INTERNATIONAL BUSINESS PAGES
are often referenced as setting a level
playing field but exclude many SMEs
from mandatory reporting by establish-
ing minimum thresholds based on fi-
nancial turnover.
A number of assumptions related to
SMEs capability to carry out due dili-
gence exist, and may require further
research to determine their validity. For
example, SMEs are generally as-
sumed to hold lower leverage with sup-
pliers but greater degrees of flexibility
in applying due diligence due to more
nimble management systems. Under-
standing how the structure of SMEs
can enable them to pursue their own
approaches to applying due diligence,
rather than trying to apply models made
for larger companies, could be valu-
able.
The Session on “Engaging SMEs to
scale responsible business practices
in the garment and footwear supply
chain” was held on 12 February 2020
to explore how SMEs are approaching
and implementing due diligence, tackle
some of the myths that only large com-
panies can do due diligence and look
at what support is available and what
more needs to be done.
The session was moderated by Libby
Annat, independent expert and consult-
ant having 19 years’ experience of
building and delivering sustainability
strategies for both large and small-
medium sized companies, with deep
cross-sector knowledge of social and
environmental sustainability. She works
and partners with companies, govern-
ments and organisations to build net-
works and trust across the multiverse
of stakeholders, including sharehold-
ers & investors, government and su-
pranational bodies, suppliers, trade
unions, companies, consumers, influ-
encers, academia, media and cam-
paigners.
The speakers were: Clare Lissaman,
Director, Common Objective; Emma
Foster-Geering, Head of Sustainabili-
ty, Vivobarefoot; Veronique Tjon, Sus-
tainable Apparel Coalition (SAC); Ken-
ichi Tomiyoshi, Executive General Sec-
retary, Japan Textile FederationReconciling due diligence with trade tensions
According to the OECD 2019 Economic Outlook, economic uncertainty be-
came the most pressing concern for firms around the world in the eighteen
months following the start of US-China trade tensions.
With the increasing unpredictability of trade policies, high uncertainty is likely
to be a persisting drag on activity for a prolonged period. While China and the
United States are most affected by these shocks, all economies are adversely
affected by the trade slowdown and rising uncertainty, with business invest-
ment impacted severely in the major economies.
Companies operating in the garment and footwear supply chain are notably
affected by the trade context between China and the United States in light of
the dominant role that China plays in the sector. Tariffs on the majority of im-
ported garment and textile goods from China to the United States increased an
additional 15 percent (on top of World Trade Organisation most favoured nation
rates) from September 2019, before the most recent signing of the Economic
and Trade Agreement between the United States and China in January 2020.
Although too early to trace the total shift in production, interviews with US
companies and the American Apparel and Footwear Association indicate that
US based companies are taking steps to move production out of China, quick-
ly. However, one of the primary constraints for doing so is finding sourcing
destinations that can adequately absorb the demand. Interviews indicate that
US companies are increasingly exploring markets that have traditionally been
dominated by European buyers – such as Bangladesh – as well as new mar-
kets entirely – such as Africa.
While the US and China trade relationship took centre stage in 2019, other
actions affecting the garment and footwear sector include Brexit, which result-
ed in considerable trade volatility across sectors in 2019, and the review of
Everything But Arms EU trade preferences in Cambodia.
Trade agreements are unlocking potential new markets and market growth,
while also incorporating expectations on responsible business conduct
(RBC)
Regional trade agreements cover more than half of international trade today,
operating alongside global multilateral agreements under the World Trade Or-
ganisation (WTO). In recent years, many countries have actively sought to
establish new – and often more modern and progressive – bilateral and regional
trade agreements that aim to increase trade and boost economic growth. Two
important trade agreements in 2019 for the garment and footwear sectors in-
clude the signing of the Comprehensive and Progressive Agreement for Trans-
Pacific Partnership (CPTPP) and the Viet Nam – EU Trade and Investment
Agreements.
Trade arrangements are increasingly being used as a tool to promote RBC
through unilateral preferences, import restrictions, and bilateral and regional
trade agreements that contain labour and/or environmental provisions. For ex-
ample the CPTPP includes chapters on labour, the environment and bribery
and corruption. Similarly, the Viet Nam – EU Trade Agreement includes a bind-
ing chapter on trade and sustainable development, dealing with labour and en-
vironmental matters.
Implications on responsible business conduct: The implications of both
trade tensions and newer trade agreements extend beyond demand and pro-
duction levels to the RBC context in which companies are moving into or away
from.
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