The Corporate Sustainability Due Diligence Directive: Assessing the Legal and Financial Impact on the EU Fast-Fashion Industry
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Date
2025
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Saudi Digital Library
Abstract
This dissertation aims to investigate, how the CSDDD will legally and financially reshape the operational, and financial structure of the EU fast-fashion Industry. This analysis will be conducted in four parts. The first part will examine the traditional shareholder-centric approach of fast-fashion corporations within the EU and the failure of the soft approach in accommodating stakeholder interests. The second part will examine the shift in the EU’s position in terms of the incorporation of the CSDDD and the main areas of concern for the industry. The third part will include a comparative analysis, of EU fast-fashion companies including Inditex, H&M, and Primark, Identifying the different compliance burdens of art. 7,8,9,10 and 11 of the directive. Hence, identifying the potential unlevelled playing field likely to occur due to the differences in structural capacity. The fourth Part will then focus on the potential consequential economic struggles and de-growth of the fast fashion industry. Examining whether the CSDDD should be reformed to accommodate different corporate structures. Finally, the dissertation will argue that despite the short-term challenges, the directive ultimately offers the potential for a more resilient and investor-aligned industry, allowing for long- term sustainability and profitability. This, however, will be further supported by the proposed reform to ensure the commercial inclusivity of the directive, allowing for fair compliance whilst avoiding market distortIon
Description
The Introduction of the Corporate Sustainability Due Diligence Directive (CSDDD) signifies a measurable and obligatory shift towards the consideration of stakeholder interests in corporate behaviour. Therefore portraying a significant burden on the financial and structural compliance of the EU Fast-Fashion Industry known for its shareholder-centric, cost externalising, high volume/low margin business model. Thus, through a critical analysis, the different provisions of the directive including articles 7, 8, 9, 10, and 11 have been examined to demonstrate the financial, legal, and operational effects of incorporation on the traditional business model indicating that it is one of the more highly affected sectors. The paper then through a comparative analysis further examined the impact of such provisions on in-scope EU fast-fashion companies including Inditex, H&M, and Primark. Demonstrating the disproportional burdens, potentially leading to an unlevelled playing field. Where in addition to company-based burdens, the directive risks the creation of a stratifying effect on the industry disrupting effective competition, leading to market foreclosure, and the potential de-growth of the fast-fashion industry. The paper, then, whilst recognising the burdens of implementation, clearly argues against its abolishment. Displaying the deeper market failures of the original business model which led to a volatile market with long run operational and financial risks due to climate change, poor business practices, and the improper usage of natural resources. Hence, arguing that the CSDDD though costly in the short-term is a necessary step towards a more stable and profitable market. This argument, however, is further supported by the proposed reform of incorporating a deferral-capacity-based clause, which through considering the different starting positions of companies, will provide for a more effective balance, allowing for a more levelled playing field
Keywords
The Corporate Sustainability Due Diligence Directive: CSDDD, EU, Fast-Fashion Industry, Inditex, H&M, Primark