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What EU's new due diligence law means for RMG industry

AP file photo used for representational purpose only
AP file photo used for representational purpose only

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The concern expressed by European Union (EU) officials in Dhaka regarding Bangladeshi exporters' requirement to adhere to the bloc's new due diligence law regarding human rights and environmental protection is entirely understandable. Speaking at a recent discussion in Dhaka, EU Ambassador and Head of the EU Delegation to Bangladesh, Charles Whiteley, went as far as to state that if Bangladeshi manufacturers fail to comply with the due diligence rules, brands could be compelled to forego ties with the relevant entities through the imposition of sanctions and fines.

On 14 December 2023, The European Parliament Legal Committee and EU government formally agreed in principle to implement the Corporate Sustainability Due Diligence Directive (CS3D). Its enforcement will begin once it is approved by the EU parliament, which is now a mere formality. In a word, the CS3D will require European companies as well as international companies doing business in Europe to check and remedy negative social and environmental impacts throughout their operations.

To what extent Bangladesh, in general, and the RMG industry, in particular, should be concerned about the CS3D is amply clear from a comment made by a leading member of European Parliament, Lara Ianthe Wolters. Terming the law a historic breakthrough, she said, "Companies are now responsible for potential abuses in their value chain, ten years after the Rana Plaza tragedy. Let this deal be a tribute to the victims of that disaster, and a starting point for shaping the economy of the future - one that puts the wellbeing of people and the planet before profits and short-termism."

It indicates the industries' harmful impact on the environment, its dubious record relating to labour rights and unsafe working conditions prompted the EU to come up with the due diligence directive. Therefore, neither the government of Bangladesh nor RMG industry stakeholders can ignore or afford to take the directive lightly.

The EU is Bangladesh's largest export destination, accounting for 52 per cent of the country's total annual export earnings. Besides, of late, Bangladeshi apparel manufacturers have been making all out efforts to maintain duty-free market access facility to the bloc under GSP+ scheme, which could be crucial for retaining Bangladesh's competitiveness in EU market in the post-LDC era. So, the importance of adhering to CS3D cannot be overstated.

Now the question remains, is Bangladesh ready to fulfill the criteria of CS3D?

The directives will require companies to mitigate their negative impact on human rights and the environment, including child labour, slavery, labour exploitation, pollution, deforestation, excessive water consumption or damage to ecosystems. The policies are primarily designed to ensure that workers are treated fairly, have freedom of association, receive appropriate minimum wage, and steps are taken to curb pollution and depletion of limited natural resources, among other considerations.

The new law is applicable to all countries worldwide; but Bangladesh RMG industry seems to be already a few steps ahead to meet some of the requirements, thanks to the rapid growth of green garment factories, and an increasing number of factories' tendency to go green, ensure structural integrity of factory buildings, adopt energy efficient technologies and disclose their environmental, social and governance (ESG) data.

As per the directive, however, companies will have to maintain due diligence not only within their own operation of the factories, but also across their subsidiaries and the value chains, which could be tricky for the factories. In this regard, concerted efforts should be made to ensure that all RMG factories, especially small and medium ones have proper knowledge of CS3D and access to practical tools to implement the same.

However, as far as ensuing labour rights and ending forced labour issues are concerned, Bangladesh still has a long way to go. The government of Bangladesh has amended its Labour Act thrice - in 2013, 2018 and 2023 - to align its practices with expected international standards. But how the law will be implemented will remain under international scrutiny. Besides, the industry leaders claim to have eliminated child labour from the sector following the USA's introduction of Harkins Bill of Child Labor Elimination in 1994. Then comes the issue of forced labour as the new proposal calls for banning import of products made using forced labour. Officially, forced labour doesn't exist in the RMG industry. But the workers' minimum wage is so meagre that to keep pace with the increasing cost of living they have to work overtime for long excruciating hours, beyond their official duty roster. In doing so, they sacrifice everything - their personal life, family life, social life and much more.

Recently, the vice president of a large RMG business conglomerate in Bangladesh, who has been working in the sector for two decades, confided to this scribe that they have a mandatory timetable to enter corporate office 8.30 AM, but they cannot say when they leave. (Officially the leaving time is 6.15PM).

As he is one of the top-notch officials of the company, the issue of working overtime for survival does not apply to him, but as he said, "the scope of work and increased responsibilities do not permit me or those in management to leave at the designated time. We are accountable to the company owners for every moment. Our time is not our own. If a member of my family phones at 10 or 11PM to ask when I will be home,  I tell them, 'I'm still slaving in office'. It's another form of slavery. Shall I say more?"

Some of the industry leaders, however, think fulfilling the criteria the EU's CS3D demands will be extremely difficult because it's the overseas buyers who dictate the trade. They say they are constantly squeezing prices, often to the bare minimum, to ward off overseas competition in this highly competitive industry. Apparel manufactures feel the terms and conditions of buyers are purely one-sided. There is no win-win situation for both sides. Their offers are given with an audacious response, "take it or leave it." Besides in a case of shocking disparity, the Force Majeure, a provision in a contract that frees both parties from obligation if an extraordinary event directly prevents one or both parties from performing, is allegedly devised in such a way that it  benefits only the buyers, and not applicable to the apparel factories!

In the end, there is no denying compliance with the CS3D dictate is an opportunity for industries worldwide to remodel their business and become even more pro-people, more pro-environment. But a meaningful engagement of diverse stakeholders including manufactures, buyers, the government, international trade bodies and development partners is of paramount importance to increase the capacity of the RMG industry to implement the due diligence directives. With the right intent, mutual collaboration and right course of action, the industry can secure a profitable long-term future while providing their workforce a better standard of living. 

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