New rules for luxury: A simple guide to CSRD for fashion brands

The reputation of the world’s luxury fashion companies has been built on heritage, craftsmanship and exclusivity.  Today, that reputation is being increasingly shaped by the degree of transparency about sustainability practices in their operations and supply chains. Stricter regulatory frameworks, such as the EU’s Corporate Sustainability Reporting Directive (CSRD) are shifting sustainability from a ‘nice-to-have’ to a central driver of corporate decision-making and governance. Responding effectively requires an understanding of both regulatory direction and the wider business context for sustainability.

From voluntary to mandatory reporting

CSRD raises the sustainability reporting stakes, swelling the number of topics that must be covered. It’s no longer enough to highlight positive initiatives — such as supporting local artisans or launching limited collections that centre on using more sustainable materials — while keeping more complex supply chain challenges out of the public eye. Under CSRD, sustainability disclosures are given the same weight as financial reporting.

The first flurry of CSRD-aligned reports arrived at the start of 2025. This included reports from leading fashion companies, such as Kering, LVMH and Brunello Cucinelli. Some of these were lengthy, compliance-heavy documents where the uniqueness of each company’s  sustainability transformation got lost. For more insight on how luxury fashion companies addressed these and other issues in their reporting, read our latest Luxury Fashion Sustainability Benchmark. 

While the EU Omnibus simplification package will lead to disclosures being stripped back, key lessons from the first two years of reporting still apply:

• Narrative matters. While disclosures must meet legal thresholds, companies still need to communicate their vision and strategy in a clear and compelling way. It is critical to engage other stakeholders, such as customers and employees, as well as show investors how companies are innovating and building long-term resilience.
• Collaboration and preparation are key. The scope of CSRD is broad and putting together comprehensive disclosures takes cross-functional collaboration. That means starting early to get the right people involved. We offer tips on engaging others in the reporting process in Sustainability reporting: All hands on deck.
• Materiality shapes everything. Materiality is the foundation of CSRD. Luxury fashion companies must have a clear view of what matters to their stakeholders.

Understanding double materiality

The concept of double materiality is at the heart of CSRD. For luxury fashion companies, this means looking at sustainability topics from two perspectives – their environmental and social impact and how sustainability risks and opportunities affect the financial bottom line.

A robust materiality assessment is crucial for understanding the sustainability issues that actually matter to a business. Companies in the luxury fashion sector should consider :

• Impacts. Assessing impact materiality (sometimes referred to as the inside-out perspective) is about understanding how the company’s activities affect the world. This includes the environmental footprint of sourcing raw materials (such as leather, precious metals or cashmere), the carbon intensity of manufacturing and the labour conditions in global supply chains.
• Financial risks and opportunities. Financial materiality (also known as the outside-in perspective) explores how sustainability issues  impact company financial performance. This includes the financial risks of climate change disrupting agricultural supply chains (e.g. silk or cotton shortages), or impending carbon taxes eroding profit margins. It’s also about how responding to evolving consumer sentiment can open up new revenue opportunities, e.g. from embracing rental models.

Because all major reporting frameworks have materiality at their core, keeping your materiality assessment up to date is a critical tool to help you stay on track as regulation evolves. We provide our top tips in 7 steps to conduct an effective double materiality assessment.

Getting your sustainability data audit-ready

Under the CSRD, sustainability reporting is subject to limited third-party assurance, or audit, ensuring claims are verifiable and data accurate. Given the scope of reporting, it’s no longer possible to rely on isolated metrics or fragmented spreadsheets. Sustainability data must meet the rigorous standards traditionally reserved for financial accounting.

We recommend the following steps to ensure your data is audit-ready:

• Granular data collection. Credibility comes from hard data. Review your sustainability metrics to verify you are collecting detailed information against each of your targets. Granularity is key to having data that serves both external reporting and internal business cases.
• Cross-functional engagement: Environmental and social risks cannot be siloed. Closer collaboration between sustainability, finance and legal teams is essential to evaluate different outcomes and embed accurate data collection into daily operations.
• Document the process: Don’t forget to thoroughly document your data collection methodologies and processes. Providing clear evidence trails is non-negotiable as more countries require assurance of sustainability reports.

The current regulatory landscape may feel like a tug-of-war, but the business case for robust sustainability practices remains clear. By treating the CSRD not just as a compliance exercise, but as a framework to strengthen governance and risk management, luxury fashion companies can build resilience and maintain their prestige in a highly scrutinised market.

How Context Sustainability can help luxury fashion transition to CSRD

Context Sustainability supports companies on their journey towards full CSRD-alignment. Our team helps companies to complete in-depth ESRS gap analysis, double materiality assessments that analyse value chain impacts, risks and opportunities, plan clear stakeholder engagement and end-to-end CSRD reporting and management. We help clients link their CSRD approach with existing frameworks, including GRI, SASB and IFRS S1 and S2.