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Fashion Gets a New ESG Framework for Corporate Due Diligence

The fashion industry has a new framework for corporate sustainability reporting.

Unveiled at the close of Milan Fashion Week on Monday, the ESG Due Diligence and Corporate Sustainability Reporting Framework will allow stakeholders to unlock a system that “introduces sustainability throughout the supply chain through serious processes of due diligence aimed at spotting, eliminating, mitigating ESG risks,” according to the Camera Nazionale della Moda Italiana (CNMI), referring to the environmental, social and governance disclosures that are gaining increasing prominence in the world of supply-chain management.

The CNMI, otherwise known as the Italian Chamber of Fashion, developed the tool in partnership with the Ethical Fashion Initiative (EFI), a program of the International Trade Commission and the secretariat of the United Nations Alliance for Sustainable Fashion, a group of UN agencies and allied organizations that promotes fashion’s contributions to the Sustainable Development Goals. It was introduced during the Milan Climate & Fashion Talks, an online event that discussed the relationship between fashion and the climate crisis with an eye on the upcoming Glasgow UN Climate Summit, colloquially dubbed COP26.

“Having a big communication event on sustainability is not enough: we also need to work on the hard part of sustainability, the scientific foundation that lies under such a glamorous event,” said CNMI president Carlo Capasa.

Indeed, when the CNMI holds its Sustainable Fashion Awards as an extension of its partnership with EFI at the legendary Teatro alla Scala next September, participating brands will not only be evaluated on their designs but their ESG performance as well. It’s all part of a growing movement to push fashion’s brightest to take meaningful action on sustainability. With the most recent Intergovernmental Panel on Climate Change report laying the blame for rising temperatures on human activity, concern about the role corporations can play in mitigating this “code red for humanity” is at an all-time high.

But with no one universal standard, the ESG landscape for fashion is fractured and diffuse, making it difficult for investors and other stakeholders to conduct an apples-to-apples comparison of where brands and retailers stand. Current and upcoming mandatory due-diligence legislation in France, Germany, the European Union and elsewhere, too, means companies are under mounting pressure to sniff out potential social and environmental abuses before they take root. Understanding where their biggest risks lie will be a critical part of the process.

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The ESG Due Diligence and Corporate Sustainability Reporting Framework, CNMI and ETI said, is founded on International Labour Organization conventions, the UN’s Human Rights Covenants and several internationally recognized standards on responsible business conduct, including those managed by the Carbon Disclosure Project, the Global Reporting Initiative, the Sustainability Accounting Standard Board and the European Union Directive on Corporate Sustainability Reporting.

Combined with an “SDG perspective,” along with the work of the UN Environment Programme and the UN Alliance for Sustainable Fashion, the new framework offers a set of common metrics that allows consistent reporting on so-called “sustainable value creation,” from facility environmental efficiency and product circularity to community capital development and respect for human rights in the supply chain. Altogether, the framework recognizes 20 areas of due diligence, 283 quantitative indicators and six levels of risk measurement.

“An ESG Due Diligence and Corporate Sustainability reporting approach allows the fashion industry to talk sustainability consistently and transparently,” said Simone Cipriani, head and founder of the EFI. “It also enables investors and consumers to make informed decisions.”