RMG exports to EU will depend on ESG compliance

Al Amin :
Bangladesh’s export-oriented readymade garment (RMG) industry’s future performance will be largely dependent on Environmental, social, and governance (ESG) compliance.
Incorporating ESG issues, the European Commission adopted a proposal for a Directive on corporate sustainability due diligence in February 2022 as part of the Green Deal and ‘Fit for 55’ package.
It aims to promote human rights and environmental protection, ensure a level playing field for EU businesses and eliminate fragmented regulatory supply chains’ due diligence enacted by EU member countries.
The directive requires EU companies, as well as some non-European companies doing significant business in Europe, to evaluate their actual and potential impacts on human rights and the environment throughout their operations and down their supply chains and to take steps to prevent, mitigate and remedy any identified human rights and environmental harms.
Germany and France have already enacted similar supply chain regulations. The German Supply Chain Act will be effective from January 2023, while France enacted similar regulations in 2017.
In partnership with the Ethical Trading Initiative (ETI), Marks and Spencer has already announced that it will be making a “responsible exit” from sourcing in Myanmar following concerns over human rights violations.
There is also similar risk of Bangladesh’s apparel as several right bodies including Human Right Watch and European commission are repeatedly accusing the country of human rights violation.
Apparel exporters, however, said that there is no risk of hurting RMG to EU so far, as the situation is yet to be deteriorated such a level.
Md Shahidullah Azim, Vice-President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told The New Nation, “The situation is yet to be created for stopping apparel sourcing from Bangladesh. But the EU has placed 17 observations including human rights, democracy and work place safety to provide duty-free facility in the post LDC era.”
The requirements are also globally acknowledged and we must follow these, he said. Dr MA Razzaque, Chairman of Research and Policy Integration for

Development (Rapid), said, “With many green garment factories, Bangladesh has already taken a considerable stride forward. But, the RMG industry has several additional ESG challenges, such as excessive water usage, weak labour standards, and inadequate waste management.”
Unless considerable consideration is paid to enhancing ESG compliance, attracting foreign investment, and increasing exports-which Bangladesh desperately needs given its impending LDC graduation-would be a daunting prospect under such conditions and given the shifting global trade and investment regimes, he said.
The supply chain laws in the EU and individual member states may affect businesses in the developing countries that supply to the EU including Bangladesh.
Companies will have to monitor and undertake the required due diligence exercise in their entire supply chain to whether suppliers are ensuring non-violation.
Therefore, non-EU businesses including Bangladesh will have to comply with the directive. The EU is an important export destination and a major source of investment for Bangladesh.
The due diligence could also increase the cost of doing business for Bangladeshi exporters, affecting their competitiveness. It is high time that these issues are taken into consideration in firm-level business and national-level export-development strategies, Razzaque said.