The size test counts your whole group: when a mid-market fashion brand is already covered

The ESPR ban on destroying unsold clothing and footwear applies to large enterprises from 19 July 2026 and to medium-sized enterprises from 19 July 2030. A brand reading those two dates will usually check its own headcount, find a number under 250, and file the question until 2029.

The check has a step in it that is easy to miss. Company size under these rules is not measured on the trading entity alone. Where a brand is majority-owned by a group, a trade buyer or a private equity house, the owner’s headcount and financial data are added to the brand’s own at 100 per cent. A business with 180 staff and EUR 40 million of turnover is very probably a large enterprise once that calculation is run, in which case the destruction ban has applied to it since July 2026 and the annual disclosure duty has been running for longer than that.

Nothing on the face of the Regulation mentions group structure at all, which is why the step gets skipped. The aggregation rule sits in a separate instrument, in an annex, four articles away from the ceilings themselves.

Where the ESPR size definitions actually come from

Regulation (EU) 2024/1781, the Ecodesign for Sustainable Products Regulation, sets no size ceilings of its own. Article 2 borrows them:

The definitions of ‘SMEs’, ‘small enterprises’ and ‘microenterprises’ in Article 2(1), (2) and (3), respectively, of Annex I to Commission Recommendation 2003/361/EC apply.

Annex I to that Recommendation, dated 6 May 2003, is where every number in this article lives, and it is a different instrument from the one a finance team will usually reach for.

Article 2 of Annex I defines the SME category and, inside it, small and micro. Medium-sized and large are residues. A medium-sized enterprise is what sits inside the SME category without being small or micro, and a large enterprise is what sits outside the category altogether. Neither is defined anywhere in the Regulation, which is why both have to be worked out rather than looked up.

The instrument people reach for is Directive 2013/34/EU, the Accounting Directive, which sizes companies on a two-of-three test across headcount, turnover and balance sheet total. It appears in the ESPR only as an alternative publication route for the disclosure duty, through its own Articles 19a and 29a. It does not decide whether the destruction ban reaches a business. Using it produces a different answer on a real set of accounts, and it produces that answer with confidence, which is what makes the substitution costly.

How the ceilings are built

Article 2 of Annex I sets out the category:

The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.

The headcount ceiling is mandatory, so an enterprise employing 250 people or more is outside the SME category whatever its accounts say. The two financial ceilings are joined by “and/or”, which makes them alternatives to each other, so meeting either one is enough.

A business with 180 staff, turnover of EUR 60 million and a balance sheet total of EUR 30 million is therefore still an SME on its own figures. A business with 260 staff and turnover of EUR 8 million is not.

Within the SME category, a small enterprise employs fewer than 50 people with turnover or a balance sheet total of no more than EUR 10 million, and a microenterprise employs fewer than 10 people with turnover or a balance sheet total of no more than EUR 2 million. Those two classes sit outside the destruction ban entirely. Medium-sized enterprises are covered from 19 July 2030.

What the group does to the numbers

Article 3 of the same Annex I sorts enterprises into three states, and Article 6 says what to do with each.

An enterprise is linked to another where any of the following holds: one has a majority of the shareholders’ or members’ voting rights in the other; one has the right to appoint or remove a majority of the members of the administrative, management or supervisory body of the other; one has the right to exercise a dominant influence over the other pursuant to a contract; or one, being a shareholder or member, controls a majority of the voting rights alone under an agreement with other shareholders.

An enterprise is a partner of another where it holds, alone or jointly with linked enterprises, 25 per cent or more of the capital or voting rights, without the relationship reaching the linked test.

Article 6 then sets the arithmetic. For a partner enterprise, data is added proportionally to the percentage interest in capital or voting rights, taking the greater of the two where they differ. For a linked enterprise, the position is absolute:

To the data referred to in the first and second subparagraph is added 100 % of the data of any enterprise, which is linked directly or indirectly to the enterprise in question, where the data were not already included through consolidation in the accounts.

One hundred per cent, and directly or indirectly, which reaches through an intermediate holding company to the top of the structure. A fashion brand sitting inside a group with 4,000 employees carries those 4,000 employees into its own size test. There is no partial credit for operating independently, and no threshold below which a group’s numbers stop counting once the linked test is met.

The mid-market case is the one to work through carefully. A brand with 180 staff and EUR 40 million of turnover, majority-owned by a listed group or by a private equity house holding control, adds the whole of that owner’s headcount and financials. On the combined figure it will usually clear 250 employees, and where it does, it is a large enterprise and the destruction ban has bound it since 19 July 2026. The calculation has to be run on the actual figures rather than assumed in either direction.

The investors that do not cost a business its status

Article 3(2) lists categories of holder that can sit at or above 25 per cent without the enterprise losing its autonomous standing. They are public investment corporations, venture capital companies and business angels, provided the angel’s total investment in that enterprise is under EUR 1,250,000; universities and non-profit research centres; institutional investors including regional development funds; and autonomous local authorities with an annual budget of less than EUR 10 million and fewer than 5,000 inhabitants.

Those carve-outs matter for a brand that has taken venture funding and reads the 25 per cent line with alarm. They carry a proviso in their own opening words, which is that the investor must not be linked to the enterprise within the meaning of paragraph 3, either individually or jointly. A venture investor holding majority voting rights or the right to appoint the board is linked, and the carve-out does not reach that far.

Article 3(4) runs the other way. An enterprise cannot be an SME at all where 25 per cent or more of its capital or voting rights are controlled, directly or indirectly, jointly or individually, by one or more public bodies, outside the categories just listed.

One unusual year does not move a business between classes

Article 4(2) provides a brake in both directions:

Where, at the date of closure of the accounts, an enterprise finds that, on an annual basis, it has exceeded or fallen below the headcount or financial ceilings stated in Article 2, this will not result in the loss or acquisition of the status of medium-sized, small or microenterprise unless those ceilings are exceeded over two consecutive accounting periods.

A single strong year does not make a medium-sized brand large, and a single weak year does not take a large brand back out. The data used are those of the latest approved accounting period, calculated annually, with turnover taken excluding VAT. The trigger is a set of approved accounts rather than a calendar date.

Article 4(2) is written about an enterprise crossing a ceiling on its own trading figures. Whether, and how, it applies in the year an acquisition completes is a question to put to advisers on the facts, because a change of control alters the data that goes into the test rather than the ceilings themselves. It does not help a brand that has been inside a group for several years and has simply never run the aggregation.

Annual work units, not payroll headcount

Article 5 measures headcount in annual work units. One unit is one person who worked full time in the enterprise for the whole reference year. Part-time and seasonal staff count as fractions of a unit, which matters in a business with a large seasonal retail or warehouse population.

The count includes employees, persons working for the enterprise in a subordinate position who are treated as employees under national law, owner-managers, and partners engaged in regular activity who draw a financial benefit. It excludes apprentices and students on vocational training contracts, and periods of maternity or parental leave are not counted.

For a fashion business with concession staff, seasonal warehouse cover and a franchise estate, the annual work unit figure and the payroll headcount can differ by a wide margin in either direction. The annual work unit figure is the one the test uses.

Incorporation outside the EU

Territorial scope is the second place a brand talks itself out of scope. The obligations attach to economic operators, and Article 2(46) names six roles:

‘economic operator’ means the manufacturer, the authorised representative, the importer, the distributor, the dealer and the fulfilment service provider;

Of those six, only the importer and the authorised representative are defined as being established in the Union. A manufacturer is any person that manufactures a product, or has a product designed or manufactured, and markets it under their own name or trademark, with no establishment test attached. A dealer expressly includes a person offering products to end users through distance selling.

A brand incorporated outside the EU that has garments made and sells them under its own name is a manufacturer for these purposes. The address on the certificate of incorporation does not answer the question. Where the duty lands in a particular supply chain, and on which entity within a group, is worth taking advice on with the contracts to hand.

What follows if the answer is that the brand is large

Two obligations attach, and they run on different clocks. Part 2 of this series covers which products each of them reaches.

Article 25 prohibits the destruction of unsold consumer products listed in Annex VII, which covers apparel, clothing accessories, headgear and footwear. That prohibition took effect for large enterprises on 19 July 2026. Destruction is defined at Article 2(34) to include discarding a product as waste, and Recital 55 confirms that recycling and other recovery, including energy recovery, sit inside the concept. Destruction remains lawful on ten documented grounds set out in Commission Delegated Regulation (EU) 2026/296.

Article 24 requires annual disclosure of unsold consumer products discarded, and it works differently. The difference is visible when the two provisions are set side by side.

Article 25(1) reads:

From 19 July 2026, the destruction of unsold consumer products as listed in Annex VII shall be prohibited.

This paragraph shall not apply to micro and small enterprises.

This paragraph shall apply to medium-sized enterprises from 19 July 2030.

Article 24(1) is longer, because it carries the whole disclosure obligation: the four things that must be disclosed, where they must be published, and the annual basis on which they must appear. It ends with the same two carve-out sentences:

This paragraph shall not apply to micro and small enterprises.

This paragraph shall apply to medium-sized enterprises from 19 July 2030.

What it does not contain, anywhere along its length, is a commencement sentence. Article 25(1) opens with one and Article 24 has no equivalent, so the 19 July 2026 date belongs to the prohibition alone. The 2030 sentence in Article 24 defers the duty for one size class without implying a start date for the others. For a large enterprise the duty therefore runs from the Regulation being in force.

Article 80 fixes when that was:

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Publication was in the L series at 2024/1781 on 28 June 2024, which puts entry into force at 18 July 2024. Article 79 corroborates that date from the other direction, repealing the old Ecodesign Directive with effect from 18 July 2024.

Entry into force and application are ordinarily two different things, so the next question is whether some other provision defers when Article 24 starts to apply. It does not. The Regulation’s final provisions run to Article 80 and there is no separate application article. The phrase “shall apply from” appears twice in the whole text, and both instances are article-specific triggers tied to the customs registry becoming operational. For the Regulation as a whole, in force and applicable are the same date, and the dates written into Articles 24 and 25 do the rest of the work.

Article 24 then says the first disclosure covers “the first full financial year during which this Regulation is in force”. The Regulation was in force for less than half of 2024, so for a brand on a calendar financial year the first disclosure covers 2025.

Article 24 fixes no date by which each year’s disclosure has to appear, so a brand cannot be late in the sense of missing a deadline. What it has is an obligation, for a financial year that has already closed, that it has not yet met.

What counts as destruction works through that definition in full, and part 2 of this series covers which products the prohibition reaches.

Article 25(2) closes the obvious workaround. Operators that are not themselves subject to the prohibition must not destroy unsold consumer products supplied to them with the purpose of circumventing it. The operative condition is purpose. An arrangement entered into in order to have in-scope stock destroyed by an operator outside the ban is caught. An ordinary supply relationship without that purpose is not. A brand restructuring its disposal arrangements in response to the prohibition should expect the question to be asked about why.

Stock destroyed while the brand believed it was exempt

This is the position a brand lands in when the aggregation is run for the first time, and it is the question the arithmetic raises next.

The Regulation contains no transitional provision for it. The prohibition applies to destruction occurring after 19 July 2026, and nothing in Article 25 turns on what the operator believed about its own size class at the time. Older inventory is inside the prohibition on the same terms as stock bought last month.

Nor does the Regulation set up a mechanism for putting it right. Articles 24 and 25 provide no correction procedure and no safe harbour. What Article 74(2) does say is that penalties must have regard to, among other things, whether an infringement was intentional or negligent, and to steps taken to mitigate.

That is the whole of what the instruments say on the point, and it is less than a brand in this position needs. The next steps are a question for counsel on the specific facts rather than something we can answer here. The honest observation is that the answer turns on national implementing law, and of the member states we have checked, only Germany has published one: section 19 of its Ökodesign-Gesetz (BGBl. 2026 I Nr. 191, in force 1 November 2026) sets fines of up to €100,000 for destruction in breach of Article 25.

What changes for a brand that has just moved into scope

For a brand that has moved from 2030 to 2026 on a morning’s arithmetic, the immediate question is which exits are still open for stock that comes back marked, creased or lightly damaged.

Preparing for reuse is defined in Article 3(16) of Directive 2008/98/EC, and the whole definition matters:

‘preparing for re-use’ means checking, cleaning or repairing recovery operations, by which products or components of products that have become waste are prepared so that they can be re-used without any other pre-processing;

The operations named are checking, cleaning or repairing. The clause after them limits the definition to products that have become waste, and that limit cuts in a brand’s favour twice over. Stock that has become waste and is discarded for the sole purpose of delivering it for preparing for reuse falls inside the exception at Article 2(34), so it is not destruction. Stock that never becomes waste, because the brand does not discard it and does not intend to, never engages the definition of destruction in the first place.

Preparing for reuse is one route among several. The ten derogations remain available to stock that qualifies for them, and holding stock is lawful with no deadline by which a warehouse has to be cleared.

Opera Garment Solutions is a single point of access to a network of professional garment care experts, drawing on the garment care knowledge already present in each market. Cleaning and conditioning leads that work and repair follows it. The usual starting point is a test box of a brand’s own returned stock, assessed garment by garment, which answers the scope question and the condition question at the same time.

Questions brands ask about the size test

Does the EU destruction ban apply to a brand with fewer than 250 employees?

Not on that figure alone. Where the brand is linked to another enterprise, 100 per cent of that enterprise’s headcount and financial data is added to its own under Article 6 of Annex I to Commission Recommendation 2003/361/EC. Linked means majority voting rights, the right to appoint or remove a majority of the board, dominant influence under a contract, or control of a majority of votes under a shareholders’ agreement. A group-owned brand with 180 staff is very probably a large enterprise on the combined figure.

Does the Article 24 disclosure duty also start on 19 July 2026 for large companies?

No. Article 24 sets no commencement date for large enterprises. It carries a size carve-out in the same words as Article 25(1), excluding micro and small enterprises and reaching medium-sized enterprises from 19 July 2030, and for large enterprises the duty runs from the Regulation being in force. Article 80 puts entry into force twenty days after publication on 28 June 2024, which is 18 July 2024, so the first disclosure covers the first full financial year in force. For a calendar-year filer that is 2025.

Which instrument sets the size thresholds for the ESPR?

Commission Recommendation 2003/361/EC. Article 2 of Regulation (EU) 2024/1781 adopts the definitions in its Annex I. Directive 2013/34/EU, the Accounting Directive, uses a different two-of-three construction and appears in the ESPR only as an alternative route for publishing the Article 24 disclosure.

Is the ESPR size test two of three, like the Accounting Directive?

No. The headcount ceiling of fewer than 250 persons has to be met on its own. Then only one of the two financial ceilings has to be met, because turnover of no more than EUR 50 million and a balance sheet total of no more than EUR 43 million are written as alternatives to each other.

Does venture capital investment make a fashion brand large?

Not by itself. Article 3(2) of Annex I allows a venture capital company, a business angel investing under EUR 1,250,000, a university, a non-profit research centre or an institutional investor to hold 25 per cent or more without the enterprise losing its autonomous status. That carve-out does not apply where the investor holds majority voting rights or the right to appoint the board, which makes the two enterprises linked.

Does a brand outside the EU escape the destruction ban?

Not on the basis of incorporation. Article 2(46) names six economic operator roles and only the importer and the authorised representative are defined as established in the Union. A manufacturer is any person that has a product made and markets it under their own name or trademark, with no establishment test, and a dealer includes a person selling to end users at a distance.

What about stock already destroyed while the brand thought it was exempt?

The Regulation contains no transitional provision. Article 25 applies to destruction occurring after 19 July 2026 and does not turn on what the operator believed about its size class. Articles 24 and 25 provide no correction procedure and no safe harbour. Article 74(2) requires penalties to have regard to whether an infringement was intentional or negligent and to steps taken to mitigate. Beyond that the position depends on national implementing law, and that is a question for counsel on the facts.

If a brand grows past a threshold on its own figures, when does its status change?

Not until the ceilings have been crossed over two consecutive accounting periods, under Article 4(2) of Annex I. The rule works in both directions, and it is measured at the date of closure of the accounts rather than on a calendar date. Article 4(2) is written about an enterprise crossing a ceiling on its own trading figures. Whether and how it applies in the year an acquisition completes is a different question, because a change of control alters the data going into the test rather than the ceilings, and it is one to put to advisers on the facts.

References

• European Union. Regulation (EU) 2024/1781 establishing a framework for the setting of ecodesign requirements for sustainable products. Official Journal L series 2024/1781, 28 June 2024. Articles 2, 24, 25, 74, 79 and 80, Recital 55 and Annex VII.
• European Commission. Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises. OJ L 124, 20 May 2003. Annex I, Articles 2, 3, 4, 5 and 6.
• European Commission. Commission Delegated Regulation (EU) 2026/296 on derogations from the prohibition of destruction of unsold consumer products. Adopted 9 February 2026, published in the Official Journal 22 April 2026.
• European Union. Directive 2008/98/EC on waste. Article 3, definitions.
• European Union. Directive 2013/34/EU on the annual financial statements of certain types of undertakings. Articles 19a and 29a, the alternative publication route.

This article describes the law as we understand it at 8 September 2026. It is not legal advice.