Key Takeaways:
- Bangladesh’s ready-made garment (RMG) factories need to prepare for the reporting requirements mandated by the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), since brands required to comply with these reporting and disclosure mandates are already passing this expectation on to their supply chain partners.
- This will require manufacturers to establish rigorous due diligence procedures to address the adverse impacts of their actions on human rights and the environment, and the data these procedures will generate will become the foundations for wider value chain transparency and accountability.
- The implications of the CSDDD are significant for the entire apparel industry, as the majority of export customers in Bangladesh’s RMG sector are European, but these regulations also herald a wider shift in how brands and their partners in different regions must collaborate to both comply with market regulations and to pull ahead of future legislation.
In February 2022, the EU published a draft on its Corporate Sustainability Due Diligence Directive (CSDDD), which included its mandatory human rights and environmental due diligence (mHREDD) obligations. The Directive, which has been widely anticipated for years, requires companies to establish rigorous due diligence procedures to address the adverse impacts of their actions on human rights and their environments, including their global supply chains.
With rising global concerns for human rights, climate change and the environment and the social and economic impact these issues will have on workers and businesses, the Directive is long overdue.
In an industry like apparel, the implications of the CSDDD are significant. In Bangladesh, for example, the majority of export customers in the ready-made garment (RMG) sector are European, meaning RMG factories will need to be prepared for the wave of reporting requirements that the CSDDD will mandate.
This is not an easy task. Considering the thousands of factories that apparel brands source from globally, the sheer amount of data alone will be enormous. And, data from RMG factories is notoriously difficult to ascertain, often being close-sourced. Of the data available, there are questions around how much it can be interrogated, how often it is updated and of course, the source of the data itself and whether its reliability if it can’t be verified and validated by an independent third-party.
When it comes to sustainability data, the fashion industry prioritises meeting the Sustainable Development Goals (SDGs) pertaining to clean water and sanitation, affordable and clean energy, industry innovation and infrastructure , reduced inequalities, responsible consumption and production, climate action and life below water . However, each country follows its own governing policies when it comes to fulfilling these goals and countries often adjust its policies for different countries. It’s therefore crucial that evidence-based, environmentally sustainable governance policies are developed, that align with international rules. This will be critical in order for apparel producing countries and factories to stay competitive and for brands to be able to comply with new regulations with streamlined reporting standards.
In Bangladesh, we are already seeing factories starting to prepare for these changes by sharing data that is seemingly relevant for CSDDD and mhREDDD reporting. Our platform, Mapped in Bangladesh, is slowly starting to see an increase in the number of factories sharing highly relevant data points such as:
Details on factory certifications (such as the Business Social Compliance Initiative, LEED- green factory certification or OEKO-TEX standards, for example)
- Affiliations with other platforms (e.g. IFC-led PaCT, Better Work, Alliance for Water Stewardship, HIGG, etc)
- Whether the factory has an Effluent Treatment Plant
- Whether the factory is a member of an industry organisation (for example, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) or Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA)
- Breakdown of male vs female workers ▪ Whether the factory is solar powered
- Whether the factory has a day-care facility
- The factory’s maternity leave policy
- Whether there are gender-specific toilets
Factories that share this data will unquestionably be better placed to support their customers in complying with due diligence. In fact, qualitative feedback from factories in Bangladesh suggests that brands are already asking factories to obtain certain specifications and share specific data points as a condition to orders. And the data shows that brands are already succumbing to these demands; BGMEA recently reported that 500 RMG factories – almost 15% of all RMG factories in Bangladesh – are in the pipeline for obtaining a LEED-certified green certification.
This trend isn’t surprising. Compliance aside, brands have much to benefit from data about the full scale of their supply chains. This includes being able to highlight data gaps, managing supply chain risk, and informing the overall sourcing strategy – to name a few. And on the contrary, getting ahead of the curve and sharing this data has benefits for RMG factories too: it allows them to stay competitive and monitor competitors, can help them to generate new business leads and can help them learn best practice, if the qualitative feedback is anything to go by. In the case of a country such as Bangladesh, where the apparel sector is central to economic development, having such data available for the entire sector benefits the industry. It can provide a fuller view of how the country fares in terms of environmental and social credentials, which has the potential to bolster trade for the entire country.
However, key to this is ensuring that the data flows are accurate, streamlined and updated frequently. In order for this to happen, the industry needs independent, third-party providers to be collecting, verifying and disseminating the data. Furthermore, central to this is ensuring that this data is available to everyone, which is where platforms like ours – Mapped in Bangladesh – where data is collected via in-person factory visits for – come in. This approach ensures that anyone can benefit from the data, which extends beyond just factories and brands and also factors in media, academics, civil society organisations, governments, certification agencies and worker’s rights groups.
While our team’s work is focused on Bangladesh, the regulatory initiatives connected with labour and environmental standards do indeed have global implications. These changes are not confined to a single region; rather, they hold significance on a global scale and can also be applied to other industries. Factories that proactively start reporting data to align with the new changes now will be better prepared for shifts in client demands, and thus, will be more competitive in the long-run. And, underpinning this is the need for primary, objective, verified factory data. This is absolutely critical for all apparel production hubs, as this has long been the barrier to meaningful change.
These changes provide a clear opportunity for the RMG sector to reset. The industry can create a brighter future for both the environment and the people that work in it by learning from its mistakes and embracing and adapting the changing conditions.
