What: The EU's Omnibus Simplification Package significantly reduces sustainability reporting requirements, potentially affecting 80% of companies whilst limiting supply chain oversight to direct business partners.

Why it is important: This regulatory pivot challenges the industry's sustainability momentum at a time when 60% of consumers show increased environmental concern, potentially undermining years of progress in supply chain transparency.

The European Union's Omnibus Simplification Package represents a significant shift in sustainability regulation, sparking intense debate within the fashion industry. The proposal would dramatically reduce the number of companies required to undertake sustainability reporting by 80% and largely restrict mandatory due diligence to Tier 1 suppliers. This change comes amid growing consumer awareness of environmental issues and established industry momentum towards greater transparency and circularity. Industry stakeholders are divided over the implications. Suppliers and manufacturers welcome the reduction in bureaucratic burden, citing examples of excessive reporting requirements that drain resources without proportional benefits. However, NGOs and civil society organisations warn that limiting oversight could destabilise progress in sustainable supply chains and worker protection. The changes could particularly impact SMEs, who have invested significantly in compliance measures and may now face conflicting contractual obligations from different brands. The proposal's timing is particularly significant as it coincides with broader industry efforts to implement circular economy practices and enhance supply chain transparency. While some companies pledge to maintain high sustainability standards voluntarily, there are concerns that without regulatory pressure, brands might retreat from hard-won environmental and social commitments.

IADS Notes: Recent developments highlight the complex implications of this regulatory shift. In February 2025, the EU implemented comprehensive textile waste management requirements, while March 2025 saw the extension of CSRD compliance deadlines to 2028. Industry experts warn that up to 75% of fashion businesses could disappear within five years due to non-compliance with sustainability requirements. However, consumer behaviour continues to evolve, with February 2025 data showing 47% of global companies incorporating sustainability features in new product launches, suggesting that market forces may maintain momentum despite reduced regulatory pressure.

EU slashes sustainability red tape — at what cost?