Fast fashion: EU recycling plan unravels on thorny externalities

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Europe’s rag trade should learn from The Great British Sewing Bee. The TV show features a Transformation Challenge in which amateur garment makers recycle ball gowns as beachwear or trenchcoats as trousers.

Appalled by fashion’s environmental impact, the European Commission wants it to pay for processing discarded clothing. Officials hope retailers will end up using more recyclable materials, and offer repair services. The scheme would cost about €0.12 per T-shirt.

Thanks to fast fashion, garment production has doubled globally in the past 15 years. It is generating a mountain of waste. In the EU, nearly 80 per cent ends up in landfill or incinerators.

The EU plan represents a well-meaning attempt to tackle “externalities”. These are costs a business and its investors do not pay directly themselves but impose on the wider world.

The flaw in the EU plan is that the bulk of fashion’s externalities are created by its inputs rather than its outputs. For example, making one pair of jeans uses 7,500 litres of water, according to the UN.

Most serious damage occurs outside the EU, according to the European Environment Agency. Vast cotton monocultures harm the environment in China and India.

Shares in larger European fashion companies ignored Wednesday’s announcement. Some groups, such as Sweden’s H&M, are already increasing recycled materials used in their garments. In H&M’s case, this improved from 18 per cent in 2021 to 23 per cent in 2022.

Technologies to use recycled materials in production are improving. But capacity is too low for them to make a difference yet. Some recycled materials such as polyester are problematic themselves because they shed microplastics.

The EU’s timid proposals highlight a broader problem. Governments are only beginning to grapple with how to turn externalities into concrete costs for businesses.

For short- to medium-term investors, that may appear to be a cause for rejoicing. Longer term, thanks to climate change, externalities may ruin us all.