Cambodia Investment Review

Cambodia launches first-ever Responsible Business Hub for adhering to global supply chain compliance

Cambodia launches first-ever Responsible Business Hub for adhering to global supply chain compliance

Tom Starkey

Cambodia has launched its first-ever Responsible Business Hub to strengthen capacity for the Kingdom’s industrial and manufacturing sectors that are being impacted by new mandatory due diligence requirements in global supply chains – in particular to the European Union.

The hub is a partnership between the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ FABRIC) and the European Chamber of Commerce (EuroCham) with support from the Textile Apparel Footwear and Travel Goods Association in Cambodia (TAFTAC).

The Responsible Business Hub will be a pioneering support desk offering a variety of services in the field of responsible business practice, including training and self-assessment tools, and a knowledge and awareness platform.

As well as a directory of qualified local service providers, basic advisory services and recognition of responsible businesses, all to help producers adapt and comply with new export regulations and reporting requirements.

To read more about balancing sustainability and profits in Cambodia’s garment sector click here.

Opening remarks at the launch were made by:

  • Dr. Angelika Stauder (Deputy Head of Cooperation at the German Embassy)
  • Mr. Tassilo Brinzer (Chairman of EuroCham)
  • Dr. Francesca Ciccomartino (Programme Manager of Good Governance, Human Rights and Decent Jobs of the European Union Delegation to Cambodia)
  • H.E. Tep Phiyorin (Undersecretary of State, Ministry of Economy and Finance of Cambodia)

Speaking about Germany’s Act on Corporate Due Diligence in Supply Chains, released in 2021, Dr. Stauder said that Cambodia’s strong integration into the global economy presents both great opportunities but also comes with great responsibility.

Dr. Angelika Stauder the Deputy Head of Cooperation at the German Embassy.

“Globally, 28 million people are in forced labor, 160 million children are affected by child labor, groundwater is polluted, and so on. Therefore, Germany has created such due diligence to make sure the business is done responsibly throughout the supply change and protect the rights of people and the environment,” Dr. Stauder said.

Cambodia must remain competitive in the region

Dr. Ciccomartino agreed, stating that many EU companies are involved in value chains that employ thousands of workers from outside of the EU.

“Therefore, there is a desire to push forward new sustainability-orientated due diligence, such as the 2021 and the European Union’s Directive on Corporate Sustainability Due Diligence, which is being driven by public and private stakeholders as well as demand from the consumer,” Dr. Ciccomartino added.

H.E. Tep Phiyorin concluded the welcoming remarks by stating that Cambodia must be competitive.

“It is not only about efficiency but also about people’s well-being. We want to promote Cambodia’s export sector both in its standards and its reputation,” H.E. Tep Phiyorin said.

• H.E. Tep Phiyorin (Undersecretary of State, Ministry of Economy and Finance of Cambodia).

“We have brought forward new reforms in the garment and footwear sector, which are designed to optimize its competitiveness, and resilience with a focus on high-value products and protecting the environment. We will do this by improving welfare, securing consumer trust, and encouraging foreign investment in these industries while switching to high-end products will also ensure our ongoing economic diversification,” he added.

Acknowledging the potential for audit fatigue

Speaking on the inception of the Responsible Business Hub, Sara Monti, RBH Coordinator of EuroCham said they have taken steps to understand the unique challenges presented in the Cambodian Market.

“Currently, only 20% of the companies in Cambodia in the garment sector know of the new requirements coming in. Also, we have found that the priority for many companies is still on human rights, so environmental issues are not seen as urgent,” Sara said.

Additionally, she said the organizations are aware of ‘audit fatigue’ from factories feeling exhausted from the inflow of new requirements into factories.

Sara Monti the RBH Coordinator of EuroCham.

To read more about the LABS initiative launches platform for gender equality in Cambodia’s apparel and footwear sectors click here.

“The Responsible Business Hub free support desk will help companies with these issues by ensuring better risk management and increased resilience, improved international reputation, improving sustainability performance, better preparing for future sustainability due diligence regulations, a better understanding of customers’ expectations and requirements and better protecting human rights and the environment,” Sara added.

Compliance on human rights and environmental issues

In a pre-recorded message from the legal expert and Eurocham Board Member Dr. Sok Siphana he said Cambodia must follow the developing trends in Europe.

“The world is on course to end child labor and stop climate change. That means Europe is moving to mandatory compliance on human rights and environmental issues, so we need to upgrade. We need conscious effort from the industry to start looking at the specificity of the regulations and see how it affects us as a supplier. We need companies to work with the Responsible Business Hub to identify shortcomings, develop the business, and be compliant by the new areas of compliance,” Dr. Sok said.

The legal expert and Eurocham Board Member Dr. Sok Siphana.

“Institutional coordination and capacity are important to reaching these goals. To overcome the long-term effects of the pandemic and continue our developments we need collective efforts from all stakeholders, especially from the business community and partners to achieve our vision of becoming an upper middle-income country by 2030. We want to build a strong, resilient, and responsible private sector to strengthen our competitiveness and seize opportunities in the future,” he added.

It is about doing the right thing

Ken Loo, Secretary General of the Textile Apparel Footwear and Travel Goods Association in Cambodia (TAFTAC) said the industry is changing.

“At the moment it is not about a legal obligation, but it is about doing the right thing. That’s why we set up a subcommittee on sustainability. We created that this year because we understand this will be a major focus of the next 5 to 10 years. While this is focused on environmental sustainability, we will not be taking our foot off the gas when it comes to human rights also,” Ken said.

Ken Loo the Secretary General, Textile Apparel Footwear and Travel Goods Association in Cambodia

To read more about Bavet as an emerging manufacturing hub in Cambodia click here.

A panel discussion also covered some more key topics on the day, such as legal issues in implementing the new regulations in a global context and also educating workers as well as factory owners on the impact of this new due diligence for jobs.

The panel discussion included:

  • Kristin Sommer (Coordinator of GIZ FABRIC)
  • Sara Park (Program Manager of International Labour Organisation)
  • Khai Yau Chua (Senior Program of Manager of the Responsible Business Alliance)
  • Ken Loo (Secretary General, Textile Apparel Footwear and Travel Goods Association in Cambodia)
  • Athit Kong (Chairman of the Coalition of Cambodia Apparel Worker Democratic Union)

Closing remarks from Marc Beckmann, Project Director GIZ FABRIC, said that Cambodia can use the Responsible Business Hub as a competitive advantage for the changes that are coming.

A panel discussion on legal issues in implementing the new regulations .

“The German supply chain act might be the only mandatory act right now, but sustainability due diligence is not going to disappear, and it is not the responsibility of just one actor in the supply chain. This is the first Responsible Business Hub worldwide and we are excited to see Cambodia become a leader in developing responsible business practices and fostering sustainability going forward,” he added.

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