The EU emerged as Bangladesh’s primary export market, constituting about 45% of the nation’s total exports in 2022-2023. This was especially notable in sectors like ready-made garments (RMG) and frozen food.
Amidst the prevailing business ties, on Wednesday (24 April 2024), the European Parliament approved a new law aimed at larger companies operating within the bloc. The law mandates these companies to scrutinize their supply chains for instances of forced labor or environmental harm and to take corrective action if such issues are found.
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The Corporate Sustainability Due Diligence Directive (CSDDD) received support from 374 votes, with 235 against and 19 abstentions. This move has been hailed by the Human Rights Watch as a positive step towards ensuring corporate accountability.
Despite this, some business groups have voiced concerns, arguing that the directive imposes additional regulatory burdens and threatens with severe penalties, including fines of up to 5% of global turnover. They fear that this could put European companies at a disadvantage compared to their competitors and deter investment in the region.
Why the New Law?
The implementation of the new law is poised to bring about significant changes in production practices, adherence to regulations, and ethical conduct among both suppliers and importers.
This shift is unprecedented in that importers will now be required to assume accountability for any breaches of compliance standards within the supply chain.
For example, in the past, international clothing retailers and brands sourcing garments from factories located within Rana Plaza were not held accountable for the tragic deaths of the workers; only the manufacturers faced repercussions. Additionally, global buyers were not legally obliged to provide compensation to the victims but voluntarily participated in the process.
What tragic event coincided with the EU’s vote on the CSDDD?
The Parliament’s vote coincided with the 11th anniversary of the tragic collapse of the Rana Plaza building, claiming the lives of 1,138 garment workers and injuring over 2,000 others.
The forthcoming law, set to be implemented gradually until 2030, is poised to prompt a substantial transformation in production practices, compliance measures, and responsible business conduct for both supplying and importing companies.
This shift stems from importers now being obligated to assume responsibility for any breaches of compliance standards within the supply chain, marking a significant departure from previous practices.
Impacts on Bangladesh
Challenges and Opportunities
The European Parliament’s approval of the Corporate Sustainability Due Diligence Directive (CSDDD) has significant implications for Bangladesh, a major global supplier of garments and textiles. While Bangladesh has made strides in environmental protection and labor rights, there are areas where the country needs to improve to meet the standards set by the CSDDD.
Bangladesh is a global champion in green factories, with 215 such units already operational and another 500 in the pipeline. This indicates the country’s commitment to protecting the environment. However, Bangladesh will have to ratify 32 United Nations conventions, including four core conventions on human rights, labor rights, good governance, and environmental protection.
“We are getting ready to switch to renewables, but it requires a lot of investments,” said Bakhtiar Uddin Ahmed, chief operating officer of Fakir Apparels.
The country is also lagging in reducing carbon emissions, with nearly 95 percent of the country’s exporters dependent on fossil fuels. The CSDDD requires companies to switch to renewable sources of energy, a challenge that Bakhtiar Uddin Ahmed, chief operating officer of Fakir Apparels, acknowledges. Fakir Apparels, a garment factory in Narayanganj, is preparing to switch to renewables and reduce carbon emissions by 50 percent by 2030, but Ahmed admits that it requires significant investments.
Labor Rights and Implementation
Labor rights in Bangladesh are still being questioned, as living wages have not been introduced, and workers face challenges in forming unions in factories due to stringent conditions in the labor law. Md Towhidur Rahman, president of the Bangladesh Apparels Workers Federation, acknowledges that Bangladesh has improved labor rights by ratifying the core ILO conventions. However, the lax implementation in areas such as decent working conditions, collective bargaining, and living wages could pose a challenge. Rahman suggests a gradual implementation of the law to ensure that all parties, including suppliers, importers, and workers, are satisfied and the industry is not damaged.
Impact on Exporters and Importers
The strict implementation of the new law may bring positive changes to the global supply chain, but it is important to ensure that the new law is implemented equally for all countries, experts say. Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, emphasizes the need to safeguard both exporters and importers. If buyers do not pay ethical prices to suppliers, it will increase the cost of business, making the law ineffective.
According to experts, the necessity of safeguarding the environment, as well as human and labor rights. Equally important is the protection of both exporters and importers.
A Watered-Down Version of the CSDDD
The new law is a watered-down version, with the Belgian government limiting the number of companies expected to comply. The agreement applies to companies with more than 1,000 employees, up from 500, and a net turnover of 450 million euros, triple the amount previously agreed. Environmental groups estimate that the changes will exclude 70 percent of the companies the law was meant to cover.
Amendments to the Law
| Watered-down version introduced by the Belgian government |
| Compliance criteria adjusted: |
| Companies now require more than 1,000 employees (up from 500) |
| Net turnover requirement increased to 450 million euros |
| Reduced Coverage |
| Environmental groups estimate that the changes will exclude 70% of intended companies from compliance |
In conclusion, the CSDDD presents both challenges and opportunities for Bangladesh. While the country needs to improve in certain areas, such as labor rights and carbon emissions reduction, it has made commendable progress in environmental protection. The gradual implementation of the law, as suggested by Rahman, could ensure that all parties are satisfied and the industry is not damaged. The protection of the environment, human rights, and labor rights is necessary, but it is also important to safeguard both exporters and importers. The new law should be implemented equally for all countries to bring about positive changes in the global supply chain.
