European Union (EU) Ambassador to Bangladesh Charles Whiteley on Tuesday said the EU legislative developments are important for Bangladesh since Bangladeshi companies are important suppliers for EU companies and the European Union is the destination for 50% of exports of the country.

“After two and a half years of political negotiation, the European Union has finally adopted the EU Due Diligence legislation,” he said, adding that this legislation marks a significant shift in corporate social responsibility, transitioning from voluntary to mandatory and horizontally applicable due diligence rules for European companies and their business partners in third countries.

The ambassador made a presentation on EU Due Diligence at the second Bangladesh Circular Economy Summit.

Earlier, Textiles and Jute Minister Jahangir Kabir Nanak spoke as the chief guest at the inaugural session of the summit.

Former BGMEA President Siddiqur Rahman, Deputy Head of Mission, Embassy of the Kingdom of the Netherlands in Bangladesh Thijs Woudstra, Deputy Head of Mission, Embassy of Germany in Bangladesh Jan Janowski and founder and CEO, Bangladesh Apparel Exchange Mostafiz Uddin spoke as special guests.

In short, the EU envoy said, the legislation aims to ensure social and environmental justice in global supply chains. It targets EU companies with more than 1,000 employees and a worldwide annual turnover exceeding €450 million, as well as non-EU companies meeting the same turnover thresholds within the EU.

“These companies can be held legally accountable for any human rights and environmental violations occurring in their own operations, their subsidiaries, and their business partners,” said Ambassador Whiteley.

The directive will have to be transposed in the national laws of our member states and will be enforced in different phases, and the first phase will begin from 2027, he said.

The envoy said non-compliant companies will face potential reputational damage through "naming and shaming" and administrative fines of up to 5% of their net global turnover.

“Moreover, victims, or civil society organizations and trade unions on their behalf, can file civil liability claims and seek reparations in a court of a Member State,” he said.

The Ambassador highlighted two aspects of this legislation which are particularly significant for Bangladesh.

Corporate Due Diligence Requirements

EU companies must adopt a due diligence policy aimed at addressing human rights and environmental violations in their supply chain, Whiteley said.

The EU legislation includes a comprehensive list of international instruments on human rights and the environment, which have a direct bearing on companies.

“The prohibitions and obligations set out in those instruments must be respected. Notable examples include the International Covenant on Civil and Political Rights, ILO's core conventions, and environmental agreements such as the Stockholm Convention on persistent organic pollutants,” he said.

For many companies, from within the EU or elsewhere, corporate social responsibility is already an integral part of their business operations.

These companies will have the certainty that they have their house in order, and have the procedures in place to identify and address environmental and human rights issues.

For those companies operating in Bangladesh many practiced due diligence on factory safety in Bangladesh since the Rana Plaza tragedy through initiatives like the Accord and the RMG Sustainability Council (RSC), said the EU envoy.

The new EU directive will require them to expand their due diligence to cover human rights and environmental standards more broadly.

Indirectly, the due diligence directive will also create an enabling environment for and improve compliance with national social and environmental regulations.

Climate Change Transition Plan

Another significant element of the EU due diligence legislation is the requirement for EU companies to adopt a climate transition plan, said Ambassador Whiteley.

This plan aims to align companies’ business models with the Paris Agreement’s global warming limit of 1.5°C. The plan must include time-bound targets for greenhouse gas (GHG) emission reduction and strategies to decarbonize the value chain.

 This requirement will significantly impact the supply chains of EU companies operating in Bangladesh, as supplying factories will need to adapt to buyers' climate mitigation strategies, said the envoy.

“The EU focus on due diligence and more widely on circularity does not come out of the blue. Europe is serious about transitioning towards a circular economy. The earth simply cannot sustain the dominant linear economic model of "take, make, and dispose”,” said the ambassador.

He said circular economy is a corner stone of the EU green deal, their strategy to ensure no net emissions of greenhouse gases by 2050 and to decouple economic growth from resource use.

“To remain competitive amidst the growing demand for sustainability and circularity in the EU, it is crucial to embrace circular systems, facilitate green transitions in production processes, and elevate labour standards,” said Charles Whiteley.

The EU and its member states support private sector and the government of Bangladesh in this journey towards innovation in sustainability. The ambassador shared a few examples.

Overall support to circularity and circular economy

The EU Switch to Circular Economy programme, a EUR 20 million, multi-country project, co-funded with Finland. This programme, also present here at this forum, aims to support the government of Bangladesh in developing a circular economy policy, and is working with private sector in piloting circular economy practices in the textile and garments.

On the social dimension

The EU and its Member States remain committed under the ‘‘Team Europe Initiative on Decent Work’’, having supported Bangladesh with over 47 programmes focused on decent work, social protection, and skills development, with EUR 685 million in funding.

A recent example is the project "Advancing Decent Work in Bangladesh (ADWIB) 2023-2027," co-funded by the European Union, Denmark, the Netherlands, and Sweden (EUR 23 million).

This project assists the Government with labour reforms and enhances preparedness for the due diligence legislation. Implementing the EU-Bangladesh National Action Plan on the Labour Sector will further contribute to Bangladesh’s readiness for the due diligence legislation.

On the environment side

The Safety Retrofitting and Environmental Upgrades Project (SREUP) co-financed by the EU, France, Germany and the Government of Bangladesh provides access to finance for innovation in safety and environmental performance of companies.

In addition, the ambassador said, through the Team Europe Initiative on Green Energy Transition, the EU and its member states are actively supporting the Bangladeshi government in greening the power generation, transmission, and distribution systems with EUR 1.3 billion, including grants and soft loans.

“This among others comprises of the Bangladesh Renewable Energy Facility (BREF), an EU-guaranteed EUR 350 million EIB loan along with a EUR 45 million grant, aimed at increasing the share of renewable energy in Bangladesh’s energy mix,” he said.