Impacts in the retail and luxury industry of the future ban on the destruction of unsold goods
Published on 1st Jun 2021
Every year in France, 630 million euros of non-food products are destroyed (1).
In some sectors, such as fashion, this phenomenon is particularly visible because collections change according to the seasons, they last a short period of time and they offer different sizes for each model, which increases the risk of unsold products.
Moreover, the fashion industry is one of the most polluting industries on the planet. It generates 1.2 billion tons of greenhouse gases per year, i.e. 2% of global greenhouse gas emissions according to the French Agency for Ecological Transition (“ADEME”) (2). All these unsold and destroyed goods represent a waste of natural resources such as water: more and more consumers are concerned about environmental protection and find this shocking.
The French government hopes to put an end to this practice with the law of 10 February 2020 on the fight against waste and the circular economy (3), which prohibits producers, importers and distributors from destroying new non-food products intended for sale (4) (such as clothes, daily hygiene products, electronic products, shoes, books, electrical household appliances, etc.). The ban covers both physical and distance selling (5).
The new system to fight against the destruction of unsold non-food products
Companies should give priority to re-employment (“réemploi”) (in particular by donating products to associations helping poor people), or else to re-use (“réutilisation”), and failing that, to recycling (6).
- Re-employment: any operation by which substances, materials or products that are not waste are used again for the same purpose for which they were intended
- Re-use: any operation by which substances, materials or products which have become waste are used again
- Recycling: any recovery operation by which waste, including organic waste, is reprocessed into substances, materials or products for its original function or for other purposes
There are exceptions for:
- products for which material recovery is prohibited, for which elimination is prescribed, or for which re-employment, re-use and recycling involve serious health or safety risks; and
- products for which the conditions necessary to achieve re-employment, re-use or recycling do not meet the objective of sustainable development.
Details are provided in Decree No. 2020-1724 (7).
Violators risk an administrative fine of up to €3,000 for a natural person and €15,000 for a legal person. The decision may also be published at the expense of the person condemned.
The investigation and recording of these violations will be carried out by the French competition, consumer affairs and fraud control officers (8).
This measure is applicable from:
- 1st January 2022 for (i) products subject to the principle of extended producer responsibility pursuant to Article L. 541-10 of the Environmental Code before 11 February 2020, (ii) hygiene and childcare products mentioned in Article R. 541-320 of the Environmental Code and for (iii) food preservation and cooking equipment, developmental toys as well as books and school supplies;
- 31 December 2023 for other products (9).
Towards a more responsible industry?
Following this new regulation, some brands may choose to use new channels like offering more promotions and destocking through specialised websites such as Veepee or TheBradery (10), opening solidarity shops like Kiabi (11), launching programmes to fight against the waste of unsold goods like Amazon (12) or building partnerships with second-hand platforms when they do not create them themselves. For the latter case, several luxury brands such as Stella McCartney or Balenciaga have partnered with the American platform The RealReal to create new clothes from unused stock (13) and brands such as Aigle (14) or Balzac Paris (15) have set up second-hand platforms to encourage their customers to give a new life to their clothes.
Other brands may not be ready to sell off their stocks to protect their image. For example, these companies may manage lower stock levels using on-demand production or 3D printing. Thanks to advances in artificial intelligence, new concepts are emerging, such as Neuro Studio (16), which offers a virtual collection and only produces the models that are actually sold.
Due to the health crisis and the closing of non-essential businesses, many companies have stocks that they will no longer be able to sell. This is the last year that these businesses will be able to destroy their unsold goods without committing an offence. From 2022 onwards, companies will have to adapt.
The administrative fine incurred appears to be relatively low but it shows the government's willingness to send a signal to companies that they must change their practices. The image with their customers and their social responsibility should be the main driver for companies to improve.