New York bill may push up Bangladesh’s garment export costs

New York, a major destination of global fashions, has introduced a bill that aims to make apparel retailers and makers disclose detailed information on environmental and social practices, including workers' wage and carbon emissions, at all levels of the global supply chain – from raw material sourcing to finished products.

The bill, titled the Fashion Sustainability and Social Accountability Act, would require the fashion industry supplying to the US state to disclose if their products are sourced from areas with reported forced or child labour, or "sweatshop" working conditions.

Leaders of Bangladesh's apparel industry, a key source of global fashion supply, feel that the requirements of the bill would not be hard to comply with, but cost of their business would go up and need to be compensated by fair prices.

The initiative came on the heels of similar moves, like the one in the United Kingdom targeting the alleged greenwashing by apparel and footwear industries, to tag the fashion industry more strictly with ESG (Environmental, Social, and Governance) issues.

Improved labour efficiency, policy support needed for environmental compliance

Some other European countries such as Germany have also passed or planned laws that require companies to comply with human rights and environmental protections throughout their supply chain.

Economists say as the world's second-largest garment exporter, Bangladeshi manufacturers need to be more compliant and accountable.

Initially, it may lead to pressure for additional spending, but a bright future awaits the Bangladeshi exporters if they can prepare themselves for this compliance in the light of the situation, they feel.

The New York bill, sent to the Consumer Protection Committee, looks to put under the scanner the fashion brands' claims that their products are "responsibly sourced", "sustainable" and "environmentally friendly".

The New York Times recently reported that the law, sponsored by State Senator Alessandra Biaggi and Assemblywoman Anna R Kelles, and backed by a powerful coalition on fashion and sustainability, will apply to global apparel and footwear companies, with more than $100 million in revenues, doing business in New York.

According to the report, Biaggi said in a news release, the act would ensure that "labour, human rights, and environmental protections are prioritised."

It would require such companies to map a minimum of 50% of their supply chain, starting with the farms where the raw materials originate through factories and shipping.

They would then be required to disclose where in that chain they have the greatest social and environmental impact when it comes to fair wages, energy, greenhouse gas emissions, water and chemical management, and make concrete plans to reduce those numbers (when it comes to carbon emissions, specifically in accordance with the targets set by the Paris Climate Accords).

Finally, it would require companies to disclose their material production volumes to reveal, for example, how much cotton or leather or polyester they sell. All of that information would also have to be made available online, the report added.

"This would mean that responsible sourcing will have to kick in at their end and at the same time the pressure on suppliers will also increase," Rubana Huq, former president of the Bangladesh Garment Manufacturer and Exporters Association (BGMEA), told The Business Standard.   

"It's now a world of accountability and all parties need to be responsible. The ball, however, will have to start rolling with consumers who generally are averse to paying more. As long as the game for cheaper products exists, any step towards sustainability by the brands will go unheeded and any pressure on suppliers will also be in vain," she thinks.

She believed, "Product type must change, pricing structure must be amended for the better. But ultimately sustainable business practice must also ensure a sustainable livelihood."

Faruque Hassan, president of BGMEA, told TBS, "It will be clear what kind of impact the law, once it is passed, will have on Bangladesh's exports. Even if there are no major impacts, the cost will go up."

"We have come a long way in terms of compliance or the environment. The world's best practices and green factories are now in Bangladesh. Where there is a deficit, we are working there," he added.

An expert working with the environment in the garment industry told TBS the new regulations will increase the hassle and cost. But there is no mechanism on where the additional costs will come from because buyers always want a lower price.

He said it is more logical to come up with a specific guideline by all the importing countries.

Dr MA Razzaque, chairman at the Research and Policy Integration for Development, told TBS, "The new law will not create problems for countries that have good documentation systems in the supply chain."

"Bangladesh lags behind in this regard due to weaknesses in the documentation system and good governance in a large part of the supply chain. If there is proper documentation, the scope of irregularities is reduced. If we can carry on with this system, Bangladesh will go ahead compared to other competitors," he added.

According to The New York Times report, companies would be given 12 months to comply with the mapping directive (18 months for their impact disclosures), and if they are found to be in violation of the law, they would be fined up to 2% of their annual revenues.

Those fines would go to a new Community Fund administered by the Department of Environmental Conservation and used for environmental justice projects. The New York attorney general would also publish an annual list of companies found to be non-compliant, the report added.