Key Takeaways:
- The European Parliament’s revised position on the CSRD and CSDDD lifts the bar for mandatory reporting to a far smaller group of companies. CSRD coverage now begins at more than 1,750 employees and €450 million in turnover, and CSDDD applies only to firms above 5,000 employees and €1.5 billion. Companies that had been preparing for deeper, multi-tier disclosure will now need to reassess how much of that work continues without a firm legislative trigger.
- Europe’s retreat sits alongside a very different direction in China, where regulators are building toward unified national sustainability disclosure standards by 2030. More than half of Shanghai Stock Exchange-listed companies already issue ESG reports, and suppliers are being asked to document value-chain impacts in greater detail. As this information is produced for China’s own system, brands sourcing from the region are likely to encounter more structured upstream data regardless of softer expectations at home.
- The practical case for visibility does not depend solely on legislation. Persistent industry challenges such as limited supplier data, cost volatility and uneven output continue to shape sourcing decisions. The shift in EU rules alters the justification but not the operational need. Reliable information about suppliers and materials remains central to managing long supply chains and planning with confidence.
At the end of last week, the European Parliament voted for a scaled back version of two of the most significant pieces of sustainability legislation in recent memory: The Corporate Sustainability Reporting Directive, and the Corporate Sustainability Due Diligence Directive. Both regulations have their intricacies – especially in the delta between promise and application – but the upshot is that thresholds for mandatory disclosure are higher than expected, and several of the more demanding requirements have been removed. As a result, fewer companies fall under the rules, and the demands made of those that do are about to become noticeably lighter.
In fashion specifically, the earlier version of the legislation set a higher bar for companies working across multi-tiered global supply chains – i.e. the vast majority of fashion businesses. Based on the expectations set by those drafts, the prevailing assumption across the market for the last couple of years has been that exhaustive due diligence and disclosure obligations were inevitable, and many companies had already begun building plans (and buying software!) around that axiom.
The key changes sit in the details. Under the Parliament’s negotiating position, companies fall under the CSRD only if they have more than 1,750 employees and over €450 million in turnover. For the CSDDD, coverage is limited to firms with at least 5,000 employees and more than €1.5 billion in turnover. The due-diligence obligations themselves are also being narrowed: reporting may focus primarily on direct business partners unless there is clear indication to look further upstream; the requirement for a mandatory climate-transition plan has been removed from the due-diligence text; and civil liability and enforcement now rest mainly with national authorities rather than a single EU body.
These shifts unsettle the strategic groundwork that companies have spent potentially years laying, and the growing sentiment in the halls of brands big and small is that technology and process initiatives already underway have now had the justification pulled out from under them. And this is also happening at a time when technology budgets are under historic scrutiny, which means that brands that had started preparing for mandatory, deep, multi-tier visibility now face a choice about how far they continue with those plans when said mandate disappears.
The surrounding technology and advisory market now also needs to take stock. Just as brands have been working towards greater upstream visibility beyond Tier 1 “direct business partners,” technology vendors, too, had been tilting their development towards multi-tier transparency with the confidence that they would have, essentially, a captive market. That market now looks a little less certain, and it’s practically a guarantee that some supply chain and sustainability technology initiatives will be pared back or eliminated now that the legislative trigger isn’t really being pulled.
But make no mistake: the argument for upstream visibility is evolving, rather than vanishing, because the problems fashion needs to tackle – thin supplier data, unpredictable costs, uneven output quality, and the occasional disruption upstream – sit outside the whims of decision-making in Brussels. For companies building traceability systems, and the customers adopting them, the emphasis now needs to fall more on day-to-day operational use cases, rather than on gearing everything toward one major compliance milestone, but the core direction remains the same.
Zoom out, and the wider landscape underlines things further, because regulatory pullback is by no means universal. China, for example, is heading the other way. More than half of the companies listed on the Shanghai Stock Exchange issued ESG reports in 2024, and the Ministry of Finance has begun rolling out trial guidance that asks firms to map and report value-chain impacts in far more detail. China has also outlined a path toward unified national sustainability disclosure standards by 2030, adding another layer for any brand with suppliers in the region.
(We should note that the relationship between government regulations and private sector compliance is less clear in countries like China, where the state directly intervenes in ways that we see less often in Europe and the United States.)
China’s environmental record, at a whole-industrial level, is familiar territory for anyone working around global sourcing. The scale of its manufacturing base shapes a lot of what happens in fashion, for better and worse, so the fact that Beijing is now pushing harder on disclosure feels worth sitting with for a moment. The drivers behind it seem less about a grand ethical swing and more about keeping the machine running cleanly enough to stay competitive. But nevertheless, the reality is that clearer reporting helps with export markets, gives outside investors something steadier to work from, and gives policymakers a way to track the environmental pressure points across an industrial system that is enormous and often unpredictable.
Because so much early production work happens in China, any change in what suppliers are required to document tends to travel with the goods, with the eventual effect being that multi-tier visibility may start from the supply side and roll into brands through sheer mass and inertia. Yarn, trims, dye ingredients and finished fabrics all move through the same upstream channels, and the information collected at that stage comes with them, whether brands have asked for it or not. Even as European rules ease, companies sourcing from China may simply see more upstream detail because their suppliers are generating it for their own regulatory reasons.
In that sense, this vote changes the backdrop rather than the basic job, and it rescopes the argument for visibility rather than doing away with it. The path ahead for selling sustainability and supply chain software directly to brands may be murkier today than it was a week ago, but the core argument stands. The day-to-day need for reliable information about suppliers, components, products, operations, and more remains unchanged, even if disclosure is no longer being forced.