European Union governments backed a proposed law requiring large companies in the bloc to check if their supply chains use forced labour or cause environmental damage after Italy switched sides.

A ‘qualified majority’ of 15 EU countries making up 65 percent of the EU population had been required for the corporate sustainability due diligence directive to proceed to a final vote in the European Parliament, where lawmakers are expected to support it.

On Friday, 17 ambassadors from the 27 EU countries backed the law, with no votes against.

Belgium, which holds the six-month rotating presidency of the European Union, had twice tried unsuccessfully to secure EU support for the law as Germany and other EU members, including Italy, abstained.

Rome referred to complex negotiations involving also a new law on packaging waste, about which Italy has expressed some reservations, saying the right balance had now been struck. That law too was cleared on Friday.

With its economy focused on smaller companies, it was also among countries pushing for them to be largely excluded from supply chain audits.

Campaign group Anti-Slavery International praised the EU’s commitment to tackling forced labour, which it said affected over 20 million people around the world.

Lara Wolters, the EU lawmaker overseeing the law, said Friday’s endorsement was a step towards justice for people and the planet. Hubertus Heil, Germany’s centre-left labour minister, said he was also pleased.

Germany’s pro-business Free Democrats had led opposition, arguing it would burden business with excessive bureaucracy. Given it is part of the three-party governing coalition, it meant the government could not back the law.

The German Chamber of Commerce and Industry said the law would be a major burden and was impractical. Lobby group Business Europe said European companies would be exposed to litigation and put at a disadvantage to their global competitors, potentially forced to pull out of markets.

Under the CSDDD, due to enter force in 2028, large companies in the European Union will have to identify and take remedial action if they find their supply chains employ forced or child labour or damage the environment, such as through deforestation.

Fines for breaching the rules could be as much as 5 percent of a company’s global turnover.

Key to pushing the law through was a compromise on the definition of a ‘large company.’

The rules will apply to companies that have more than 1,000 employees and a net worldwide turnover above 450 million euros ($489.9 million). The previously proposed thresholds had been 500 employees and 150 million euros.

The rules will be phased in over a year, initially applying to firms with more than 5,000 employees and 1.5 billion euro turnover.

Reporting by Philip Blenkinsop; additional reporting by Giselda Vagnoni, Holger Hansen Simon Jessop; editing by GV De Clercq, Kirsten Donovan and Christina Fincher

Learn more:

EU Parliament, Council Agree to Ban Products Made With Forced Labour

European Union Council and the European Parliament on Tuesday reached a provisional agreement to ban the entry of products made with forced labour into the European single market.

Not so long ago, Chinese e-commerce giant Shein burst onto the fast fashion scene, threatening to unseat the likes of Zara and H&M as leaders of the category. The meteoric rise of Temu too has disrupted the industry, wooing consumers with jaw-dropping low prices — such as a pair of $0 fur boots that made the rounds on fashion media this week — at a time when spending is tight.

There have been casualties. Digital retailers like Asos and Boohoo Group lost significant share, while H&M is in a protracted slump as it struggles to find the right positioning in the market.

But two fast-fashion players have been largely immune, if not emboldened, by the new competition.

This week, Zara-owner Inditex reported record sales of €35.9 billion ($39 billion) in 2023, up 10.4 percent year-on-year. Fellow Spanish retailer Mango, a fast fashion chain similar to Zara in price and trendy assortment, also hit an all-time high with sales of €3.1 billion, a 19 percent annual lift.

Both retailers have been able to stand their ground against Shein and Temu by doing the seemingly impossible: creating an elevated consumer experience around fast fashion. In practice, that means selling higher-quality clothes (relative to Shein, at least) at higher prices, and investing in physical retail, where Shein and Temu have minimal presence.

Zara in particular has undergone a concerted push upmarket. It sells $699 leather coats and $439 leather blazers, and shoppers can find cashmere sweaters and evening dresses among the usual assortment of cheap, trendy staples. In its marketing, Zara also follows in the footsteps of luxury brands, working with photographer Steven Meisel on campaign imagery, and stylist Karl Templer for its biannual premium capsules, dubbed Studio Collections. The result is a sophisticated customer interface that starkly contrasts with the chaotic, graphic-heavy online shops of Shein and Temu.

Collaborations with London-based ready-to-wear label Studio Nicholson, which yielded two collections of elevated men’s and womenswear basics, also signalled Zara’s status as a bona fide player in fashion rather than just a fast fashion retailer.

“We see [Inditex’] proposition of good quality, good value fashion resonating more strongly even in its better penetrated region,” Jefferies analyst James Grzinic wrote in a note published Wednesday. “This at a time of growing discount propositions with poorer quality garments, and a luxury end becoming less affordable to the masses.”

The far smaller Mango has taken this cue from Zara’s playbook, investing in its own creative collaborators to differentiate its products. Last summer, it released a womenswear collaboration with Los Angeles-based label Simon Miller, followed by a menswear collection designed by heritage Italian tailoring company Boglioli in the fall.

Mango’s double-digit growth is largely driven by retail expansion. While the retailer is well known in Europe, the US market has become a key growth region. Mango opened a flagship store on New York’s Fifth Avenue in 2022, where its neighbours include Armani and the celebrity hangout The Polo Bar. Around 20 of the 130 stores Mango opened last year were in the US — currently its fifth largest market — while the brand plans to add a further 30 locations in the country by 2026. It will open 500 more stores worldwide in the next two years, taking its store count to 2,700.

The expansion is expected to help the retailer generate annual sales of €4 billion and double its net profit by 2026 as a result of the expansion, CEO Toni Ruiz told investors this week.

Meanwhile, Inditex is also investing in US retail, with Zara flagships planned for Los Angeles and Las Vegas set to open later this year.

Both retailers have invested heavily in the look and feel of brick-and-mortar locations, which has helped differentiate them from rivals, online and off. Zara in fact announced it would close 1,200 locations in 2020, or about a quarter of its footprint, but sales continued to grow because remaining stores were renovated and as a result have become more productive. Eighty of Mango’s existing stores were refurbished last year, according to the brand’s financial report.

Zara is testing a new store layout that’s bigger and more immersive in brand visuals; last year, it opened a 30,000-square-foot store in Rotterdam — just smaller than the average supermarket. CEO Óscar García Maceiras said the retailer will double the size of its flagship stores in Paris and Miami in 2024.

For now, retail is an outsize advantage against the Chinese e-commerce behemoths, which have yet to explore physical stores beyond Shein’s partnership with Forever 21.

The sustained growth for Inditex and Mango, despite brutal conditions across the retail sector, is a case study for other mass retailers struggling to engage their customers and losing market share to the likes of Shein and Temu.

By investing in the quality of products, retail experience and of creative identity, these two Spanish fast fashion retailers demonstrate the power of differentiation in the face of competition.

THE NEWS IN BRIEF

FASHION, BUSINESS AND THE ECONOMY

Federer-backed On disappoints with sales forecast and results. The shares tumbled as much as 19 percent in early New York trading, the most since On’s initial public offering in September 2021. On expects sales to grow at least 30 percent this year to 2.25 billion Swiss francs ($2.56 billion) or more.

Mango’s US expansion helps sales top $3 billion in 2023. Sales jumped 19 percent last year through a focus on party wear and fashion pieces for upmarket shoppers who are less sensitive to higher prices. Mango’s net profit rose to €172.1 million, from €81 million in 2022.

Inditex gets spring season boost from upmarket fashion. Sales jumped 11 percent at constant currencies in the first half of its spring season. Shares rose as much as 4.4 percent to a record high in early Wednesday trade after it reported the figures for Feb. 1 to March 11.

Zalando jumps as online fashion retailer sees return to growth. The stock jumped as much as 18.5 percent after the company also said late Tuesday it would buy back up to €100 million ($109 million) of shares, starting from March 13. The company expects a gross merchandise value of between 0 and 5 percent this year, after a 1.1 percent decline to €14.6 billion in 2023.

Dick’s Sporting Goods rises as sales surpass expectations. Comparable-store sales rose 2.8 percent for the quarter ended Feb. 3, much higher than the 0.8 percent predicted by Wall Street. The retailer issued an outlook for this fiscal year that fell in line with estimates.

Kering and Essilorluxottica possible suitors for Italy’s Marcolin, according to sources. Marcolin’s owner, private equity firm PAI Partners, is seeking a valuation of about 1.3 billion euros ($1.4 billion) for the company.

Li Ning considers taking the company private, sources say. Li is considering leading a consortium to buy out Li Ning Co Ltd, which has a market capitalisation of HK$52.85 billion ($6.8 billion). He owns slightly more than 10 percent of the company.

US retail sales rebound in February and weekly job claims fall. Retail sales rose 0.6 percent last month, the Commerce Department’s Census Bureau said. Consumer spending slowed as households grappled with inflation and higher borrowing costs.

EU probes AliExpress over possibly illegal online products. AliExpress could face a hefty fine after the European Commission on Thursday opened an investigation into dissemination of potentially illegal and pornographic materials. AliExpress said it respected all applicable rules and regulations in the markets where it operates.

Dior to show Cruise in Scotland. The gardens of Drummond Castle in Perthshire, Scotland will be host to Dior’s Cruise 2025 show. Maria Grazia Chiuri is expected to spotlight local traditions and collaborate with local artists and craftspeople.

THE BUSINESS OF BEAUTY

Hedi Slimane launches Celine beauty line. The designer is making a foray into cosmetics at the LVMH-owned megabrand-in-making. Celine’s Rouge Triomphe lipstick will debut in the autumn, with a full range of 15 satin-finished colours slated for January 2025.

The Body Shop files for bankruptcy in the US and Canada. The company filed for Chapter 7 insolvency putting about 400 jobs at risk including those in a distribution centre that still holds millions of dollars-worth of stock. In Canada, 33 of the 105 shops have closed, with the loss of more than 200 jobs.

CVC’s beauty chain Douglas sets terms for a $991 million IPO. The shares are being marketed at €26 to €30 each. The offering seeks to raise about €850 million for the company through the sale of new stock.

Eli Lilly partners with Amazon to deliver Zepbound and other drugs. The drugmaker said prescriptions sent to LillyDirect Pharmacy Solutions would now be delivered by either Amazon Pharmacy or Truepill, depending on the patient’s insurance coverage and other factors.

PEOPLE

Under Armour’s founder to return as CEO. Kevin Plank will return to the company as CEO, effective April 1, succeeding Stephanie Linnartz. Linnartz will step down as president, CEO and member of the board.

Allbirds names new CEO as sales slide continues. Co-founder Joey Zwillinger is stepping down and will be succeeded by COO Joe Vernachio on March 15. Allbirds announced the news as it reported that sales fell 14.7 percent in 2023 to $254.1 million, a decline attributed to lower selling prices driven by heavy discounting.

Modes hires Simon Whitehouse as CEO. Whitehouse previously led communications firm Reference Studios and JW Anderson. He will take the reins from Aldo Carpinteri, who founded the retailer, then called Stefania Mode, in Trapani, Sicily in 1971.

Naomi Campbell gets V&A exhibition. The exhibition will open in June and is sponsored by Boss. Dresses made for Campbell by Azzedine Alaïa and Valentino will be on display.

Bernard Arnault receives highest French honour. Founder of luxury conglomerate LVMH received the Grand-Croix de la Legion d’Honneur at the Elysee Palace. It’s the highest rank in a system of government recognition that dates back to Napoleon.

Harper’s Bazaar names new executive digital director. Lynette Nylander the publication from Dazed, where she most recently served as executive editorial director. In her new role, she will oversee content and strategy for the magazine’s website, including social media and report directly to editor-in-chief Samira Nasr.

MEDIA AND TECHNOLOGY

US House passes bill to force ByteDance to divest TikTok or face ban. The bill passed 352-65, with bipartisan support, but it faces a more uncertain path in the Senate. It is unclear whether China would approve any sale or if TikTok’s US assets could be divested in six months.

Chioma Nnadi unveils first cover for British Vogue. The cover stars British actress and singer FKA Twigs. It was styled by Ib Kamara and shot by Johnny Dufort in British landmarks and locations.

Compiled by Yola Mzizi.

The author has shared a Podcast.You will need to accept and consent to the use of cookies and similar technologies by our third-party partners (including: YouTube, Instagram or Twitter), in order to view embedded content in this article and others you may visit in future.

Subscribe to the BoF Podcast here.

Background:

Amir Fayo, the founder of 69 Group, marries brand architecture and art direction to create retail and hospitality concepts rooted in culture and connection. Best known for operating Egyptian stores Maison69 and Villa Baboushka, Fayo breaks with conventions to create immersive store experiences that resonate with consumers on an emotional level. Everything starts by not thinking of himself as a retailer.

“I don’t know how to do retail. Retail is structured. Retail is data. Retail is numbers … I connect to people, to how they feel, what makes them tick, what makes them be interested,” he says.

This week on The BoF Podcast, BoF founder and editor-in-chief Imran Amed sits down with Fayo to discuss his innovative attitude toward retail.

Key Insights:

• Fayo, who was born in Wales and raised in Egypt, says his architectural style is heavily influenced by his multicultural upbringing. “Egypt gave me a heart, the UK gave me my creativity and the US gave me my thinking process.”
• There are three pillars to how Fayo approaches a project. The first is building an environment in which people can form an emotional memory. The second is creating a sense of social intimacy. Finally, he remains focussed on the idea of elevating the everyday. ‘I want to elevate [mundane moments] to be something that people remember, that people want to come back to,” Fayo explains.
• When designing retail spaces, the idea of home is kept at the forefront. “When we started to define that code, I said, where is that space where there is no right and there is no wrong? It should be home,” says Fayo. “We’re going to design homes because homes should be welcoming. Homes should create belonging. Homes should create easy connections.”

Additional resources:

The Italian megabrand is releasing “Who Is Sabato De Sarno? A Gucci Story,” a short film offering a behind-the-scenes look at the new Gucci designer’s debut last September.

The move comes amid a flurry of documentaries and docu-dramas about fashion, from Cristóbal Balenciaga to The New Look.

De Sarno’s first show was a palette cleanser after the magpie maximalism of predecessor Alessandro Michele, but the brand is still struggling to tell a clear story about what his new Gucci stands for.

Learn more:

The Business of Gucci’s Designer Debut

Shares rose 4 percent following a Milan Fashion Week outing which saw Sabato de Sarno hone the brand’s universality and upscale appeal. Critics were left wanting more in ways both good and bad.

Advertisers who turn to TikTok to market to young consumers are preparing contingency plans with social media rivals in the event the short-form video app is sold or banned in the US, but they are waiting for signs of Senate action before shifting marketing budgets.

House Republicans voted Wednesday to force Chinese tech company ByteDance to sell TikTok in roughly six months, or face a ban, one of the most significant challenges to the company that has long faced questions about national security concerns.

The White House has urged the Senate to pass the bill and US President Joe Biden has pledged to sign it.

Meta’s Reels and YouTube’s Shorts, TikTok’s biggest competitors, are set to be the beneficiaries of advertising budgets if the app is banned, ad experts said.

TikTok did not respond to a request for comment. The company has said it will exercise its legal rights to prevent a ban, which it says would “take billions of dollars out of the pockets of creators and small businesses.”

“The momentum around this legislation is greater than in previous national efforts to curtail or sell off TikTok, and advertisers are keeping a sharp eye on developments,” said Jasmine Enberg, principal analyst at research firm Insider Intelligence.

If the bill progresses, “it would put us more on alert,” said Jack Johnston, senior social innovation director at Tinuiti, a digital marketing firm that has worked with brands like Revlon and E.l.f. cosmetics.

Still three digital marketing firms, including Tinuiti, told Reuters they are advising clients to keep a “business as usual” approach to TikTok, noting the viral app has survived multiple previous attempts to restrict its availability in the US, including an executive order from then-President Donald Trump in 2020 to ban it.

While advertising budgets are planned months in advance, brands can quickly place or pull ads on social media to respond to events.

Videos on TikTok can quickly set off new trends in music, fashion and beauty, and brands have flocked to the app in hopes of becoming part of major cultural moments. Insider Intelligence estimates TikTok will generate $8.66 billion in US ad revenue this year.

The high stakes involved with banning a major app like TikTok make an outright ban unlikely, one digital ad firm told clients on Wednesday, declining to be named to discuss the conversations.

A sale of the app is more likely, and the roughly six-month timeline would help brands prepare, Johnston said.

If the app is sold during the holiday season, a critical sales period for many companies, “then there is a little more urgency for brands that rely on this time of year for a bulk of their revenue,” Johnston added.

Even if marketing budgets are redirected to Reels and Shorts, there’s no guarantee the competing features could perform the same as TikTok.

“While a good portion [of TikTok users] are also active on other platforms, there is a healthy chunk that use TikTok as their primary media consumption channel. Reels and Shorts are the two logical offerings out there that most closely match TikTok’s content format, but it doesn’t mean that this is where users will flock to necessarily,” Johnston said.

By Sheila Dang in Austin; editing by Peter Henderson and David Gregorio

Learn more:

The US TikTok Ban Clears Its First Hurdle. What’s Next?

The US House of Representatives approved a bill that could ultimately lead to a ban of the app, but its path forward remains far from certain.