[Guest post] How to reconcile sustainability and eradication of counterfeit goods in the fashion industry?

While fashion brands and retailers are committing to sustainability standards with increasing strength, the environmental and social impact of counterfeit goods is being neglected. This is particularly striking, giving that the range of such products is widening and the urgency to effectively manage the storage and disposal of fake fashion products escalates.

The IPKat is pleased to host the commentary below by Sara Cavagnero and Lucia Toffanin. Here's what they write:

How to reconcile sustainability and eradication of counterfeit goods in the fashion industry?

by Sara Cavagnero and Lucia Toffanin

Genuine or not?

Counterfeiting is harmful to health and safety: do we know anything about the quality/source of counterfeit products?

The latter are often made without abiding by any environmental protection criteria: are the producers in line with any standards regarding control of raw materials and supply chain?

We guess you know the answers.

These simple questions highlight that the unsustainability of counterfeiting is a multifaceted issue.

Primarily, counterfeiting is extremely attractive for organized crime. This form of criminality, over the past several years, has proven to be increasingly profitable while receiving little interest from law enforcement and policy makers. Experts have highlighted a rising tendency by organized crime to introduce counterfeit products into the legitimate supply chain, in view of selling them as originals and reaching a wider customer base. Of course, this aspect relates to organized crime’s efforts to extend its control over legal economy in various sectors, directly and indirectly. Counterfeiting provides huge funds to organized crime which can be reinvested in various activities, both licit and illicit.

On a different note, the growth of e-commerce represents one of the greatest and most challenging opportunities for the fashion industry as far as counterfeiting is concerned. On the one hand, online stores are connecting millions of people around the world, creating new opportunities for the biggest brands as well as for the small and medium ones. On the downside, the positive effects of digital progress are tarnished by the inadequate governance of the web environment. In particular, the main threats emerge when it comes to tackling illicit conducts, the impact on the goods transportation method, and the relative ease of the dissimulation of identities and supply chains.

It is one of the goals of the EU Customs Policy to keep pace with the proliferation of counterfeit products, especially in the wake of the pandemics, in parallel with a rise in the level of successful enforcement interventions. As larger amounts of infringing goods will be detected by authorities, the urgency to effectively manage the storage and disposal of such products increases.

Against this background, protecting consumers against the commercialization of fake goods, fighting against counterfeiting as a crime closely linked to environmental crimes, and the environmentally friendly disposal of seized products shall be top priorities within the EU Green Deal. This entails the implementation of sustainable solutions to manage the rising volume of counterfeit goods seized by customs authorities.

Still, the EU Commission's Roadmap for Sustainable Textiles, which aims to foster the shift to a climate-neutral, circular economy where products are designed to be more durable, reusable, repairable, recyclable and energy-efficient did not mention counterfeit goods at all.

Articles 46, 59, 61, and 69 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement, 1994) provide for the international legal framework regarding disposal procedures. The broad scheme set by these provisions is that goods that infringe on IP rights should be disposed of in such a way that prevents them from re-entering channels of commerce.

The disposal strategies currently in use range from open air-burning, shredding, crushing, burying in landfills to recycling and donation to charities. The adoption of a method depends on national regulation, the nature of goods, and right-holders’ will. In Italy, for instance, these products are simply incinerated or sent to landfill, with potentially harmful environmental consequences. INDICAM is focusing on prioritizing recycling and re-use of these goods, always preventing counterfeit products from returning to the market.

Some authorities, such as the Dubai Customs, have accepted recycling as an acceptable way of destruction since 2015. However, one of the major obstacles to the secure and environmentally friendly disposal of counterfeit goods is the lack of suitable facilities for destroying and recycling specific materials, as well as barriers to the international movement of confiscated fake goods.

When it comes to the disposal of infringing goods through non-commercial channels, such as donations to charities, many questions arise as well. Issues mainly relate to the unknown provenance of counterfeits, their indefinite (or proven poor) quality, and the likelihood of items being reintroduced into commercial channels. Nonetheless, commercially viable de-branding and re-badging technologies are under development, despite the current lack of commercial scale operations.

Finally, should the destruction of infringing goods not be avoidable, it could be taken as an opportunity to reinforce the message that counterfeiting is responsible not only for economic but also for social and environmental harm. Learning from the Asian experiences (where the destruction is attended by prominent politicians, enforcement agencies, rights holders, and advertised on national television, print, and social media) and inspired by some brand’s lateral thinking initiatives to counterfeiting, destructions should be re-conceived as a tool for educating the society and shaping public attitudes about the non-sustainability of counterfeit products.