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News of the week: Bangladesh’s rating for social, labour compliance improves

Fashion brands and buyers in the United States see lower social and labour compliance risks in sourcing apparel from Bangladesh as the rating of the country in this particular area improved in 2022, according to a global study.

The ‘2022 Fashion Industry Benchmarking Study’ conducted by the United States Fashion Industry Association found that the movement from a rating of 2.0 in the past few years to 2.5 in 2022 reflected fashion companies’ acknowledgment of the continued efforts to improve social responsibility in the Bangladeshi garment industry.

‘In comparison, more than 70 per cent of respondents say sourcing from China now involves “high” or “very high” labour and social compliance risks,’ the report said.

The study also found that the fashion brands and buyers in the US would increase their sourcing from Bangladesh, India, Indonesia and Vietnam over the next two years.

This year’s benchmarking study was based on a survey of 34 executives at the leading US fashion companies from April to June 2022.

Approximately 70 per cent of respondents were self-identified retailers, followed by self-identified importers/wholesalers (67 per cent) and self-identified brands (40 per cent).

The USFIA report showed that ‘China plus Vietnam plus Many’ remained the respondents’ most popular sourcing model.

‘While China remains the most utilised apparel sourcing base, respondents have significantly reduced their “China exposure”. This year, one-third of respondents report sourcing less than 10 per cent of their apparel products from China, a significant decrease from 20 per cent of respondents before the pandemic,’ the report said.

The USFIA said that China plus Vietnam typically accounted for 20-40 per cent of respondents’ total sourcing value or volume in 2022, down from 40-60 per cent in the past few years.

Other than these two countries, the US fashion companies also source from a few other countries, it said.

‘Regarding Asia-based suppliers, India, Bangladesh, Indonesia, and Vietnam are among the most popular destinations where respondents plan to increase sourcing over the next two years’ study showed.

It also said that these countries had relatively large-scale production capacity and stable economic and political situation.

Respondents said that China had lost its competitive advantage of ‘sourcing flexibility and agility’ in 2022.

They said that the supply chain disruptions caused by China’s frequent lockdown measures and its zero-Covid policy presented a significant concern for fashion companies in 2022.

Though US fashion companies are adopting a more diverse sourcing base in response to supply chain disruptions and the need to mitigate growing sourcing risks, eight of the top 10 most-utilised sourcing destinations for the US companies are Asia-based, led by China, Vietnam, Bangladesh, and India, the study showed.

In 2022, the United States and Mexico demonstrated more significant competitive advantages over suppliers from other regions in terms of speed to market while respondents rated Asian countries’ performance in lead time lower.

Respondents said that Asian suppliers, such as Vietnam, Bangladesh, and Cambodia offered the most competitive prices in 2022.

In comparison, sourcing from the United States and Europe was the most expensive due to the much higher labour costs.

The USFIA said that the US fashion companies reported significant challenges coming from the macroeconomy in 2022, particularly inflation and rising cost pressures.

Respondents ranked ‘increasing production or sourcing costs’ and ‘inflation and outlook of the US economy’ as their 1st and 3rd top business challenges in 2022, the study showed.

It showed that 100 per cent of respondents expected their sourcing costs to increase in 2022, including nearly 40 per cent expecting a substantial cost increase from a year ago.

Further, almost everything has become more expensive in 2022, from textile raw materials, shipping, and labour to the costs associated with compliance with trade regulations, the study said.

See original article; New Age; July 23, 2022