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‘The Era of Enhanced Scrutiny is Upon Us’
Glenn Taylor
4 min read
More than 80 percent of Europe-based corporations said they didn’t feel prepared to meet the requirements of either Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), according to a cybersecurity firm S-RM.
But a preeminent voice in the apparel supply chain compliance community remains skeptical of the data.
When posed a question on the study at the SJ Fall Summit, Avedis Seferian, president and CEO, Worldwide Responsible Accredited Production (WRAP), quipped half-jokingly: “You must have been talking to some pretty optimistic people.”
“I’d like to meet those 20 percent who feel they are ready, because I don’t think you can feel ready for it. It isn’t clear yet what the requirements are, what the expectations are going to be, with regards to some of this emerging legislation,” Seferian said. “All that we can say for sure is that the era of enhanced scrutiny is upon us, and we have made the definitive move away from sort of voluntary, soft-law drivers of compliance behavior to what is going to be hard law.”
This “hard law” includes plenty of legislation worldwide, whether it be Europe’s CSRD, CSDDD or E.U. Forced Labour Regulation (EUFLR) or the Uyghur Forced Labor Prevention Act (UFLPA) and proposed New York Fashion Act in the U.S.
This slate of legislation has shifted more of a burden to brands and retailers to better understand their supply chains beyond their Tier 1 and Tier 2 vendors, or risk incurring a fine.
Apurva Bhargava, head of sales of supply chain traceability software provider TrusTrace, told Sourcing Journal senior news and features editor Kate Nishimura that brands often struggle to adhere to regulations because they don’t communicate on their strategy. Additionally, they likely use disparate systems to track different parts of their supply chain.
This lack of communication happens across departments within an organization, as well as across multiple, competing brands within an industry—further decentralizing the process.
“If you talk about the footwear industry, of the largest brands around, like Nike, Adidas, New Balance and Puma—each of them don’t talk to each other,” said Bhargava. “Each of them have different ways they want to be able to understand and get the documentation, as well as get the information from the supplier, which further creates the confusion.”
There’s still plenty of uncertainty around exactly what laws like CSDDD require as regulatory agencies have yet to deliver detailed guidance on the legislation, said Seferian.
Additionally, Seferian called out an “audit fatigue scourge” among suppliers that are tasked with passing constant checkups at their factories, typically by brands who felt threatened by public backlash over facility working conditions.
Seferian believes the only way to avoid that fatigue is for independent auditors who aren’t conducting similar reviews to take control back from the brand auditors.
“The future has to be not one of forced harmonization into a single standard, but synchronization, where we have a handful of independent programs that are not all exactly the same,” Seferian said. “All sufficiently address that common underlying goal, so that you have choices. You have options.”
At least in the U.S., the apparel industry has gotten more used to the enforcement of the UFLPA in the two years since the law took effect, Bhargava said.
Although U.S. Customs and Border Protection (CBP) has stopped 4,614 shipments over the last 12 months, 2,286 were later released. Bhargava noted that the increase in shipments that were released after detention “shows that the companies are having better systems in place to be able to comply to this.”
Regarding the CBP enforcement, Seferian’s skepticism returned due to the 50 percent release rate, with him saying there are still questions into the agency’s targeting methods.
“The real sort of measure of success regards what supply chain shifts are being caused by it, which is interesting, right?” Seferian said. “Because if you think of the UFLPA as a law that’s meant to achieve its title, ‘prevent forced labor in Xinjiang,’ I’m not sure we can say it’s been very successful. But if it’s meant to be a ‘get out of China’ legislation, I think it’s got a pretty good track record to go for it.”
Although there’s plenty of uncertainty hitting the apparel supply chain now as companies prep for Donald Trump’s return to the White House in January, the compliance landscape will remain the same due to the bipartisan nature of bills like the UFLPA.
“Forced labor legislation is not going anywhere. There’s going to be further acceleration put to it in terms of giving them additional tools to make it stricter,” Bhargava said. “There are other countries as well which are forcing similar regulation because the U.S. government is working with them.”
