already in effect for brands selling more than 20 million into France today. I think from 1st of Jan it moves down to 10 million. So yeah, and obviously it will depend on what you're selling into that market, whether your brand is impacted by that. So yeah, in terms of what we can do now, obviously that 18-month time frame, especially for a big brand, is not a lot of time, probably for any brand. But also there's a lot of uncertainty. So these are some of the things we think we can probably get on with now. So it's first of all understanding what What legislation applies to us, to each of the brands, depending on, yeah, channels, turnover, product categories sold, etc. And then, you know, starting data mapping of the fields that have been made available, and again, there will be more that we don't know yet, but at least with those we can get maybe started and see which of them do we already capture, what effort would it take to bring in additional fields, how would you actually go about it, even if you're not implementing that yet. From a data carrier point of view, sort of starting those investigations of what the options are. Obviously, if you, if you would be using a QR code, I'm trying to look at some of the standards there. What would the requirements be? You probably wouldn't want to encode the data on the QR code itself. So it's where would that link to, and the length of that link impacts how big the QR code is, which then impacts the size of the care label. And you might then need to work through what impacts that translates to on the product or how you then deal with— again, we don't know the requirements yet from in terms of other packed products and things like that. So we'll have to wait until we hear a bit more. But the French legislation there is an interesting reference point. Yeah, and then from a target tech architecture, I think there are probably too many unknowns. But maybe starting to think about what are the source systems that we already know about, maybe having a look at some of the tools in the market to see what are the— differences between them? Would you want to create, you know, sort of that more compelling customer proposition through this, use it as an opportunity for that? Some of them do have, yeah, some interesting looking offers there. But realistically, probably it's hard to make a decision really until we know more from a legislation point of view.