It is widely known that brands around the world destroy over-ordered under-sold clothing and non-expired cosmetic products (often referred to as dead stock or obsolete inventory), rather than discount the sale price or donate the items. Such brands (and in particular, clothing brands with a focus on ‘fast fashion’), are no strangers to being criticized for playing their part in the increasing volumes of wasted products entering landfills globally each year. However, recent developments at a legal and advisory level in Europe, focused on improving sustainability practices by brands and retailers, seek to prevent these activities.
In January 2020, a wide-ranging anti-waste law1 was passed in France which bans the disposal (i.e. landfilling/incineration) of any unsold non-food products. According to the French government, €630 million worth of unsold non-food products are destroyed every year in France, including between 10,000 to 20,000 tonnes of textile products (which is equivalent to the weight of one to two Eiffel Towers)2. This new law is set to come into effect at the end of 2021/start of 2022 and will secure greater retailer accountability in relation to stockpiled inventory. Companies will now have to donate or recycle their unsold items (including clothing, shoes, cosmetics, daily hygiene products, electronics, books, household appliances, etc.). For unsold basic necessities; companies will be required to allow their use, for example by donating them to specifically accredited associations that can ensure such products are utilised by an end customer in accordance with their purpose. Failure to comply with the new law may expose companies to financial penalties of €15,000 per infraction. The authority in charge of the protection of competition and consumers, which is authorised to impose such fines, may also be entitled to publish its decision online or in the press at the expense of the company being fined, which could additionally expose the offender to substantial reputational damage.
On 17 February 2020, and in alignment with the French position, the European Commission announced an investment of €101.2 million in projects under the LIFE programme for Environment and Climate Action, which aims to see EU member states halve their waste production by 2030. The executive vice president of the European Commission, Frans Timmermans, confirmed that the project is intended to transform retailer behaviour and enhance sustainability.
In the UK, the Environmental Audit Committee has called on the government to press brands to take greater responsibility for the waste that they create3, and has stated that although some parts of the fashion industry are reducing their carbon and water consumption, these improvements are outweighed by vast volumes of product waste. One Committee proposal is for retailers to pay a fine for each item of dead stock, so that it can pass through a more sustainable end of life process. However, no legislation has yet taken shape in response to the Committee’s comments. Despite there being no current legislative requirement, NHS staff have reported that many retailers have in recent weeks been opting to donate (rather than destroy) unsold fashion and cosmetic products to hospital staff, which is very much in the spirit of France’s anti-waste law.
Consumers are more mindful than ever before of what is happening to unused goods, and therefore these anti-waste initiatives are generally well received at a consumer level. Whilst brands in the retail and consumer products industries recognise the value of demonstrating transparency and sustainability in their supply chains, many have conflicting yet legitimate concerns surrounding the protection of their brand image on the basis that preserving product scarcity and prestige is critical to the success and viability of, in particular, prestige or luxury brands.
Retailers, producers, distributors and online trading platforms may now need to strategize, to the extent they are or may be in due course affected, to implement processes to donate, reuse, repurpose, recycle or upcycle unsold items in a way that minimizes the risk of brand degradation that may be suffered as a result of luxury products circulating in non-luxury supply chains (such as through charity shops or online bidding platforms). This need for a clear strategy on excess or obsolete inventory is made even more pressing by the Coronavirus outbreak; preventing sales across nearly an entire season by retailers (and with new season shipments on the way from factories), and potentially creating enormous amounts of unsold inventory. In anticipation of this, the industry is already seeing the incorporation of start-up companies that seek to assist companies with reducing their waste, in particular, by offering to act as intermediaries between affected companies and charities to facilitate the transfer of unsold goods.
With consumer pressure rising in response to published waste data, we expect to see other countries around the world take action to similarly advance the sustainable management of waste. It will certainly be an area for retailers to watch.
2. https://www.ecologique-solidaire.gouv.fr/loi-anti-gaspillage
[View source.]
