Coping with EU’s new rules is hard for garment sector

The RMG sector’s future performance will largely be 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. 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. There is also a 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 violations.
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.
The supply chain laws in the EU and individual member states may affect businesses in the developing countries that supply to the EU. With the growing global tension over the anticipated great recession, Bangladesh should take effective steps to earn foreign currency through RMG exports and remittance inflow. Coping with the new rules is hard to comply with; however, we have very few choices without doing it.