Due Diligence in Garment Industry
Due diligence discussions in the garment factory sector are heavily focused on identifying, preventing, mitigating, and accounting for a wide range of adverse impacts across the entire supply chain.
The cases and issues most frequently brought up relate to the three main pillars of Environmental, Social, and Governance (ESG) risk, particularly as defined by the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector.
Here are the primary cases and issues discussed:
1. Social and Human Rights Cases (The Most Common Focus)
These are the core issues addressed in due diligence, often stemming from poor purchasing practices by brands that pressure suppliers on costs and deadlines.
Forced Labour & Modern Slavery
Retention of Passports/ID: Employers holding migrant workers’ documents. Debt Bondage: Workers paying recruitment fees, leading to an inability to leave the job. Abusive Working/Living Conditions and Excessive Overtime.
Wages & Working Hours
Failure to pay a Living Wage: The persistent gap between the legally mandated minimum wage and a wage sufficient for a decent standard of living. Forced and Unpaid Overtime. Wage theft or illegal deductions.
Worker Safety & Health
Unsafe Factory Buildings: Lessons learned from disasters like the Rana Plaza collapse drive the need for structural integrity and fire safety assessments. Hazardous Working Conditions (e.g., in dyeing/finishing due to chemical exposure). Heat stress due to rising temperatures in production centers.
Freedom of Association & Collective Bargaining
Suppression of Trade Unions: Cases where management prevents or retaliates against workers attempting to form or join a union. Lack of effective grievance mechanisms that workers can use without fear of reprisal.
Child Labour
Identification of children working in factories or further down the supply chain (e.g., in raw material production like cotton). Focus on remediation protocols when a case is found.
Discrimination & Harassment
Cases of gender-based violence, harassment, or discrimination against vulnerable groups, such as migrant workers or female workers.
2. Environmental Cases
Due diligence discussions increasingly cover the environmental footprint of garment production.
Water Pollution
Discharge of Toxic Effluents from wet processing (dyeing, washing, finishing) into local water sources without proper treatment.
Chemical Management
The use, storage, and disposal of hazardous chemicals, and the need for stricter protocols to protect workers and the environment.
Climate Change & Emissions
Requiring companies to develop and implement transition plans to mitigate climate change, including setting time-bound targets for Greenhouse Gas (GHG) emission reduction in their supply chains (Tier 1-3).
Waste Management
Cases of improper disposal of textile scrap, general factory waste, and hazardous waste. Concerns around the environmental impact of discarded textiles and the due diligence needed for recycled materials supply chains.
3. Governance and Transparency Cases
These issues relate to the business practices that allow social and environmental harms to persist.
Supply Chain Mapping/Transparency
Cases where brands lack visibility beyond their Tier 1 suppliers, which allows risks like forced labor to hide in subcontractors or raw material production (Tier 2/3).
Audit Fraud
Evidence of suppliers coaching workers or falsifying documents to pass social audits, leading to discussions about the limits of auditing and the need to go “beyond audits.”
Social Washing
Cases like the Armani and Dior investigations (in Italy) where companies made public sustainability claims but failed to conduct adequate due diligence, resulting in illegal labor practices by their subcontractors.
Responsible Purchasing Practices
The need for brands to align their purchasing decisions (e.g., fair pricing, reasonable lead times, long-term contracts) with their due diligence commitments, as reckless buying is often the root cause of labor violations.
Mandatory due diligence legislation, such as the EU Corporate Sustainability Due Diligence Directive (CSDDD), is making it legally necessary for large companies to address these cases, which drives them to the forefront of industry discussions.