Understanding the Corporate Sustainability Reporting Directive (CSRD)
On February 26, 2025, the European Union proposed amendments to the CSRD aimed at reducing administrative burdens on corporations and enhancing EU competitiveness. The proposed changes focus on three key areas. First, the amendments extend reporting timelines and simplify disclosures, allowing companies more time to comply while reducing the number of required data points in sustainability reporting. Second, the reporting thresholds have been increased, limiting the requirements to companies with more than 1,000 employees and annual turnover of at least €50 million or a balance sheet of €25 million, a significant change from the original thresholds of 250 employees, €50 million in net turnover, or €25 million in assets. Lastly, the revenue threshold for non-EU parent companies operating within the EU has also increased substantially, from €150 million to €450 million in EU revenue.
These revisions aim to foster a more competitive business environment across the European Union by streamlining reporting obligations. The European Commission estimates that these adjustments will reduce the number of companies required to comply with the CSRD by approximately 80%.
How Will This Affect the Fashion Industry?
While the changes aim to ease compliance burdens, their impact on the fashion industry warrants closer scrutiny.
The European fashion and textiles sector is predominantly composed of small companies. Of the approximately 143,000 companies in the sector, almost 90% are micro-companies with nine or fewer employees. Only 0.2% of European fashion and textile companies would have met the original CSRD reporting thresholds. Increasing the reporting threshold to companies with over 1,000 employees will further reduce the already small number of fashion companies required to disclose sustainability data.
Globally, employee count data for the fashion and textile industry is difficult to determine. However, it is clear that under both the original and revised CSRD criteria, only a tiny fraction of fashion and textile companies will be subject to mandatory reporting.
The Power of Large Companies to Drive Change
Although the revised CSRD reduces the number of companies required to report and simplifies the disclosures, the effect on the fashion industry may remain similar. The largest fashion companies will still need to disclose their environmental impact and supply chain practices, maintaining pressure for more sustainable operations. The large companies subject to CSRD compliance dominate the global clothing and apparel market and significantly impact industry-wide practices. The direction they set in a transition towards sustainability, highlighted in their mandatory reporting, is likely to influence the entire industry.
The hope is that these disclosures from industry leaders will continue to drive sustainable innovation in areas such as sustainable design and manufacturing, product circularity (reusing, recycling, and reducing waste) and voluntary sustainability reporting by smaller companies.
Broader Implications for EU Sustainability Policy
The recent proposed changes to the CSRD also eliminate the plan to adopt sector-specific reporting standards, and signal further simplifications to corporate sustainability regulations. European Commission President Ursula von der Leyen has stated, “EU companies will benefit from streamlined rules on sustainable finance reporting, sustainability due diligence, and taxonomy. This will make life easier for our businesses while ensuring we stay on course toward our decarbonization goals. And more simplification is on the way”.
Although the CSRD does not contain industry-specific standards for fashion and textiles, the EU has introduced other directives and regulations affecting the sector, such as:
- EU Strategy for Sustainable and Circular Textiles
- Ecodesign for Sustainable Products Regulation
- Waste Framework Directive
- Waste Shipment Directive
Whether these sustainability plans will also be simplified remains to be seen, but their futures could have a significant impact on sustainable fashion in Europe and worldwide.
The Urgency of Sustainable Change in Fashion
The fashion industry remains one of the world’s largest polluters, responsible for approximately 10% of global greenhouse gas emissions and 20% of the world’s wastewater. Each year, 92 million tonnes of clothing are discarded, with 85% ending up in landfills or being incinerated. The CSRD has been viewed as a pivotal tool for increasing transparency and compelling fashion companies to reveal their environmental and social impacts. These disclosures could catalyze significant changes in how garments are designed, produced, and recycled.
Looking Ahead: A Push for Sustainable Fashion
Despite the EU’s proposal to reduce the scope of the CSRD, there is still reason for optimism. Mandatory sustainability reporting for the largest companies can continue to push the industry toward greener practices. Moreover, increasing consumer demand for ethical and environmentally responsible clothing adds further momentum.
While the revised CSRD may exempt small and medium-sized fashion businesses, the largest market players remain under obligation to disclose their sustainability efforts. This ongoing transparency can foster a culture of accountability and drive the fashion industry toward a more sustainable future.
For more information:
Commission simplifies rules on sustainability and EU investments, delivering over €6 billion in administrative relief
https://ec.europa.eu/commission/presscorner/detail/en/ip_25_614)
EU Strategy for Sustainable and Circular Textiles
https://environment.ec.europa.eu/strategy/textiles-strategy_en
Fashion United: Global Fashion Industry Statistics
https://fashionunited.com/statistics/global-fashion-industry-statistics/european-union