{"id":20736,"date":"2023-10-12T06:39:30","date_gmt":"2023-10-12T06:39:30","guid":{"rendered":"https:\/\/www.lightcastlebd.com\/bunon2023\/?p=20736"},"modified":"2023-10-12T06:41:01","modified_gmt":"2023-10-12T06:41:01","slug":"eu-due-diligence-act-way-forward-for-banglades-rmg-industry","status":"publish","type":"post","link":"https:\/\/lightcastlepartners.com\/bunon2030\/eu-due-diligence-act-way-forward-for-banglades-rmg-industry\/","title":{"rendered":"The EU\u2019s Due Diligence Act: Way Forwards for Bangladesh\u2019s Apparel\u00a0Industry"},"content":{"rendered":"\n
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Originally published on the\u00a0LightCastle Partners website<\/a>.<\/em><\/p>\n\n\n\n

The apparel sector, also known as the ready-made garment (RMG) industry, has a relatively short but significant history in Bangladesh. The RMG industry began to take shape in the late 1970s and early 1980s, when the late Nurool Qader Khan, the pioneer of RMG in Bangladesh, sent 130 trainees to South Korea, where they learned how to produce ready-made garments [1]. However, it was not until the early 1990s that the industry really gained traction and became a major contributor to the economy.<\/p>\n\n\n\n

It is a vital component of Bangladesh\u2019s economy, contributing significantly to the country\u2019s economic growth, job creation, and export earnings. The RMG industry is the largest contributor to Bangladesh\u2019s economy, accounting for approximately 81.82%<\/strong> of the country\u2019s total export earnings [2]. It is Bangladesh\u2019s biggest export earner, with a share of 42,613 MN USD<\/strong> of export earnings in FY 2021\u201322 <\/strong>[2]. In FY 2021-22<\/strong>, the RMG sector contributed 9.3 percent <\/strong>to Bangladesh\u2019s GDP [3]. Bangladesh\u2019s overall RMG export earnings were 35.5 percent <\/strong>higher than that of the previous fiscal year [3]. It is also the second-largest<\/strong> employer in the country, providing jobs to over 4 million <\/strong>workers, more than 58 percent <\/strong>of whom are women [4].<\/p>\n\n\n\n

Nature of EU\u2019s Trade Relations with Bangladesh<\/h2>\n\n\n\n

Over the past few decades, the European Union (EU) has evolved to become a vital trade and development partner for Bangladesh. The EU, which imports about half of the country\u2019s export goods, is by far the nation\u2019s largest export market [5]. They are one of the country\u2019s major trading partners, particularly in the ready-made garment (RMG) sector. During\u00a0FY2021\u20132022<\/strong>, the EU Region stood first with\u00a044.6%\u00a0<\/strong>of the total export earnings of Bangladesh [2].<\/p>\n\n\n\n

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Bangladesh is a beneficiary of the EU\u2019s GSP scheme, which provides duty-free and quota-free access to the EU market for a wide range of products, including textiles and garments. The GSP scheme is aimed at promoting sustainable development and good governance in developing countries. Bangladesh has been a beneficiary of the EU-GSP scheme for LDCs since 1971 [6]. The country is also a beneficiary of the EU\u2019s Everything But Arms (EBA)<\/strong> initiative, an arrangement of GSP, which provides duty-free and quota-free access to the EU market for all products except arms and ammunition. The EBA scheme is designed to help the world\u2019s least developed countries integrate into the global economy and reduce poverty. And the country has been a beneficiary of the EBA scheme since 2001.<\/p>\n\n\n\n

In addition to the GSP and EBA, the EU and Bangladesh have also signed several trade-related agreements aimed at strengthening their economic ties and promoting sustainable development. These agreements cover various areas such as investment, intellectual property, and labor rights.<\/p>\n\n\n\n

EU\u2019s Due Diligence Act: A directive for punishment and penalties for human rights and environmental abuses in the production<\/h2>\n\n\n\n

In March 2021, the European Union (EU) announced mandatory Human Rights and Environmental Due Diligence (mHREDD) to encourage companies to prioritize responsible and sustainable business practices, including the fair treatment of all individuals in their supply chains and reducing environmental impacts [7]. The legislation aims to ensure that human rights are respected and that the environment is protected throughout the entire supply chain. These issues are becoming increasingly important, and the new legislation is designed to encourage action from companies to address them.<\/p>\n\n\n\n

The due diligence directive sets out regulations that require large companies to take responsibility for any actual or potential harm caused to human rights and the environment by their own operations, as well as those of their subsidiaries and business partners. The directive also establishes penalties and civil liability for any violations of these obligations. Additionally, companies must adopt a plan that ensures their business model and strategy align with the Paris Agreement [8].<\/p>\n\n\n\n

The regulations of the due diligence directive are applicable to both major EU companies and non-EU companies operating within the EU. Companies that fall under these obligations:<\/p>\n\n\n\n