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The EU Strategy for Sustainable and Circular Textiles shows great ambition. But failure to adequately consider the challenges faced by key trade partners to adapt to these ambitions risks jeopardising the success of the strategy. More inclusive approaches to circular economy (CE) policy design, broader stakeholder consultations and technical assistance programmes should be developed to ensure the EU’s sustainable and circular textile strategy works for all along the value chain.
This article summarises the findings of a multi-country study into the potential effects of the European Union’s (EU) strategy for sustainable and circular textiles on key trade partners. Further detailed country-specific analysis can be found in the links below.
The textiles sector accounts for a significant share of global energy consumption and water pollution, with the global textiles value chain accounting for about 4 per cent of global emissions (2.1 Gt CO2e) in 2018 –about the same quantity of greenhouse gas emissions per year as the entire economies of France, Germany and the United Kingdom combined. The so-called 'fast-fashion' paradigm also relies on a production and consumption model dominated by buyer-driven global value chains, which involve human rights and labour violations that have long been the subject of international scrutiny. In addition to fuelling overconsumption in high-income countries, the industry status quo also perpetuates unsafe and inequitable working conditions.
In response to these challenges and in support of the wider EU Green New Deal and Circular Economy Action Plan 2.0, the EU Strategy for Sustainable and Circular Textiles was launched in 2022 by the European Commission. This strategy aims to transform the EU’s textile sector via a broad suite of policy measures, including the introduction of the Ecodesign for Sustainable Products Regulation (ESPR), and revisions to the Waste Framework Directive (WFD) and Waste Shipments Regulation (WSR). With its multifaceted approach, the strategy aims to not only enhance environmental stewardship but also to foster economic growth within the EU’s textile and garment sector.
The ability for non-EU value chain actors to adapt to these requirements is fundamental to the success of the strategy given that the EU imports 80% of its textiles and that half of all EU textile imports come from low- and middle-income countries. Yet the introduction of this raft of policy measures will increasingly disrupt and reconfigure global textile value chains, resulting in complicated and context-specific challenges for textile and garment suppliers to the EU and post-consumer textile recipient trading partners – the majority of which are poorly understood.
Take Ghana and Bangladesh, for example, which are deeply integrated into the textile value chain and play vital roles as key partners to the EU. Ghana imports a large volume of Europe’s post-consumer textiles. In 2022 alone, nearly 30,000 tonnes of second-hand textiles were sent to Ghana, primarily from the Netherlands, Germany and Poland. Similarly, as the largest global importer of textiles and apparel, Europe is a major market for Bangladesh. The textile trade in both countries sustains a significant number of jobs and businesses in both countries, creating extensive socio-economic dependencies on Europe.
Ghana and Bangladesh will face several challenges as a direct result of the EU strategy. For example, there is likely to be a negative impact on employment, and a lack of transition pathways for workers that are operating in a largely informal environment (27–35 per cent of the global textile workforce, according to some estimates), and particularly for women, who are over-represented in the garment sector. In Bangladesh specifically, but also in other garment manufacturing countries, high compliance costs and short transition periods for businesses mean that small- and medium-sized enterprises that do not have the resources to adapt quickly enough risk being replaced with other larger suppliers. There is also a threat to the preservation of circular skills and knowledge, as overcapacity and declining quality make it harder to trade second-hand clothing in Ghana; in Bangladesh, informal workers who rely on access to post-production waste for their livelihoods, risk losing this access as factories divert these resources to large-scale recycling facilities.
The EU is already facing pushback around the world regarding several ambitious green policies (such as the Carbon Border Adjustment Mechanism and the Deforestation Act). There is a risk that demands the EU strategy will put on non-EU value chain actors will also face increasing pushback. Reforming the way EU green policy is designed, implemented and evaluated to better take account of the impacts on non-EU actors will therefore be critical going forward. Understanding the unique challenges non-EU textiles value chain actors will face due to the EU strategy will also help provide more targeted long-term support measures to assist the most impacted value chain actors (such as MSMEs and informal workers).
This article, based on the findings of a multi-country research project (for more information, see below), aims to demonstrate to EU policymakers that, although challenging, it is possible to evaluate, to a certain extent, the possible short-, medium- and long-term impacts on trade partners (and particularly the most vulnerable and marginalized communities). In doing so, we identify critical areas for strengthening the design of the policy packages and supportive measures to aim for a win–win situation for all as well as required areas for scaled-up support to trading partners.
It is also worth noting as a point of clarity that there is currently no universal definition of what constitutes low- versus high-quality new textiles. As such, for the scenarios below, high-quality garments are considered those that will comply with future ESPR requirements (as outlined in the upcoming Delegated Act on textiles), whereas low-quality textiles are defined as those that do not comply, for example, they may exhibit the following characteristics:
There are also no universal sorting criteria for used textiles. As such, for the scenarios below this paper draws on the commonly used Grade A-D system.
In the short term (0–5 years), we predict that EU exports of both low- and high-quality used textiles, as well as unsold pre-consumer textiles, will increase, while waste textile exports to non-OECD countries will reduce. This is based on the premise that mandated separate textile collection and EPR schemes, combined with a ban on the destruction of unsold textiles, will lead to a rapid accumulation of used and unsold stock. It is likely that EU textile resharing, renewal and recycling infrastructure and systems will not scale fast enough to handle this growth, and hence there will be a strong incentive to export this used surplus stock to secondary markets and avoid costly domestic landfill or incineration fees.
The WSR will also begin to dramatically reduce waste textile exports to non-OECD countries. However, there is a risk this regulation may be circumvented by attempts to reclassify sorted post-consumer waste textiles as used textiles (the extent to which this is possible is subject to upcoming end-of-waste criteria for textiles). Imports of low-quality ‘fast fashion’ items will continue increasing prior to the ESPR delegated act for textiles coming into full force.
These short-term changes will impact major producer countries by restricting access to textile waste and used textiles, which are needed to provide the feedstock for recycled materials, while at the same time paradoxically increasing ecodesign market access requirements (including minimum recycled content requirements). They will also impact used-textile destination markets in the short term by increasing volumes of trade, bringing opportunities for additional sales but also potentially putting further pressure on local waste management systems already struggling to cope with current volumes.
In the medium term (5–10 years), we expect exports of used and unsold textiles to begin stabilising and eventually plateau as domestic capacity to resell, repair and recycle used textiles within the EU improves. Volumes will remain high due to the continued collection of pre-ESPR low-quality legacy textiles. Exports will likely continue to reduce in quality (i.e. textiles that are too poor quality to extract economic value from in the EU). As such, destination markets for used textiles will increasingly receive lower-quality consignments leading to lower profit margins and higher levels of pre-sale discards to waste. Demand for imports of low-quality items will begin to plateau, while demand for higher-quality ESPR-compliant imports will begin to slowly increase.
In the longer term (10-plus years), we expect all exports of used textiles, unsold goods and textile waste to plateau or decline, while imports in high-quality textiles will rapidly rise and low-quality textile imports will rapidly drop.
These medium- to long-term changes are likely to require large used textile and textile waste recipient markets to either transition away from used textile and textile waste activities or to attempt to source feedstock from alternative markets such as the US and China, where WSR is less stringent and domestic repair and recycling capability is limited. Suppliers in non-EU producer countries (particularly micro, small and medium-sized enterprises) will face a major challenge in transitioning from a fast-fashion industrial complex to producing high-quality, sustainable and circular textiles while at the same time demonstrating high levels of supply chain transparency and traceability.
As a result of these impacts, the EU strategy may lead to a series of unintended consequences. For example, market access requirements may simply become too challenging and costly and producers in non-EU countries choose to pivot to other growing but less stringent markets, particularly in the Global South. This may result in less market choice for EU textile procurers and increased average prices.
Second, simply restricting exports of EU textile waste and used textiles to secondary markets may have the counter-effect of increasing environmental and social impacts in these destinations and importers will be forced to source from countries and regions with weaker textile waste sorting and export regulations. As such, it is important for the EU to take a proactive approach to mitigating these potential consequences, which, if they become true, could threaten the overall success of the EU textiles strategy.
A detailed overview for the potential short-, medium- and long-term impacts of the EU textiles strategy on Bangladesh and Ghana will are available.
1. Recognise the extent of EU circular policy success dependence on third-party trade partners. Engaging proactively with textile trade partners, both upstream and downstream, offers the EU significant opportunities to harness the benefits of global circular value chains and reduce the cost of transition. By collaborating with textile trade partners, the EU can tap into its expertise in upcycling, reselling and recycling textiles, helping to close the loop on textile production and consumption. This approach not only supports the EU’s sustainability goals, strengthens economic ties, and promotes innovation in circular practices.
In lieu of the imminent risk of increased tariffs being imposed by President-elect Trump and the growing risk of inflation in the EU, greater consideration should also be given to how the circular textile transition can be achieved in the most cost-effective manner. This involves exploring the synergistic benefits of closer cooperation with key trade partners, drawing on their competitive advantages related to textile repair, upcycling and recycling.
2. Improve the EU policy impact assessment process. Impact analysis and consultation processes are currently insufficient to identify and quantify: (i) the level of EU dependence upon non-EU value chain actors to achieve EU circular economy (and broader environmental) policy goals; (ii) the willingness and ability of these value chain actors, with the support of the European Union, to adapt to new requirements; and (iii) the socio-economic policy impacts on the most marginalized value chain actors. It is, therefore important that the EU improves the ex- and post-ante policy impact assessment process by including evaluations of likely impacts on trade partners (similar to that conducted by this project).
In tandem, it is important to improve the consultation process beyond ‘Have your say’, to ensure the trade partners the EU is most reliant upon for domestic policy success submit perceived challenges they may face and recommendations for policy improvement.
3. Facilitate investments and access to finance to upgrade textile production facilities to enable circular solutions. The EU can facilitate investments by leveraging the European Investment Bank (EIB) and other European development finance institutions (e.g. KfW) to collaborate closely with local development banks, creating credit lines specifically tailored to circular economy initiatives in the textile sector.
To support the smaller players that form a large part of the textile ecosystem, the EU should consider making microloans available through local banks, targeting very small businesses and cottage industries that use textile waste as resources but are excluded from traditional financing.
By allocating grants and public funding to support informal actors involved in textile waste collection and sorting, the EU can promote inclusion and enable sustainable textile waste management practices, critical for achieving textile circularity on a broader scale.
4. Improve working conditions and strengthen workers’ rights. The EU may consider providing ongoing support to improve working conditions and workers’ rights at all stages of the textile value chain. For an inclusive circular textile value chain, enabling decent working conditions for workers engaged in the collection, sorting, processing and recycling of secondary textile materials and waste is crucial. The Corporate Sustainability Due Diligence Directive includes ambitious measures for access to remediation and decent pay, but without adequate representation and the right tools to access these rights, the impacts will not be felt. This would not only benefit the local workforce but also, with regard to activities operating in reuse and recycling, ensure that circular textile practices are built on fair and equitable labour standards as well as ensuring the products produced by this workforce maintain long-term access to the EU market.
5. Build technical capacity to implement digital product passports (DPP) for textiles upstream and downstream. This requires a phased approach, engaging key stakeholders such as manufacturers, suppliers, local governments, traders and recycling entities. In the first phase, which focuses on production, capacity-building should prioritize digital skills and data management for manufacturers and suppliers to track and document essential product information like material composition, carbon footprint, production processes and sourcing data. Training programmes and technical support in digital literacy, data entry and systems integration will be essential to ensure the accuracy and interoperability of DPPs across textile value chains.
As the textile DPP expands over time to incorporate end-of-life and recycling data, capacity-building efforts must extend to waste collectors, sorters, second-hand traders and recyclers, equipping them with digital tools and knowledge to input information on product disposal, reuse potential and recycling status.
6. Establish EPR transboundary fee transfer. Used textiles will continue to be exported to non-OECD countries thereby transferring the cost burden of waste management. The expense of preparing items for reuse is a significant factor in material being discarded as waste as retailers and upcyclers cannot bear the cost of preparing increasingly poor-quality clothing for reuse (and these costs are not currently accounted for within EU EPR costing evaluation). Without funds to prepare unbaled garments for reuse, second-hand retailers report that the items are being sold at a loss or given up as waste.
To address the ongoing risk of offshoring used textile and textile waste handling costs to secondary markets, the EU should consider embedding transboundary transfer payments within its guidelines for EU textiles EPR. This would ensure that the polluter pays principle – the goal of the EPR – is more likely to be fulfilled by ensuring sufficient funding is available to manage exported textile items at their end-of-life. This approach will help create a more accountable and sustainable system for handling textile waste beyond EU borders. Alongside EPR fee transfer, direct support for establishing domestic EPR schemes and producer responsibility organizations could also be provided.
7. Facilitate technology transfer for textile renewal. The EU should strengthen commitments to facilitating technology transfer for key textile trade partners, along with improved access to recycling services. Enhancing local capacity for textile renewal and recycling will enable these countries to fully participate in circular value chains, driving global sustainability goals forward.
8. Pursue international collaboration to identify pragmatic trade facilitation and regulation solutions for unsold, used and upcycled textile products. Recognizing that a global effort is required to transition to a sustainable and equitable textiles sector, the EU should take a proactive stance to support and coordinate at the global scale ongoing initiatives to identify pragmatic trade facilitation and regulation solutions for unsold, used, upcycled and waste textile products. This coordinated effort will help address systemic challenges and promote a just transition across the textile industry worldwide.
Currently, there is no clear distinction between unsold, used and upcycled textiles, all classified under the HS code 6309 (worn clothing). This lack of differentiation complicates trade, especially as bans on destroying unsold textiles increase, potentially harming local markets and repair industries. Upcycled textiles, which support circular economy goals, also face trade barriers due to ambiguous waste definitions.
Technically, unsold and many upcycled textiles should not be classified under HS6309, as this category requires (i) visible wear and (ii) bulk packaging. However, without specific classifications, producers often use HS6309 for lower duties, risking significant penalties if customs audits determine non-compliance.
The lack of separate classifications for unsold and upcycled textiles hinders the development of circular textile value chains. Solutions could include revising HS codes or introducing new classifications in the HS2028 revisions, similar to the successful e-waste addition in HS2022. Alternatively, establishing production and traceability standards could prevent misclassification.
A coalition involving the EU, key trading nations and institutions such as the World Customs Organization could drive these changes. Revising multilateral agreements, such as adding textile waste to the Basel Convention, may also help but could increase costs for recipient countries and potentially decrease second-hand trade while encouraging fast fashion consumption.
9. Improving provisions within trade and economic agreements. The EU has an opportunity to strengthen existing economic and trade partnership agreements with key textile trade partners to include commitments supporting collaborative actions. This could involve enhanced commitments to facilitating technology transfer, necessary financial transfers, cooperation on innovative trade facilitation, and harmonization of policy and standards. Support for capacity-building, particularly for third-party auditing of recycling facilities in line with waste shipment regulations, would be valuable.
Additionally, the EU could establish partnerships with countries importing used textiles, enabling renewal and upcycling for reimport to meet shifting market demands. Consideration should be given to incentivizing this process under existing EU regulations, such as the ESPR and WSR.
Funded by Laudes Foundation and the German Federal Ministry for Economic Cooperation and Development (BMZ), with the support of Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ); and led by a consortium of globally leading circular economy organizations (Chatham House, Circle Economy Foundation, European Environment Bureau), this project aims to co-design an EU circular textiles policy framework that is informed by data and includes the perspectives of key stakeholders.
Textile Trade Flow and Employment Baseline Analysis Ghana
Textile Trade Flow and Employment Baseline Analysis Bangladesh
Circular textiles policy review Considerations for EU trading partner countries
Socioeconomic Impacts of European Union Circular Textiles Policies on Trading Partners
In response to the social, environmental and economic challenges associated with the current linear and wasteful global textiles sector, and in support of the wider European Union (EU) Green New Deal and Circular Economy Action Plan, the Strategy for Sustainable and Circular Textiles was launched in 2022. This strategy aims to transform the EU’s textile sector via a broad suite of policy measures. With its multifaceted approach, the textiles strategy aims to not only enhance environmental stewardship but also to foster economic growth within the EU’s textile and garment sector.
