Apparel’s omnibus impacts: how to respond to regulatory rollback

At the 2024 Innovation Forum Sustainable Apparel and Textiles Conference in Amsterdam, we discussed at length the tsunami of regulation on reporting and sustainability performance facing retailers and brands alongside their suppliers and manufacturers. 

Setting out roadmaps, recalibrating resources and adopting new platforms and tools to meet legislation such as the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD) and the European Sustainability Reporting Standards (ESRS) was becoming the modus operandi, at least for larger companies in the sector. 

But in recent months, the landscape has shifted alongside increased politicisation of climate action and stagnant multilateral global negotiations on issues such as plastic use, and environmental challenges more generally.

A roll back of efforts on diversity, equity and inclusion (a critical component of the S in ESG) is now accompanied by the impact of the recently announcedEU omnibus packages of simplification on sustainability reporting regulations. Many observers see this to be a dilution of ambition, under the guise of the intention to increase global competitiveness of the EU market and a removal of red tape.

This goes alongside a reprioritisation of sustainability – only 18% of fashion executives consider sustainability as a top-three risk for growth in 2025, a decline from 29% in 2024, according to the Business of Fashion and McKinsey’s 2025 State of Fashion. 

These events beg a number of questions. Were we naïve to think it would be smooth sailing? What are the key pieces of legislation that companies should be aware of to remain on course and drive positive impact? How might delays to EU regulation limit ambition and tangible progress? Are there any silver linings? 

With the announcement of the EU omnibus package on 26th February, corporate reporting requirements have been revised. Previously, under the CSRD, large companies in the sector with turnover of €50m, or total assets exceeding €25m, and over 250 employees in a given reporting year were required to disclose information. Now, with the omnibus revision, the CSRD applies to companies with over 1,000 employees and an annual turnover of €50m. According to reports, this will reduce the number of companies in scope by a substantial 80%. Reporting deadlines for the second and third wave of companies set to comply under the CSRD have been delayed by up to two years. 

Critically, for apparel and textile players required to report to the CSRD, they no longer need to obtain data, such as information from SMEs and supply chain partners who are also not CSRD-compliant companies, thus limiting the pool of data shared about the industry’s supply chain and engagement across organisations. 

Under the omnibus revisions, sector-specific standards for the ESRS have been scrapped. At a broad level, the ESRS aimed to add technical aspects to a given company’s disclosure, with a focus on consistent reporting across ESG indicators including specific areas including climate, biodiversity, workers in the value chain and governance structures to support performance in these areas. 

By requiring companies that are listed in the EU and non-EU companies with significant operations in the region to assess and report on financial and impact materiality, it would have pushed for wider consideration and action on aligning business models to global climate targets. 

The CSDDD has also been impacted by omnibus revisions. Designed to encourage companies to develop their approach to human due diligence across the supply chain, whilst ensuring environmental impacts of activities are in line with the Paris climate agreement, it has been limited by a new scope, accounting only for direct suppliers, unless information suggests risks occur elsewhere. 

With the knowledge that the revised CSDDD will no longer cover the entire value chain, companies impacted should move beyond regulatory compliance to engage with suppliers at every tier, including agricultural sources at the farm level (tier 4) and raw material suppliers (tier 3) where opacity remains. Many grievances, such as child labour, across fashion supply chains occur in the third and fourth tiers.

Supplier monitoring, now reduced from annual requirements to once every five years, presents a risk for organisations given how quickly sourcing conditions and environmental compliance risks can change. And that’s before considering how a changing climate could impact different sourcing regions, especially in the global south such as Bangladesh and Vietnam within the space of five years. 

What’s more, no penalties will be incurred by organisations if they fall short, removing a key financial mechanism to hold players to account. When it comes to transition plans, companies need to adopt them but are not required to implement them. 

However, the European Council's adoption of the ban on EU Forced Labour in 2024, set to prohibit products made with forced labour from being sold on the market, may create a layer of due diligence that has been lost under the new CSDDD. 

Elsewhere, full implementation of the EU’s deforestation regulation (EUDR) has been postponed by one year. This means that large and medium-sized companies must be compliant by the end of 2025 and smaller businesses by June of 2026. 

By ensuring that commodities are not linked to deforestation or forest degradation, it will force companies both inside and outside of the apparel sector to review sourcing from high-risk countries and understand how actions around nature and biodiversity can help reach climate goals, including reducing greenhouse gas emissions. It will cast a particular focus on tier 4 operations for the industry at the farm level and will be pertinent to those manufacturing and selling leather goods. In the future, this could become important for items containing man-made cellulosic fibres including viscose and rayon, should the list of commodities be expanded.

Yet, the EUDR has not been without criticism. Some have said that it places a heavy burden on smallholder farmers, who need financial and technical support, alongside arguments from NGOs who argue that the rules don’t go far enough as they don’t include ecosystems like savannas and wetlands. 

When it comes to labelling, the EU Commission’s approach to the product environmental footprint (PEF) methodology for fashion and textiles has also been under scrutiny over the last year. Organisations and campaigns such as Make the Label Count Coalition argue that the current structure is not aligned with EU sustainability strategies and that it should account for the microplastic impact, incorporate a specific indicator for plastic waste management in accordance with directives, plus mirror the objectives of the Circular Economy Action Plan (CEAP) with the inclusion of a circularity indicator. For those who look to the PEF methodology to help guide decisions, it is important to keep these debates and nuances in mind. 

The tranche of other directives and facets of the EU Textile Strategy continue to evolve, whether that’s on setting concrete dates for the rollout of digital product passports (DPPs), expanding extended producer responsibility (EPR) for both clothes and packaging, plus continuing the dialogue surrounding the approved Green Claims Directive and Green Transition Directive. 

That said, elsewhere, tenets of the EU Textile Strategy continue to push the industry forward in accounting for their climate-related impacts, increasing supply chain transparency and traceability and boosting investment in infrastructure that can support circularity practices and scale low-impact fibres. 

So what was the process that led to the omnibus announcement, the reasoning behind it, and what have key stakeholders made of it all? 

In January 2025, closed-door discussions took place to decide the fate of the draft omnibus proposal, announced by the president of the European commission, Ursula von der Leyen, in November 2024 as part of the EU Compass to “regain competitiveness”. Then on 26th February, the results of the omnibus package were made public – focusing on the CSRD, CSDDD and EU Taxonomy – sending shockwaves across industries. 

The announcement of what exactly will be “simplified” has sent sustainability teams scrambling to unpack the realities of delays and new reporting requirements for themselves and their supply chain partners. 

Major global corporates, including Unilever, Nestlé, and Mars, expressed concerns earlier in 2025 that reopening regulations for amendment would lead to legal uncertainty and potentially weaken existing sustainability commitments. Now the omnibus has been announced, these concerns remain. 

Delays to the number of companies expected to report to the CSRD in the second and third wave are likely to be hugely frustrating to many companies in the apparel and textile sector. Many have invested significant time and resources in reporting to CSRD requirements and want regulation to push for better performance on environmental and social sustainability. Plus, regulatory uncertainty adds to the compounding volatility that executives face related to geopolitical tensions, tariffs and inflation. 

To put costs in context, according to Bloomberg Intelligence, the total administrative costs for all companies within the scope of CSRD are €2.1bn in one-off costs and €2.4bn in recurring costs. 

It’s not just businesses that have spoken out against the omnibus before February’s announcement. Over 150 civil society organizations, human rights and environmental groups, trade unions, and climate activists voiced opposition to delays and dilution. Simultaneously, a group of investors representing €6.6tn of assets urged European officials to not scale back ESG regulations, as reporting requirements are essential for helping asset managers and owners allocate funds appropriately. 

Are there any positives from the outcomes of the omnibus package? Any additional time could present an opportunity for companies to collect and refine data as well as invest resources in directly addressing the most material impacts in the value chain, including clear funding to support suppliers with their energy transition. 

In other areas, positive developments have also stalled a little. Alongside voluntary initiatives including the UNFCCC Fashion Industry Charter for Climate Action, which is helping guide the apparel and textile sector to stay aligned with the Paris agreement, global negotiations on plastics and nature could help focus the industry’s efforts on plastic pollution, ecosystem conversation and restoration and more. 

But, 2024 was a disappointing year for global multi-lateral negotiations. The stalling of progress at the discussions on the UN Plastics Treaty in Busan, South Korea, in December meant that no clear agreement was reached on how to limit plastic production, phase out harmful chemicals and reduce waste. As the negotiations are set to resume in 2025, it is critical for the apparel and textile sector to consider how this might impact operations. 

An ambitious Plastics Treaty could push for stronger EPR policies and place restrictions on synthetic materials such as polyester and nylon, driving a shift towards bio-based, recycled and next-gen fibre innovations. Similarly, any regulation on microplastics could lead to strict rules on shedding and testing on both natural and synthetic fibres. 

Fashion’s absence at the UN Convention of Biological Diversity COP16 in Cali, Colombia raised some eyebrows. While the convention failed to reach an agreement on key funding aspects of the Global Biodiversity Framework, apparel and textile companies should still be working at pace to reduce nature-related impacts and integrate biodiversity into business strategies. 

There are many ways in which the targets of the GBF can positively guide the industry. For instance, target 1 aims to halt biodiversity loss in key ecosystems. This could lead to tighter regulations on deforestation-linked supply chains, impacting leather, cotton, and other agricultural inputs, aligning with the EUDR. If key sourcing regions for cotton, wool, leather or cellulosic fibres fall under new protections, brands might need to shift supply chains or comply with stricter land-use rules.

With the focus on reducing pollution including chemicals, target 7 could lead to tougher rules on toxic dyes, PFAS and textile wastewater management, especially in key manufacturing hubs such as Bangladesh, India and China.

Elsewhere and aligned to EU reporting disclosure requirements, target 15 pushes businesses to assess and disclose their biodiversity-related risks, dependencies, and impacts. Leading companies are now setting Science Based Targets for Nature, including Kering Group.  

In 2025, collaboration across apparel and textiles stakeholders to pursue climate and nature-related targets, while amplifying social justice across supply chains is more important than ever. 

Amidst political headwinds, this period of transition for EU policy on supply chain due diligence, reporting disclosures and product management represents an opportunity for businesses to move beyond compliance and, regardless of how requirements may change, remain steadfast in pursuit of progress. 

This moment calls for proactive advocacy efforts, engaging with governments and pushing for bold legislation at both a regional and devolved level on issues like creating the infrastructure for a just energy transition and supporting human rights across the supply chain. 

Businesses must also recognise that the shifting pace of regulation presents an increased burden on suppliers and manufacturers. A way forward? Smarter financing, stronger partnerships, and positive feedback loops that ensure resilience across every tier. With climate risks escalating, safeguarding supply chains is no longer just about compliance, it’s about survival.