TTWTO VCCI - Risk aspects in the garment and footwear supply chains from a due diligence standard perspective

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Risk aspects in the garment and footwear supply chains from a due diligence standard perspective

Suppliers participating in the supply chains of companies subject to due diligence obligations are required to comply with human rights and environmental standards (under the SCDDA Law / CSDDD Directive) and the requirements of the companies (through Codes of Conduct, if applicable). This requirement applies universally, regardless of the specific product or service supply chain.

However, for the garment and footwear supply chains, due to the specific characteristics of production and service processes, compliance with certain due diligence standards may be subject to more frequent and stricter monitoring by the relevant supply chain due diligence authorities as well as by EU/German partners subject to these regulations. Therefore, Vietnamese enterprises participating in garment and footwear supply chains need to pay particular attention to complying with these groups of standards to minimize risks of violations and adverse impacts.

The table below summarizes some of the specific due diligence risk areas that may be closely monitored in Vietnamese garment and footwear supply chains, along with corresponding risk mitigation or management measures (referencing the OECD Guidance on Responsible Supply Chains in the Garment and Footwear Sector, with appropriate adjustments for the specific context of supply chains and stakeholders in Viet Nam).

Table: Common risks in garment and footwear supply chains and suggested risk mitigation/remedial measures

Due Diligence Aspect	High-Risk Situations	Suggested Remedial Measures
I. Human Rights Risks (including labour rights)
Child Labour	- Outsourced production steps (to households or informal entities, e.g., embroidery, beadwork, leather stitching…) - Production locations where: (i) school attendance is low, (ii) cost of living is high while wages are low, or (iii) a high proportion of migrant workers leads to use of child labour to supplement income	- Immediately cease the use of prohibited child labour, especially in hazardous work areas. - Employ workers only under formal contracts. - Coordinate with local authorities to improve living standards, school attendance, and provide legally compliant work opportunities for children if necessary; establish community monitoring mechanisms. - Implement structural measures to eliminate child labour (e.g., improve parents’ income, employ family members of children).
Harassment, Violence, Gender Inequality	- Production steps that (i) predominantly employ women and girls with low income; (ii) often hire workers on short-term or seasonal contracts; or (iii) frequently involve adolescent or child labour. - Workplaces where (i) women constitute the majority of workers but have limited promotion opportunities while management is mostly male; (ii) high female workforce turnover. - Living conditions where (i) workers reside far from the workplace; (ii) dormitories at the workplace are managed by male supervisors, with many unmarried female workers. - Presence of female minority workers. - Recruitment, wage, or promotion criteria related to gender.	- Review and immediately cease any recruitment, wage, or promotion practices that discriminate based on gender. - Provide skills training for workers and supervisory staff. - Establish effective mechanisms for female workers to report issues or lodge complaints when necessary. - Organize shared transportation for workers at risk of harassment during commuting. - Cooperate with local authorities to prevent risks to female workers and girls in areas outside the workplace.
Forced Labour	- Recruitment through intermediaries/agents with high fees, leading to worker exploitation (deductions from wages). - High-interest loans or credit for training costs. - Groups vulnerable to forced labour: (i) children and adolescents; (ii) workers from remote or rural provinces; (iii) prisoners; (iv) outsourced, seasonal, or informal workers. - Peak production seasons, large order volumes, or orders from multiple partners	- Strictly comply with labour regulations and contracts regarding working hours and working conditions. - Support and encourage trade unions and workers to report risks when they arise.
Occupational Health and Safety	- Excessive working hours (due to low wages, high order volume, or last-minute order changes) - Potentially polluted production environments (dust, noise, etc.) - Use of materials or chemicals that may be harmful to health - Machinery, equipment, or worker positions/postures that are unsafe or high-risk - Occurrence of safety hazards in the production area	- Organize planning and production processes to reduce working hours - Establish feasible, effective, and rehearsed plans for evacuation, isolation, and protection of workers in case of safety incidents - Conduct regular risk reviews and implement solutions to address pollution and safety hazards at the workplace - Develop and strictly enforce workplace safety rules - Provide financial support for workers affected by work-related health or safety issues - Assess risks and implement specific programs to protect workers’ health (leveraging available support, including from EU partners)
Trade Union Rights and Collective Bargaining	- Discrimination based on trade union membership - Delays or lack of proactivity in collective bargaining - Extensive use of short-term contract workers (less protected by trade unions)	Immediately eliminate risky practices and ensure freedom of association
Wages	- Legal minimum wages vary by region and may not provide a living wage - Many workers come from other provinces and must rent accommodation or live at the workplace - Extensive use of apprentices, young workers, or informal workers Payment based on piecework or working hours	- Ensure wage structures and payments are transparent for workers - Minimize and clearly explain any wage deductions or penalties - Strive to improve wages, especially for vulnerable workers (from other provinces, young, apprentices) or those with irregular pay
II. Environmental Risk
Hazardous Chemicals	Raw material processing (fibers, fabrics, leather, etc.), especially when multiple material types are involved	- Stop using chemicals listed as banned by EU partners. - Establish and strictly enforce internal rules and procedures for chemical use - Provide comprehensive training for management and workers on safe chemical handling
Water Wastage	Weaving, dyeing, and leather processing	- Improve technology to reduce water consumption, reuse water, and prevent wastage - Limit the use of freshwater in production
Water Pollution	- Wet processing of fabric/leather or use of highly hazardous chemicals; and - Production areas located on high ground, in geologically sensitive zones, or near water-sensitive areas (residential areas, food crops, orchards, etc.)	- Upgrade wastewater treatment technologies, reuse water, and manage discharge processes - Implement mechanisms for periodic measurement and treatment of wastewater quality - Minimize liquid waste discharge

Source: Compiled by the TTWTO-VCCI Research Group from the “OECD Guidelines for Responsible Supply Chain Due Diligence in the Garment and Footwear Sector”

Given the specific characteristics of Viet Nam’s garment and footwear supply chains, compared with suppliers in other countries around the world, the implementation of supply chain due diligence obligations for EU market regulations presents both advantages and challenges for Vietnamese suppliers.

Specifically, from the perspective of implementing supply chain due diligence requirements, Viet Nam’s garment and footwear supply chains exporting to EU markets have the following advantages:

- Low risk of hazardous chemicals or soil and water pollution: Since the majority of raw materials and inputs are imported for the production of goods exported to the EU, the risks associated with the dyeing and tanning sectors are less prevalent for Vietnamese suppliers. Furthermore, Vietnam’s garment and footwear suppliers have begun applying new washing and drying technologies, so health and safety risks related to hazardous chemicals or water pollution are also lower.

- Low risk regarding human rights related to migrant labour, informal labour, child labour, or forced labour: Due to the relatively abundant domestic labour force, the low skill requirements of production processes, and closed-loop manufacturing systems, factories producing garments and footwear for EU markets primarily recruit Vietnamese workers of working age and use minimal outsourcing to households or informal business entities.

- Familiarity with multinational companies’ human rights and environmental codes of conduct: Having produced garments and footwear for the EU market for many years, Vietnamese suppliers are accustomed to signing and implementing Codes of Conduct (CoC) required by European-based multinational companies. Reviews show that most CoCs from major European companies contain requirements similar to labour and environmental due diligence standards under the SCDDA or the CSDDD.

However, in some areas, the implementation of human rights standards, particularly labour rights, by certain Vietnamese suppliers in garment and footwear export supply chains may face stricter scrutiny, as highlighted by the OECD Guidelines. Examples include:

- The legally prescribed minimum wage in Viet Nam is still very low, and in many areas it does not meet a living wage.

- Most garment and footwear factories employ a large number of female workers from other provinces, most of whom occupy lower-level positions in the management hierarchy.

- Overtime and seasonal work during peak production periods are quite common.

In practice, compared with many other countries participating in garment and footwear export supply chains to the European market (e.g., China, Cambodia, Bangladesh), Viet Nam encounters fewer issues related to labour rights and has generally not been subject to consumer boycotts in Europe regarding these matters. Nevertheless, given the high-risk characteristics outlined above, Viet Nam’s garment and footwear industry still needs to pay attention to fully implementing human rights and labour standards, particularly those included in the Codes of Conduct of European partners.

Source: Compiled by the TTWTO-VCCI Research Group