Government Reforms Taxation to Reward Sustainable Fashion Companies


The Environmental Audit Committee (EAC) in the UK investigates the social and environmental impact of disposable ‘fast fashion’ and the wider clothing industry.

Environmental impact of clothing production

Clothing production consumes resources and contributes to climate change. The raw materials used to manufacture clothes require land and water, or extraction of fossil fuels. Clothing production involves processes which require water and energy and use chemical dyes, finishes and coatings – some of which are toxic.  Carbon dioxide is emitted throughout the clothing supply chain. In 2017 a report by the Ellen MacArthur Foundation on ‘redesigning fashion’s future’ found that if the global fashion industry continues on its current growth path, it could use more than a quarter of the world’s annual carbon budget by 2050.

Mary Creagh MP, Chair of the Environmental Audit Committee, said:

“Fashion shouldn’t cost the earth. But the way we design, make and discard clothes has a huge environmental impact. Producing clothes requires toxic chemicals and produces climate-changing emissions. Every time we put on a wash, thousands of plastic fibres wash down the drain and into the oceans. We don’t know where or how to recycle end of life clothing.”

Conclusions and recommendations

The parliament recognises that fast fashion has made it affordable for everyone to experience the pleasure of style, design and the latest trends. However most sustainable garment is the one we already own and that repairing, rewearing, reusing, and renting are preferable to recycling or discarding clothes.

The Government must change the system to end the throwaway society. Often it is more expensive to repair an item than buy a new one. Many of us also lack the skills to perform more than basic clothing repairs.

The Government should make fashion retailers take responsibility for the waste they create and reward companies that take positive action to reduce waste. A charge of one penny per garment on producers could raise £35 million to invest in better clothing collection and sorting in the UK.

The Government’s recent pledge to review and consult on extended producer responsibility for the textile industry by 2025 is too slow.

The Committee is recommending:

  • the Government should publish a publicly accessible list of all those retailers required to release a modern slavery statement. This should be supported by an appropriate penalty for those companies who fail to report and comply with the Modern Slavery Act.
  • that the Companies Act 2006 be updated to include explicit reference to ‘modern slavery’ and ‘supply chains’. Statements on a business’ approach to human rights in its supply chain should be mandatory as part of the Annual Report. The Financial Reporting Council’s (FRC) Corporate Governance Code and UK Stewardship Code, and the Financial Conduct Authority’s (FCA) listing rules should likewise be amended to require modern slavery disclosures on a comply or explain basis by 2022. If this is not possible then a Corporate Duty of Vigilance Law, as in France, should be considered.
  • that the Government strengthen the Modern Slavery Act to require large companies to perform due diligence checks across their supply chains to ensure their materials and products are being produced without forced or child labour. We also recommend that Government procurement should be covered by the Modern Slavery Act.
  • that the Government works with industry to trace the source of raw material in garments to tackle social and environmental abuses in their supply chains.
  • the Government should facilitate collaboration between fashion retailers, water companies and washing machine manufacturers and take a lead on solving the problem of microfibre pollution.
  • the Government should ask the Health and Safety Executive to review the evidence and take action accordingly.
  • manufacturers must be mindful of potential risks now and should seek to reduce the exposure of garment workers to airborne synthetic fibres.
  • post 2020 SCAP should include new targets following the Ecodesign Directive, including reducing microplastic shedding.
  • that the Government reforms taxation to reward fashion companies that design products with lower environmental impacts and penalise those that do not.
  • the Government should investigate whether its proposed tax on virgin plastics, which comes into force in 2022, should be applied to textile products that contain less than 50% recycled PET to stimulate the market for recycled fibres in the UK.
  • as part of the new EPR scheme, Government and industry should accelerate research into the relative environmental performance of different materials, particularly with respect to measures to reduce microfibre pollution.
  • the Government should ban incinerating or landfilling unsold stock that can be reused or recycled.
  • that lessons on designing, creating, mending and repairing clothes be included in schools at Key stage 2 and 3.
  • the Government must end the era of throwaway fashion. It should make fashion retailers take responsibility for the waste they create by introducing an Extended Producer Responsibility scheme for textiles and reward companies that take positive action to reduce waste.
  • the Resources and Waste strategy should incorporate eco-design principles and offer incentives for design for recycling, design for disassembly and design for durability. It should also set up a new investment fund to stimulate markets for recycled fibres.
  • that the Chancellor should use the tax system to shift the balance of incentives in favour of reuse, repair and recycling to support responsible companies. The Government should follow Sweden’s lead and reduce VAT on repair services.
Source: Environmental Audit Committee