As the unsustainable role of the fast fashion industry is catapulted into the spotlight, brands face growing public pressure to be “eco-friendly” and “sustainable”. However, this has in turn led to widespread greenwashing, with companies making misleading claims about their products’ environmental impact.
By adopting legislation such as The Corporate Sustainability Reporting Directive (CSRD), The Green Claims Directive and The Unfair Commercial Practices Directive (UCPD), the European Union (EU) has positioned itself as a pioneer of championing sustainable business practices. Yet a major regulatory gap remains: non-European brands remain largely unaffected by these directives.
While European companies must comply with strict regulations, many non-European fast fashion companies, especially those in e-commerce, become a more attractive option as they are able to continue selling products without following sustainable practices in the European market at substantially lower prices.
Understanding Greenwashing in Fast Fashion
Greenwashing is a tactic used by businesses to gain a commercial advantage by misleading customers about the environmental impacts their products, services or business have. Brands do this through subtle methods, like labeling products as “ethical” or “conscious” without concretely defining these words. This allows brands to be selectively transparent, where they may highlight the sustainable or recycled materials they use, while downplaying the broader environmental harm caused by their products.
Occasionally, these claims are unintentional, stemming from limited information about a product's true environmental impact. In fact, a “Green Claims” report by the European Commission found that there is “weak” or “non-existent” verification on half of all green labels in the EU. Moreover, there is no supporting evidence for around 40% of claims, and 53% of them are simply unfounded, misleading or vague. Considering that Western Europe is the world’s third largest region for textile consumption (22 kg per person), these statistics highlight the pressing necessity for strict regulation.
The EU’s Fight Against Greenwashing in Fast Fashion
To tackle these deceptive practices, the EU has begun implementing legal frameworks targeting corporate sustainability claim regulation. The CSRD mandates companies to report verified sustainability data - through independent audits - detailing their resource consumption and environmental impact forcing brands to provide measurable evidence for their environmental claims. Additionally, the Green Claims Directive, which is currently awaiting adoption, aims to put an end to misleading advertising for European companies by banning unverified sustainability claims and requiring companies to substantiate their (voluntary) “green” claims. The Corporate Sustainability Due Diligence Directive (CSDDD) goes a step further by requiring large companies to conduct due diligence across their entire value chain, from raw material sourcing to final product sales. This includes identifying, preventing, and remedying environmental and human rights abuses throughout their supply chains – a critical measure for addressing fast fashion’s global impacts. Finally, the UCPD was revised in 2019 to explicitly list greenwashing as a deceptive marketing strategy, further strengthening EU enforcement against the use of misleading sustainability claims.
The Loophole
A key weakness in the EU’s regulatory approach is the e-commerce loophole, which allows online retailers - like Shein and Temu - to sell to EU consumers without registering as a EU-based business. While European brands must comply with the CSRD and Green Claims Directive, non-European companies are outside their jurisdictional scope, leaving their deceptive marketing tactic use unchecked.
The UCPD similarly fails to regulate non-EU e-commerce brands and adds to the issue by assigning enforcement to individual member states, creating inconsistent penalties. With no jurisdiction to penalize companies outside Europe, the EU’s legal reach is limited, giving global fast fashion brands a significant competitive advantage.
Shein exemplifies the consequences of the e-commerce loophole. Despite widespread criticism for its lack of transparency and unsustainable practices, the Chinese e-commerce giant continues to grow rapidly within the EU. Thanks to this loophole, Shein avoids EU sustainability regulations while offering ultra-cheap clothing, giving it an unfair advantage over European brands. In 2023 alone, its Ireland-registered entity grew by 68%, with sales exceeding € 7 billion, all while operating largely outside the scope of the EU’s sustainability frameworks.
The EU sent Shein a Request for Information and labeled it a “Very Large Online Platform” under the Digital Services Act. Although these actions focus on consumer protection and market fairness, they don’t directly target sustainability. Tools like the “safe and sustainable e-commerce” toolbox and the Eco-design for Sustainable Products Regulation also fall short of addressing Shein’s environmental impact. Without mechanisms to enforce sustainability obligations across all market actors, this regulatory gap will persist, undermining the EU’s broader sustainability agenda.
While the CSRD and the proposed CSDDD aim to enhance corporate accountability, their impact on non-EU brands remains limited. Notably, the CSRD applies only to non-European companies with substantial EU turnover. And despite this progress, the Omnibus Directive marks a partial step back in enforcement. Originally intended to strengthen consumer protections, the final version of the Omnibus removed some of the more ambitious transparency obligations, such as stricter rules on online marketplaces and clearer accountability for product rankings and sustainability claims. As a result, it weakens the EU’s ability to hold platforms and non-EU sellers fully accountable. For more, click here.
What Needs to Change?
To close this loophole, the EU must expand its sustainability regulations to ensure that all brands selling in Europe are subject to the same rules. Several actions could be taken to achieve this.
Extending the CSRD and the proposed Green Claims Directive to all brands and fast fashion companies selling in Europe would ensure that the same sustainability reporting standards are met before participating in the EU-market.
To disincentivize and prevent brands from self-certifying their sustainability efforts, the EU could implement a mandatory third-party verification system for sustainability claims on all imports and strengthen the penalties for deceptive marketing. The EU could also impose import restrictions or financial sanctions on companies that fail to comply with sustainability regulations, a possibility hinted at in policy discussions around enforcement and due diligence obligations.
Finally, the European Commission should legally mandate that online marketplaces, including Shein’s platform, verify that all hosted brands comply with EU sustainability regulations before allowing them to sell. This could be enforced through a system of mandatory due diligence checks, transparency reporting, and penalties for non-compliance. National regulators would monitor enforcement and provide guidance to platforms on compliance standards, as outlined in the Digital Services Act and the Commission’s “toolbox for safe and sustainable e-commerce”.
Conclusion
Through the CSRD, the UCPD revisions, the proposed Green Claims Directive, and the direct claims launched against e-commerce giants, the EU has made significant progress in addressing greenwashing and creating a more transparent framework for corporate sustainability claims. Although this will ensure that European companies are held accountable for their environmental impact, failure to regulate non-European fast fashion brands remains a critical weakness.
As companies like Shein continue to expand in the European market without facing the same legal requirements, the effectiveness of EU sustainability laws is undermined.
To maintain its leadership in corporate sustainability, the EU must extend its regulations to all companies selling in Europe, enforce stronger penalties for non-compliance, and finally close the e-commerce loophole that allows global brands to evade accountability. Only by creating a level playing field for all brands can the EU ensure that its fight against greenwashing truly delivers real sustainability improvements in the fast fashion industry.
