What Would Happen if Fashion Were Taxed Like Cigarettes?
By Sarah Kent, Business of Fashion
KEY INSIGHTS
Last week, France’s National Assembly unanimously passed a bill that would impose steep penalties on the sale of fast-fashion products based on their environmental impact.
The bill still needs to move through the French Senate, but if it passes, brands could face a fee of up €10 per item on products that qualify as most environmentally damaging, threatening fast fashion’s business model.
The move reflects growing regulatory scrutiny of fashion’s climate impact, as well as the way in which surging imports from companies like China’s Shein have drawn the sector into increasingly nationalist and protectionist policy debates.
Regulation can often move at a glacial pace, but a French push to impose steep penalties on fast-fashion products has passed through the initial stages of the legislative process as swiftly as a Shein drop.
The bill, which would impose hefty surcharges on fashion products based on their environmental impact, unanimously passed its first reading in the National Assembly last week and will now move to the Senate before it can become law.
France’s move is the latest in a barrage of new regulations taking aim at the fashion industry, as climate-minded policymakers look to crack down on waste, pollution and labour abuses in the sector’s supply chain.
Though fashion has been chronically under-regulated, growing awareness of the industry’s environmental impact has attracted mounting scrutiny in recent years. The rapid growth of disruptive ultra-fast-fashion brands led by China’s Shein has also helped push the topic up the political agenda.
But the French proposal drastically ratchets up the stakes for the industry compared to other efforts, with penalties that could mount as high as €10 ($10.90) per item by 2030.
If passed, it would put fast fashion in a bracket alongside products like tobacco — subject to a “sin tax” intended to be so steep that it discourages consumption. That added cost could threaten the entire economic model for brands whose market relies on selling through high volumes at bargain basement prices.
“This makes many other regulations look like a kindergarten sandbox,” said Baptiste Carriere-Pradal, co-founder and director of public-affairs consultancy 2B Policy. “Some companies could see their entire business model go to waste. It’s not a few points of EBITDA, but an entire business model that is irrelevant in France.”
What would France’s crack down on fast fashion look like?
In its current form, the French bill would introduce a raft of penalties and restrictions targeting producers of low-cost, fast-moving garments.
From next year, products would be subject to a hefty fee of up to €5 each linked to their environmental impact. This could rise as high as €10 per product by 2030, though it would be limited to no more than 50 percent of an item’s price tag.
Fashion companies that flood the market with rapidly shifting product assortments would also be banned from advertising in France. And companies would be required to provide information about the impact of their products at the point of sale and encourage re-use and repair.
Meanwhile, funds generated by the new system would be used to subsidise businesses working to improve the industry’s environmental footprint.
Though the bill is framed as a green initiative, designed to reduce excessive consumption and penalise products that damage the environment, it’s also aimed at curbing the influence of disruptive foreign ultra-fashion-fashion businesses like Shein and protecting French brands and manufacturing. That’s helped it draw wide-ranging support across the National Assembly at a time when broader climate measures are facing growing pushback for threatening domestic industry.
“What is unprecedented is that, from far right to far left, they all said ‘yay,’” said Carriere-Pradal of last week’s vote.
What counts as fast fashion?
The bill still has some way to go before becoming law and the fine print of how it would apply has yet to be ironed out.
The big question it raises is what counts as fast fashion?
Shein argues that while it has an expansive and fast-moving range of products, it only produces in small batches according to demand. The result, it says, is that very little that the company makes goes unsold, making it much less wasteful than more traditional retailers.
France is in the process of finalising its own criteria to assess the environmental performance of a product.
Companies’ scores — and the likelihood their products could be subject to hefty penalties — could change dramatically depending on how many products they place on the market each year, the length of their sales cycles, the types of material used and pricing. Whether materials and products are sourced locally will also factor into the equation.
It’s a topic that has been the subject of fierce debate for years and remains contentious.
Under the French system as it currently stands, many of the world’s biggest apparel brands, including H&M, Zara and synthetic-heavy sportswear makers, would likely come off poorly.
The companies did not provide comment.
Who pays?
The politically pointy end of all this: clothes in France will get more expensive.
The proposed law’s only impact would be to “worsen the purchasing power of French consumers, at a time when they are already feeling the impact of the cost-of-living crisis,” Shein said in an emailed statement.
But changing spending habits is exactly the point, said Cécile Désaunay, director of studies at consultancy firm Futuribles. It’s not France’s poorest consumers fueling growth at the world’s biggest fashion brands, but largely middle-class shoppers stuffing their wardrobes with products they may never even end up wearing.
“The problem isn’t a lack of affordable clothes for the most vulnerable, but rather the overproduction of poor-quality clothes that end up in wardrobes or even in bins,” said Désaunay.
Whatever happens next, the bill’s initial rapid passage puts the industry on notice. Regulators are gunning for fast fashion and they’re willing to push for legislation that could change the shape of the industry. If France keeps pressing ahead, where it leads, others could follow.
“This is definitely a game changer,” said Carriere-Pradal.