In this article, Worldwide Responsible Accredited Production (WRAP) strategic advisor Bonnic Chung reveals how the fashion industry can navigate the transition from voluntary guidance on human rights to mandatory due diligence. Chung will be delivering a seminar on the topic at the Global Sourcing Expo, running from November 21 to 23 in Melbourne.
In the ever-evolving landscape of human rights due diligence, the fashion industry finds itself at a critical juncture, facing the need to transition from voluntary guidance (soft laws) to mandatory due diligence (hard laws).
This shift brings with it a host of challenges and opportunities for businesses, brands, and suppliers – with many searching for answers on how to meet the heightened expectations of key stakeholders.
“Brands have a key role to play in driving this transformation and can use technology tools such as data management software to enforce human rights standards within the supply chain,” explains WRAP strategic advisor Bonnic Chung.
“Above all, close collaboration between brands and suppliers is essential for maintaining a consistent and responsible approach to human rights due diligence.”
Key Differences Between Voluntary vs Mandatory Approaches to Human Rights
Traditionally, businesses were not legally obligated to conduct human rights due diligence, and the extent of their efforts varied widely.
“The introduction of the UN Guiding Principles (UNGP), albeit a voluntary measure, served as a helpful framework and associated guidelines for businesses to follow that assisted with developing a more structured approach to human rights due diligence,” Chung says.
In contrast, the shift to mandatory due diligence has been driven by a wave of regulations, including the Supply Chain Transparency Act, and the UK and Australian Modern Slavery Act.
These laws require companies to disclose their efforts to identify and eliminate human trafficking and modern slavery in their operations and supply chains.
“Stricter legislation on supply chain practices is spreading around the globe, primarily spearheaded by European countries. Australian brands who export to Europe should take particular note of the EU Supply Chain Act, which is expected to be implemented by early 2026.”
Challenges For Buyers and Suppliers
The rapidly changing regulatory landscape presents challenges for fashion brands/buyers and suppliers as they strive to maintain their operations and competitiveness. At the buyer's level, companies are now expected to devote significant time and expense to monitor human rights compliance along the supply chain.
“Ensuring the comprehensive disclosure of practices by all suppliers, particularly those in lower tiers, can be hindered by the complexities of tracing material and labour origins,” Chung says. “Disruptions may arise if a supplier is found to be involved in human rights abuses, as searching for a replacement will incur additional delays and costs.”
As for suppliers, operating within the complex global supply chain leads to difficulties in ensuring compliance across multiple tiers of subcontractors. Continuous risk assessment and monitoring are essential but demanding tasks, with suppliers facing additional operating costs resulting from the new compliance requirements imposed by buyers.
“The associated various audits and assessments will further burden suppliers, affecting their competitiveness, especially if profit margins are slim,” she adds.
The Role of Stakeholders in Driving Change
The shift from voluntary to mandatory human rights due diligence is not a solitary endeavour, with multiple key stakeholders driving the transformation. Governments play a crucial role here, enacting the laws and regulations that require brands to conduct and report on human rights due diligence, enforcing compliance through legal measures, penalties, and audits.
“Equally as important are the NGOs leading advocacy efforts raising awareness of human rights abuses and pressuring companies to address these issues,” Chung says. “Their efforts are augmented by rising consumer demand for transparency and ethical practices from brands, at the risk of reputational damage for failing to do so.”
Finally, company shareholders recognise the financial risks of human rights abuses and are increasingly demanding improved due diligence measures to protect the brand’s long-term financial stability.
Collaboration for a Responsible Approach
Ethical sourcing that prioritises human rights is a two-way street,” Chung says. “The key is partnership, and buyers and their suppliers have to work together to understand the challenges the other side faces and how best to overcome these.”
She shares the following best practices for ensuring a consistent and responsible approach to human rights due diligence:
1) Maintain a comprehensive understanding of the supply chain to track the origin and conditions of raw materials, components, and finished products.
2) Facilitate open dialogues, forums, and workshops for suppliers to share experiences and challenges, and explore solutions together.
3) Offer training and capacity-building programs to suppliers on social compliance and human rights due diligence, in partnership with industry experts and NGOs.
4) Collaboratively develop and use supply chain mapping and transparency tools that help identify risks and ensure a responsible approach.
5) Opt for existing, independent and credible programs to reduce audit fatigue and drive effective social compliance practices.
“As the fashion industry undergoes a profound transformation towards mandatory human rights due diligence, the importance of collaboration cannot be overstated,” Chung says. “Adapting to these changes is not just a matter of compliance; it's an ethical imperative that ensures the protection and respect of human rights within the industry.”