The European Union ( EU )’s ban on the destruction of unsold clothes, effective on July 19 for large companies and extending to medium-sized ones in 2030, is expected to have an immediate bullwhip effect on Asian garment manufacturers, particularly in Vietnam, Cambodia and Bangladesh, who must now align production with these circularity requirements to maintain EU market access.

The ban, announced on February 9, is part of the Ecodesign for Sustainable Products Regulation, established in 2024, which introduces a ban on the destruction of unsold apparel, clothing accessories and footwear.

Under the regulation’s rules, companies must also disclose their volumes of discarded unsold goods starting in 2027, with limited exemptions for safety or damage reasons.

This aims to curb the annual destruction of 4% to 9% of unsold textiles, which generates around 5.6 million tonnes of carbon dioxide emissions, according to an EU statement, an amount equivalent to Sweden’s 2021 net emissions.

Instead of incineration or landfilling, brands are encouraged to pursue resale, re-manufacturing, donations or reuse of unsold textiles.

However, while this ban is laudable for environmental reasons, it could inadvertently exacerbate the bullwhip effect in fashion supply chains, according to analysts, leading to greater volatility, overproduction risks and economic strain upstream.

The bullwhip effect, a well-documented phenomenon in supply-chain management, describes how small fluctuations in consumer demand at the retail level amplify into larger swings as they move upstream to wholesalers, manufacturers and raw material suppliers.

In fashion, this is particularly acute due to the industry’s fast-paced trends, seasonal cycles and long lead times.

A minor dip in end-consumer purchases, for example, might prompt retailers to slash orders by 10% to 20%, but manufacturers – fearing stockouts – could overreact by cutting production by 30% to 50%, causing suppliers to reduce output even further. This ripple creates excess inventory or shortages, inflating costs and waste.

In hyper-competitive markets like e-commerce, historical data show, overstocking is common to ensure quick deliveries, but it often leads to unsold goods piling up.

The EU’s ban directly intersects with this dynamic by removing destruction as a “safety valve” for excess stock, forcing brands to internalize the costs of overproduction.

Prior to the ban, destruction was a cost-effective, albeit unsustainable, way to clear warehouses and protect brand value – imagine, luxury houses like Burberry incinerating millions in unsold items to avoid discounting.

Now, with this destruction ban, retailers and brands may become hyper-cautious in ordering, leading to under-forecasting to minimize unsold inventory that is no longer easily disposable.

This conservative approach, analysts say, could trigger a downward bullwhip, in which a perceived demand drop prompts sharp order reductions, starving manufacturers of volume and causing layoffs or factory shutdowns in production hubs like Asia.

Conversely, if brands overcompensate by building buffer stocks to hedge against uncertainties, such as fluctuating returns from online sales ( in Germany alone there are 20 million discarded items annually ), it could amplify upward swings, leading to even more overproduction upstream.

Without addressing root causes like poor demand visibility, analysts warn, the ban risks turning a waste problem into a supply-chain crisis.

The fashion sector’s inherent vulnerabilities heighten these risks, particularly overproduction, which is baked into the business model. This involves using cheap labour in low-income countries that enables the industry to produce massive volumes, while the bullwhip effect from sudden trend shifts exacerbates imbalances.

A spike in customer demand – according to a 2023 study from ScienceDirect, entitled Product Destruction: Exploring Unsustainable Production-Consumption Systems and Appropriate Policy Responses – can result in production orders far exceeding actual needs, contributing to excess inventory destined for destruction.

“The bullwhip effect also contributes to the presence of excess inventory,” the study highlights. “This refers to a situation in which a sudden increase in customer demand causes a ripple effect of increased orders throughout the entire supply chain, resulting in production orders that outstrip actual demand.”

The EU ban, by mandating transparency and alternatives to disposal, could initially worsen this effect, according to analysts, by introducing regulatory uncertainty as clothing brands might err on the side of caution, slashing orders unpredictably, which ripples back to suppliers.

In 2023, excess stock already cost the industry up to US$140 billion in lost sales, according to The State of Fashion 2025 report published by The Business of Fashion and McKinsey & Company, with luxury giants like LVMH and Kering holding €5 billion ( US$5.95 billion ) in unsold inventory.

Post-ban, this could balloon if supply chains don’t adapt; yet, the ban also presents an opportunity to mitigate the bullwhip effect through better practices.

Industry experts are advocating for artificial intelligence-driven demand forecasting, which can reduce mismatches by 15% to 25%. For example, real-time inventory tracking, via RFID ( radio-frequency identification ) and IoT ( Internet of Things ) sensors, as used by Zara, allows agile adjustments, minimizing distortions.

Hugo Boss’ €150 million ( US$178.4 million ) investment in digital intelligence is a model that can dampen amplification, according to the report, which also notes that near-shoring production can shorten lead times.

Test-and-react models, in which small batches are produced and scaled based on sales data, cut excess by aligning output with demand. Digital product passports, required by the EU by 2027-28, will enhance traceability, helping brands forecast more accurately across the chain.

In essence, the EU’s ban is a forcing function for supply-chain resilience. While it may initially amplify the bullwhip through overcorrections, proactive adoption of technology and circular models could smooth fluctuations, reducing overproduction by design.

For the fashion industry, valued at trillions of dollars, this transition is not just environmental – it’s economic survival. These measures, as Jessika Roswall, the European commissioner for environment, water resilience and a competitive circular economy, notes, empower the textile sector towards sustainability and competitiveness. However, without holistic reforms, the whip could crack harder before it quiets.