Key dialogue on due diligence of circular processes at OECD Forum

• The OECD hosted its annual Forum on Due Diligence in the Garment and Footwear Sector in Paris from 16-17 February. The Forum brings together representatives of government, business, trade unions and civil society to discuss responsible business conduct risks and due diligence in the sector.
• Libby Annat, Partner at Due Diligence Design, moderated a panel with experts from the European Apparel and Textile Confederation (EURATEX), H&M Group, the Centre for African Resource Efficiency and Sustainability (CARES) and Global Fashion Agenda (GFA) on the challenges and opportunities of transitioning to circular supply chains and due diligence implications.
• The outcome of the discussion will contribute to research led by the OECD, supported by Due Diligence Design, on the structure of circular value chains in the garment and footwear sector and the characteristics of business relationships and associated responsible business conduct risks within those value chains. The research will provide a basis for the development of an OECD FAQ tool for businesses on due diligence of circular processes.

Key takeaways

• The Ellen MacArthur Foundation estimates that by 2030, circular business models will represent almost a quarter of the entire fashion industry. The shift towards circular economy will be increasingly regulated. Within the EU, the Ecodesign for Sustainable Products Regulation will ban the destruction of unsold consumer products, including unsold or returned textiles. Under the Waste Framework Directive, the EU Commission is expected to introduce Extended Producer Responsibility rules (EPR) for textiles and mandatory targets at Member State level for preparing for re-use and recycling of textile waste.
• The transition to a circular economy will come with new upstream and downstream business relationships and may shift leverage in the value chain away from buyers towards those who hold circular technology solutions.
• New business relationships and processes bring additional environmental and social risks. This includes impacts the industry is already familiar with (e.g., child labour, forced labour and risks linked to the informal economy) in new parts of the value chain as well as new risks, such as the risk of linkages to criminal activity. The sector is still at an early stage in understanding these risks in circular economy value chains.
• The EU Corporate Sustainability Due Diligence Directive is likely to include requirements that companies carry out due diligence on circular processes. Broadly, companies in the sector are not assessing for or addressing human rights and environmental risks linked to their circular programmes at the same scale as their more traditional supply chains. Businesses will need to start building their due diligence for circular value chains now, particularly as pilots and small-scale innovations shift into bigger scale production. The OECD FAQ on due diligence will help fill a gap in what due diligence means in this context.