Most garment brands operate across borders, leading to corporate structures and supply chains. Besides delivering benefits to companies and society, business activities also generate negative externalities violating social standards. The complex and fragmented nature of the global supply chain makes it difficult for companies to trace the negative social impact of their global operations.
Fair Wear has agreed – in alignment with international guidelines and principles – to minimise these externalities through a so-called smart mix for regulation. A smart mix refers to a regulatory ecosystem that includes traditional forms of business regulation via legislation and judicially-enforced remedies, on one hand, with incentives, information-based and new governance approaches, such as sector-specific multi-stakeholder initiatives, as well as measures to enhance the role of financial actors in encouraging more sustainable business practices.
A louder voice is expressing that the reliance on solely voluntary frameworks to promote business respect for human rights has proven insufficient and ineffective for workers, society and businesses, or translated to our industry: (women) workers, garment and textile brands, factories, civil society organisations and consumers. Fair Wear joins the growing group of organisations that is in favour of a European regulatory framework including mandatory human rights due diligence. A call needed to progress our high ambitions to build back a better garment sector.
Multi-stakeholder approaches and mandatory due diligence
Mandatory human rights due diligence (HRDD) can help increase overall compliance with the OECD guidelines and United Nations Guiding Principles (UNGPs) in the garment industry. Regulation can incentivise all actors to play by the rules. However, due diligence according to the OECD guidelines is about having a strategy and procedures in place to identify the root causes of problems, work towards remediation and aim for continuous improvement. Companies need to be equipped to handle these responsibilities in a tailored and practical manner.
Although states are obliged to proactively prevent human rights violations, regulation by law is unlikely to set standards for high quality strategy and procedures as well as provide companies with excellent practical guidance. Implementation of human rights due diligence remains a responsibility of companies themselves. Multi-stakeholder initiatives (MSIs), such as Fair Wear, can provide tailored guidance to companies working in the garment industry to create robust strategies and procedures that allow companies to conduct their HRDD at a high level and take responsibility for their negative externalities. By providing companies the opportunity to properly register their risks and prevention and remediation plans, companies can show that they have taken all due care. Our added value is not limited to ‘How to’ toolkits, but as a multi-stakeholder initiative we set high normative standards and stimulate brands to adopt these norms by providing practical guidelines. The OECD guidelines might mention what risk areas to consider, but Fair Wear can give garment and textile brands genuine practical guidance regarding risk assessment, prevention and remediation.
In relation to social issues in the garment industry, Fair Wear is perfectly positioned as it supports brands on HRDD in all six steps of the OECD guidelines. We guide our brands through every step of the due diligence process with practical guidance and a mirror on their own purchasing practices. This is especially relevant for SMEs which often do not have the resources to fully understand the requirements and implement due diligence strategies and procedures.
Moreover, more companies will be interested in ways to comply with OECD guidelines if a legal obligation is established. This will give us an opportunity to increase our impact beyond our own member base and mainstream training materials, tools and measures to a larger audience. Examples include Fair Wear’s grievance mechanism or the labour minute costing methodology and its tools. By aligning appropriate measures for sector-specific topics in the industry, MSIs and other voluntary initiatives can enable companies to fulfil due care and comply with legislation in a way that truly benefits workers and ensures human rights are protected.
Fair Wear’s position
We acknowledge the strength of the smart mix in its full potential and support a movement towards mandatory HRDD. However, we would like to see our ambitions for the new normal in the garment sector covered. To enable the best outcomes of such legislation, we would like to see the following ambitions included:
- We believe that mandatory HRDD would be most effective if governments in the EU would align on common principles to create a coherent and predictable level playing field. Fair Wear prefers alignment at EU level. Nevertheless, we recognise the value of national HRDD legislation processes as these incremental learnings pave the way for higher quality legislation at EU level. For the long term, Fair Wear maintains its commitment to engage for the adoption and the ratification of the UN Treaty on Business and Human Rights.
- A bill should have the ILO Conventions, UNGPs and the OECD Guidelines as the basis for implementation. Workers and trade union rights and responsible business conduct should be included. This would mean that companies have the responsibility to respect internationally-recognised human rights and must take on appropriate measures to identify, prevent, mitigate and account for how they address adverse human rights impacts.
- Make mandatory HRDD compulsory for all companies, regardless of size. At most, companies should be given the opportunity to grow in the implementation of due diligence. Timelines for implementation should be in line with capacity, resources and leverage in the supply chain of a given company. Proportionality should be taken into account in line with the UNGPs and OECD guidelines.
- Mandatory HRDD should be applicable for all companies. SMEs also have high risks in their supply chain should therefore be included in this level playing field. However, it is crucial that the implementation of the law should be in line with the capacity, resources and leverage in the supply chain of a given company. Companies should be given the opportunity to grow in the implementation of due diligence. In line with the OECD Guidelines, due diligence by companies should be about improving continuously, which means that companies identify and learn about risks step-by-step, remediating and preventing issues in the supply chain along the way. Arrangements need to be in place in this regard. Non-compliance with these arrangements could mean that a company steps up the ladder regarding its degree of involvement.
- Mandatory HRDD should aim for a due diligence system and procedures that encourage continuous improvements in the entire supply chain over mere compliance. Due diligence should not focus on merely compliance but on having a strategy and procedures in place to identify the root causes of problems, work towards remediation and aim at continuous improvement. It could be considered that companies may discharge their liability provided that the proposed EU legislation is in line with the OECD guidelines and UNGPs. In monitoring, it is important to take workers, trade unions or their legitimate representatives into account when companies define and implement their due diligence measures.
- A bill should cover all companies’ operations, including own activities, the operations of their subsidiaries and controlled undertakings, and their business relationships, including their whole supply and subcontracting chains, franchise and contract management. Impact in its supply chain is related to the degree of its leverage. Fair Wear supports legislation in line with this definition to ensure alignment with the OECD Guidelines and UNGPs within the smart mix.
- Enforcement mechanisms should not be solely focused on remediation (after adverse impacts are raised) and combined with the responsibility to cease, prevent and mitigate activities that are causing or contributing to adverse impacts. Businesses should have proper monitoring in place to track implementation of due diligence in order to learn and improve due diligence processes.
- We should encourage companies to join voluntary multi-stakeholder approaches and Enforceable Brand-Worker Agreements (EBWAs) to leverage their efforts. Voluntary multi-stakeholder approaches and EBWAs can provide the frameworks for companies to take due care.
- Workers, trade unions or their legitimate representatives should be included in the definition and implementation of companies’ due diligence initiatives.
In addition to any regulation, it is also important to retain focus on other policy instruments at both national and European level, such as:
- Public procurement policies: Public authorities account for a significant part of GDP and can play an enormous role in advancing socially responsible practices. They can lead by example by integrating human rights due diligence in the procurement processes.
- Trade preferences and investment policies can influence the protection of human rights, for example through free-trade agreements with clauses on human rights monitoring and possible sanctioning. Mandatory HRDD could accelerate momentum for human rights in trade negotiations and give input to free-trade agreements.
- Support better investment decisions. Absence of comparable due diligence processes, reporting on such processes and implementation is problematic for investors, because it is difficult for them to evaluate and to compare companies’ due diligence processes, which is essential to make fair investment decisions.