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October 21, 2022

Apparel sector demands effective, mandatory human rights due diligence for EU

Business and multi-stakeholder initiatives from the apparel industry are working together to advance effective mandatory human rights due diligence at the EU level.

By Laura Husband

The apparel sector is presenting joint recommendations on the EU Corporate Sustainability Due Diligence (EU CSDD) that was proposed on 23 February 2022 and deemed a very important step.

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The signatories of a joint letter support the commitment of EU decision makers to implement a regulatory approach to due diligence, in order to ensure companies are taking their responsibility to respect human rights and the environment throughout their value chains.

The apparel organisations making the recommendations include:

  • Amfori (open and sustainable trade organisation)
  • Ethical Trading Initiative (alliance of companies, trade unions and NGOs for workers’ rights)
  • Fair Wear Foundation (international multi-stakeholder organisation)
  • Sustainable Apparel Coalition (independent and impact-creating organisation)
  • Transformers Foundation (unified voice representing the denim industry)

The manufacturer associations from the Sustainable Terms of Trade Initiative include:

  • Turkish Clothing Manufacturers Association (TCMA)
  • Moroccan Association of Textile and Apparel Industries (AMITH)
  • Apparel Export Promotion Council of India (AEPC)
  • Association of Indonesian Apparel and Textile Industries (API)
  • Bangladesh Garment Manufacturers and Exporters Association (BGMEA)
  • Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA)
  • Myanmar Garment Manufacturers Association (MGMA)
  • Pakistan Textile Exporters Association (PTEA)
  • Towel Manufacturers Association of Pakistan (TMA)
  • Pakistan Hosiery Manufacturers and Exporters Association (PHMA)

The International Apparel Federation (IAF) explains that together these organisations represent the majority of brands and retailers from EU market countries and garment manufacturers that make up around 50% of extra-EU imports of garments and textiles.

The IAF says: “Coming from a sector classified as high-risk by the Organisation for Economic Co-operation and Development (OECD), their knowledge and experience is critical in developing effective due diligence mandates in the garment industry.”

The joint recommendations for the EU Corporate Sustainability Due Diligence (EU CSDD) Directive emphasise the necessity for a comprehensive due diligence approach that is risk-based.

The organisations argue that, when well-designed, mandatory due diligence positively affects all parties across the supply chain: responsible businesses will profit from an EU-wide level playing field, and suppliers, including their workers, will benefit from the responsible purchasing practices of their customers.

The organisations are keen to offer guidance to EU decision makers on how to further develop the EU CSDD Directive and explain the directive must capture the responsibility of companies to respect human rights and the environment in their supply chain as formulated in the UNGPs and OECD guidelines. Most importantly, it must offer clarity and legal certainty.

The joint recommendations for creating an effective, mandatory human rights due diligence for the EU

The signatories explain that although they welcome a regulatory approach to due diligence, they recommend a current proposal be brought more in line with the accepted and long-standing international standards.

“We believe that by doing so, it will be more likely to achieve its stated goals of creating legal certainty, clarity and a level playing field, as well as increase acceptance by all actors involved. We would like to see companies engage in meaningful and impactful due diligence.”

The joint letter states: “The current proposal of the CSDD Directive deviates from the UNGPs and OECD guidelines on crucial points. The following points are most urgent:

  1. Performing Human Rights and Environmental Due Diligence should be risk-based.

In the UNGPs and OECD Guidelines, responsibility flows from the connection between negative impacts (in the value chain) and a companies’ operations, products and services. It is up to each individual company to assess the risk caused by these operations, products and services, prioritise risks and, within the notion of proportionality, take their responsibility in preventing, mitigating and ending adverse effects.

The current proposal limits the scope of the due diligence duty by introducing the ambiguously defined concept of established relationships, making due diligence a relationship-based duty. One of the problems in the garment and textile industry is that most relationships are transactional, and contracts rare. By only imposing a due diligence duty on companies in case of established relationships, companies could be invited to actively avoid these, or at best, to look for risks and impacts primarily among their strategic suppliers and other proximate relationships, ignoring risks of (potential) adverse impacts in more remote parts of the value chain, where they are often more severe.

We ask EU decision makers to take an approach that is truly risk based and in line with the UNGPs and the OECD guidelines. The current practice of many garment and textile companies shows that the due diligence concept of prioritisation based on severity is crucial in making due diligence manageable for business, while addressing the most salient risks to people. Moreover, companies already performing their due diligence have been doing so according to these international standards. They have had almost a decade of practical experience with applying them and have developed processes and tools with these standards in mind. An EU directive should reward these efforts, and expect all companies to adopt this same internationally accepted approach.

  1. Due diligence does not shift responsibility

In line with the UNGPs, all companies have a responsibility to respect human rights when doing business, and the OECD guidelines state they cannot shift the responsibility of due diligence onto others, such as their suppliers, industry schemes and/or multi-stakeholder initiatives.

The proposal suggests large companies within its scope rely on contractual assurances and audit/verification processes to show compliance and results. Many companies that implement a more ‘mature’ due diligence system, have found that relying solely on audits has limited effect in delivering impact for workers and human rights.

Reviewing a companies’ own purchasing practices is part and parcel of due diligence. Numerous studies[iv] have shown that purchasing practices have an enormous influence on working conditions in the supply chain. Responsible purchasing practices are essential in order to achieve the improvements in working conditions that many companies have publicly committed to. The response of companies to the COVID-19 crisis has highlighted how crucial responsible purchasing practices are for ensuring the protection of workers’ rights.

We would like to ask EU decision makers to make sure that, in line with the UNGPs and the OECD guidelines, companies in scope of the legislation cannot shift their responsibility to companies down the supply chain. Future legislation should promote responsible purchasing practices by EU market companies as well as encourage proper engagement with their supply chain partners and other stakeholders as part of the prevention and mitigation activities. The proposed legislation should take into account the set-up of manufacturing supply chains and the power imbalances between buyers and suppliers, commonly in a context of weak governance protection of human and environmental rights.

  1. Due diligence legislation must provide certainty and clarity

The current proposal contains many concepts (partner, indirect partner, business partners, established relationship) that are either not or not clearly defined, i.e. in their current form they are open to multiple interpretations which is problematic.

Although we understand the choice for a Directive, the current proposal leaves room for Member States (MS) to adapt and add to the legislation. This will not lead to the desired level playing field. Currently, the proposal expressly mandates MS as well as the European Commission to publish guidelines as to how the legislation needs to be interpreted. In a worst-case scenario, enterprises may be facing up to 27 national versions of the due diligence legislation, with 27 different monitoring and sanctioning regimes, as well as 28 different sets of guidelines, should the EC choose to provide these as well. Small and Medium-sized Enterprises (SMEs), although not directly within the scope of the directive, will face even more – possibly conflicting – ‘guidance’, as large companies within the scope of the current proposal are encouraged to cascade their codes of conduct throughout their value chains.

We strongly support one set of guidelines at EU-level to provide clear and coherent guidance for MS and companies. We urge EU decision makers to provide more clarity and certainty, by aligning the current proposal closely to the UNGPs and OECD guidelines and giving clear and uniform guidance to MS for the implementation of the Directive in order to avoid a myriad of guidelines and guidance that companies need to adhere to, not to mention competitive (dis)advantages depending on in which MS a company has its headquarters or seat.

Policymakers and industry stakeholders explore how the EU Commission’s proposed due diligence legislation will impact fashion brands and retailers.

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Thematic Research- ESG – Governance Factors

Governance is central to GlobalData’s ESG framework, developed to help companies understand and address their responsibilities across three main areas: environmental, social, and governance (ESG). Organizing the topic into these three key areas makes it easier for companies to assess where they stand. The framework goes deeper and defines four key areas within each topic. Within corporate governance, these are corporate structure, risk management, corruption, and bribery and ethics. Then, within each area, the framework identifies several contributing factors and mitigating actions to help companies identify where progress is needed and create action plans. Good corporate governance has never been more important. It has come to the fore as directors and executives recognize that they are responsible not just to shareholders, as in the past, but to a wide range of stakeholders. GlobalData’s report on ESG - Governance Factors, taken from the collection of >17,000 reports on GlobalData Explorer, will help you to:    
  • Assess companies based on GlobalData’s detailed ESG framework on governance
  • Identify relevant issues pertaining to governance using our framework
  • Explore reasons why governance is an important ESG issue
  • Identify factors which help to improve corporate governance in a company
Don’t miss out on key market insights that can help optimize your next investment – read the report now.
by GlobalData
Enter your details here to receive your free Report.

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