Garment Factory Compliance
Indian Textile Industry and Garment Exports

The Indian textile industry is one of the largest industries in the world, with a huge raw material and textile manufacturing base. The industry occupies a unique position as a self-reliant industry, from the production of raw materials to the delivery of finished products. This large and ancient industry has carved out a special niche for itself as a facilitator of the county’s economic growth and participative development.

Textile industry in India is a highly versatile sector, with smaller firms providing flexibility needed for smaller orders; the larger firms have the capacity to service the world’s biggest buyers. The Government of India has also undertaken several favourable policy initiatives, which have resulted in the growth of the sector. “Indian textile industry contributes about 14 per cent to industrial production, 4 per cent to the country’s gross domestic product (GDP) and 16.63 per cent to export earnings,” as per Ministry of Commerce and Trade, India.

Major destination for Indian garment exports
The USA is the number one destination for the exports of Indian apparels. During 2011, the garment imports to the USA from world were around US$ 81.51 billion. India exports garments of worth US$ 3.53 billion to the USA, which accounts for 4.33 per cent share in the USA’s total garment imports.

AEPC: An official body of apparel exporters
Apparel Export Promotion Council (AEPC) is an official body of apparel exporters in India. The body provides invaluable assistance to Indian exporters as well as international buyers who select India as their preferred sourcing destination for garments.

AEPC initiative: DISHA
Several western countries like the USA, have raised concerns regarding the usage of child labour in production houses in developing countries. The US and the European Union together account for 80 per cent of India’s total apparel exports. Therefore, an initiative “DISHA”- Driving Industry Towards Sustainable Human Capital Advancement has been launched by AEPC for the qualitative assessment of Indian garment manufacturers. The initiative will encourage Indian manufacturers to follow better social practices, which will give them a competitive edge in the global market.

With DISHA in progress, India is well placed to emerge as one of the most compliant sourcing destinations amongst the developing nations and able to meet all the compliance challenges. Under the programme, the units would be encouraged to adopt improved production systems and worker’s productivity. The important focus of DISHA is issue of certification which certifies that the industry is complied with all social compliances as per international standards. Some of the compliances in the industry are:

  • Prohibition of child/forced labour
  • Non-discrimination
  • Proper working environment
  • Proper wages and working hours

Step taken by AEPC to promote garment exports
Apparel Export Promotion Council (AEPC) as part of its export promotion plan, for the first time, is organising Buyer-Seller Meet at New York, USA during January 2013. The initiative will provide an opportunity for international buyers to meet with selected top exporters of India, who will be showcasing their collection of women’s wear, men’s wear, children wear and fashion accessories. These exporters are fully compliant with the global quality standards and have world-class production infrastructure.

Significance of Compliance in Indian Garment Industry

Compliance is all about the quality of products from the factory which must meet the audits and inspections and to give a proper environment for working. The demand for compliance is growing rapidly in today’s business scenario as the buyers from the global markets are insisting on ethically manufactured products. As the export of garment products from India has increased, the demand for social compliance has also risen in the Indian garment Industry.

Social Compliance
Social compliance refers to how a business treats its employees, the environment and their perspective on social responsibility. It refers to a minimal code of conduct that directs how employees are treated with regards to wages, working hours and work conditions. To ensure that the company meets standards of various environmental laws, it may be necessary to conduct a compliance audit.

Compliance Audit
Audits and assessments provide vital management control for Process Safety Management, Process Security Management, and Risk Management Programs. Audits focus on the policies and procedures to verify compliance with regulatory requirements and industry standards. They help to ensure programs are properly designed and implemented. Further, audits also identify program deficiencies so that recommendations can be developed for corrective action.

Compliance audit in India includes an examination of rules, regulations, orders and instructions for their legality, adequacy, transparency and prudence. Auditors gather information through visual observation at the site, document reviews and interviews of staff. This data is then compared to the applicable permits and regulations to evaluate how well the operation is conforming to the applicable legal requirements.

Phases of Audit
There are three main phases of compliance audit in India:

  • Pre-audit: It includes planning and organising the audit; establishing the audit objectives, scope and etiquette; and reviewing the design of the program by inspecting documentation
  • On-site audit: It includes conducting personnel interviews, reviewing records, and making observations to assess program implementation
  • Post-audit: It includes briefing the management on audit findings, and preparing a final report

Therefore, Indian apparel manufacturers need to follow Government guidelines, and social compliance standards not only within their sphere of operations, but also insist their vendors, distributors, and other collaborators involved in the supply chain to do the same.

Core labour standards

  • Elimination of Discrimination in Respect of Employment and Occupation
  • Freedom of Association
  • Right to Collective Bargaining
  • Elimination of all Forms of Forced or Compulsory Labour
  • Effective Abolition of Child Labour

Apparel industry players would now make sure that labour contractors don’t engage forced or child labour and get the supply chain of the suppliers audited. Apparel Export Promotion Council (AEPC), an apex body of Indian apparel exporters, has designed a garment factory compliance program ‘Disha’ (Driving Industry towards Sustainable Human Capital Advancement) to make India a global benchmark for social compliance in apparel manufacturing and export. This Common Compliance Code project will prepare the Indian apparel industry on a common platform towards a more social and environmentally compliant industrial environment.

India adopting Universal Standards on Child Labour

The level of garment factory compliance is very high for Indian exporters. Large global firms, conscious of their image, often set up their own compliance standards for the exporters to ensure that all standards are being complied with. Many U.S. companies have included child labour in their code of conduct, due to persistent evidence of child exploitation in the industry.

Common compliance code
There is a huge compliance fatigue in the Indian apparel export industry. Although catering to the global brands, apparel suppliers are yet to accept that compliance is an essential management practice. Further, the Indian apparel export industry has decided to adopt zero tolerance on child labour and cleanse the supply chain.

“This common compliance code will not only give the opportunity for the industry to negate international claims against child labour promotion in the garment industry, but will also help to improve the image of the industry and win more international businesses,” as per Premal Udani, Chairman, Apparel Export Promotion Council (AEPC).

AEPC-Disha
Apparel Export Promotion Council (AEPC), the apex body of Indian apparel exporters, has launched the programme “DISHA” (Driving Industry towards Sustainable Human Capital Advancement) to aid garment exporters comply with global standards pertaining to child labour.

The programme will encourage members to follow better social practices, which will give them a competitive edge in the global market where industrial compliance code is increasingly becoming an important factor in buying decision.

Responsibilities of Disha member factory
DISHA member factory is committed to adhere to the DISHA common code of conduct (CCC) Principle on child labour and takes the responsibility to:

  • Understand and identify applicable laws and acts
  • Understand general industry practices and perception
  • Establish management systems for sustenance and continual improvement

Disha-CCC for child labourDisha- common code of conduct (CCC) is based on various central and state laws. Some of the laws that specify conditions on the subject of employment of children and young persons are as follows:

  • No child who has not completed fourteenth year of age shall be required or allowed to work in any occupation in the factory
  • Persons who have completed fourteenth, but not eighteenth, year of age are not employed in hazardous or dangerous operations
  • No female young person shall be required or allowed to work in any factory except between 8.00 A.M. and 7.00 P.M
  • Young people are required to work only after obtaining a ‘certificate of fitness’ from a government medical officer not below the rank of an Assistant Surgeon. The fee for obtaining this certificate would be borne by the factory

By implementing DISHA CCC, it will be possible for the DISHA Member Factory to establish factory compliance to adhere to Indian laws, re-frame policies and better practices aimed at improving social and environmental impacts by the factories.

Role of AEPC in Indian Garment Industry

Indian apparel industry is one of the important export sectors and enjoys good global ranking because of its quality and price competitiveness. However, there is a growing need to increase competitiveness in the social domain as the industry faces various labour, compliance and contextual challenges.

Being a labour intensive industry, social compliance is becoming an important issue for this sector. The apparel export promotion council of India (AEPC) under the textiles ministry is helping domestic textile industry to adhere to global norms through development and implementation of tools to help factories certify, monitor and improve universal standards.

AEPC’s assistance to garment exporters
AEPC provides invaluable assistance to Indian garment exporters as well as international buyers who select India as their preferred sourcing destination for garments. The body today has grown to become the most powerful association for promotion and facilitation of garment exports. With an objective of building a strong ground for the Indian exporters, AEPC is committed to provide various platforms which would help in increasing garment exports.

AEPC- Disha Initiative
AEPC in its continuous efforts to make India a preferred sourcing destination plans to undertake a series of activities to strengthen the compliance code capacity in the Indian export garment industry. Further, the project DISHA has been initiated with the aim to unify the Indian apparel manufacturers for mutual co-operation, global alignment and resource optimisation. It also focuses to create and adopt management systems to address human and environmental challenges.

Objectives of Disha programme

  • To increase awareness among apparel manufacturers on social and environmental standards based on applicable Indian laws
  • To improve competitiveness of apparel manufacturers
  • To promote a management system oriented thinking and approach for engaging with social and environmental issues
  • To promote a process-based certification system that enables measurement of progress towards adoption and maintenance of benchmark practices in the Disha Common Code of Conduct (Disha-CCC)

Major components of Disha
Environmental, social and safety related compliance issues are gong to assume increasing importance in textiles and apparel sector as the competiveness in the sector moves to new emerging economies. Creating an environment for better compliance standards and improved social sustainability of the industry can give India the required edge over its competitors in the global market. Some of the major components of the program Disha are:

  • Common Code of Conduct (CCC)
    AEPC-Disha’s common code of conduct is designed to guide the Indian apparel manufacturers on legal, social and environmental issues. The program establishes the principles for business responsibility, based on applicable Indian laws and International labour organisation (ILO) conventions approved by the Government of India.
  • Factory Capacity Building & Training
    The common code of conduct involves orientation for the owners of apparel factories and capacity building for factory-nominated personnel on Disha-CCC and towards applying the management systems for Disha-CCC.
  • Baseline & Impact Assessment
    Initially, a factory shall undergo a pre intervention baseline assessment for gap analysis against the Disha-Common Code of Conduct (CCC) principles and benchmarks. Afterwards, post intervention assessments on operationalisation of the management systems in the factory shall be undertaken.
  • Disha Certification
    A Disha certificate shall be awarded to the factory by AEPC upon successful and satisfactory implementation of the social and environmental management system.
Indian Garment Industry and Social Responsibility

The Indian garment industry is one of the largest and oldest sectors in the country. It is also an important industry in terms of output, investment and employment. It is a niche market globally and has earned reputation for its durability, quality, and beauty. The industry is growing at a faster pace with change in customer taste and preferences. The various factors responsible for change in customer preferences are:

  • Rise in disposable incomes,
  • Increasing demand for branded apparels and fashion accessories,
  • Convenience of shopping at departmental stores and shopping malls,
  • Boom in the retail industry, and
  • Government policy focused on fast-track growth

International labour standards

The Indian garment industry is well established and enjoying considerable demand in both domestic as well as global markets. Further, the increased pressure from international apparel buyers to comply with labour standards and worker’s rights in Indian garment factories has led to a vast number of labels and code of conduct policies entering the markets.

Corporate social responsibility

Corporate social responsibility (CSR) essentially means that the organisation should work in an ethical manner and work in the best interest of the various parties associated with it. The concept of social responsibility in Indian garment industry is gaining popularity in today’s times. More and more companies are trying to work in a way to protect the interests of the employees, customers, suppliers and the society at large.

Social responsibility in the garment industry

Just like the firms in other industries, garment firms also have social responsibility associated with employees and the environment. Social responsibility in the global apparel industry provides an in-depth examination of labour practices and standards. However, the ways by which different organisations choose to fulfill their social responsibility might be different. A garment factory can fulfill its social responsibility in the following manner:

  • By providing a competitive and challenging work environment to the employees
  • By having ethical recruitment, remuneration, promotion and other policies
  • By providing opportunities to the employees to voice their opinion and complaints and have an effective policy for the solution of these complaints
  • Ensuring a safe working environment for the employees
  • Ensuring not to adopt child or forced labour in the industry
  • Having fair policies for the solution of employee disputes

Apparel Export Promotion Council

The Apparel Export Promotion Council (AEPC) would like to reiterate that the Indian garment industry is deeply engaged in ensuring industrial compliance with the law and that its efforts encompass the informal sector, including home workers, and facilities serving solely the domestic market, stated Dr. A Sakthivel, Chairman, AEPC. “The AEPC therefore, respectfully urges to make clear in its reports and lists that the garment export sector in India is not marked by child labour or forced labour and there have been significant increase in initiatives at the government, industry and NGO levels to improve awareness among the informal sector and those serving the domestic market achieve the policies and compliance for which the export sector is rightly recognised,” said the Chairman.

Social Compliance in Indian Garment Industry

Indian apparel trade and compliance standards

The Indian apparel industry is working with an objective of reaching 7.5 billion by the end of 2012, a figure that is almost double the size of the last profit calculated by the Indian Chamber of Commerce (ICC).

With the increasing globalisation, a lot of importance has been placed on internationally recognised compliance standards in the garment industry. Factories involved in the international trade must keep a proper check of the garment factory compliance at regular intervals. Therefore, every apparel export business needs to have adequate understanding of compliance guidelines for foreign trade.

Why code of ethics is required

The code of ethics is all about the quality of the products from the factory and the working environment that should meet the requirements of audits and inspections. An individual running an export business needs to follow these ethics sincerely. These ethics are required for:

  • Increasing national competitiveness in terms of social compliance
  • Increasing competitiveness of small scale manufacturers
  • Reducing burden on manufacturers

Some of the compliance codes in Indian garment industry are listed below.

Working hour & wage rate compliance

  • Garment factory must ensure that employees should get atleast minimum wages according to the domestic law and as per the time spent by them in the industry
  • Employer should pay equal wages to both men and women employees, for performing the same work or work of a similar nature
  • Worker employed for more than nine hours on any day or for more than 48 hours in any week, shall be entitled to wages at premium legal rates for such overtime work
  • Every worker should be given one holiday (for a period of 24 consecutive hours) in a week. Whenever a worker is required to work on a weekly holiday, he is to be allowed a compensatory holiday for each holiday so lost
  • Every worker is to be allowed at least half an hour rest interval after a maximum working of 5 hours at a stretch

Workplace & work environment compliance

  • Organisations should ensure proper ventilation, sufficient light and air to provide the employees with standard work environment
  • Indian garment industries should provide the workers with comfortable sitting chair with back support and proper leg space

Non-discrimination compliance

  • Organisations should not discriminate employees on the basis of physical characteristics, beliefs and cultural characteristics. All the terms and conditions of employment should be based on an individual’s ability to do the job. They should provide equal employment opportunities for all employees and associates irrespective of the employees’ race, color, religion, age, sex, creed, national origin, marital status, etc.

Social compliance in India

The demand for social compliance is increasing day-by-day. However, we can attain a robust compliance system only when the workers are provided with an equal platform to voice their concern and have consultative mechanism at the workplace.

The Apparel Export Promotion Council of India (AEPC), an apex body of Indian apparel exporters, provides all social compliance services to meet international global standards. The council also trains and guides factories to upgrade the workplace conditions and labour standards.

Health and Safety Compliance in Indian Garment Industry

Importance of compliance in garment industry

Garment industry is getting increased attention from consumers, social workers, welfare organisations and branded international buyers. Many international buyers are demanding for factories to comply with their “code of conduct” before placing any order.

Nowadays, continuous adherence to quality standards and employee satisfaction have become important parameters for measuring the company’s performance. Enterprises undertake business compliance, not necessarily out of a need to act generously, but more so for survival in a globally competitive and legally complex modern environment.

In the context of growing competition among exporting countries and increasing demand for products that meet internationally recognised standards, it is essential for the suppliers to improve safety and health compliance code and provide proper working environment in their factories.

Several foreign countries have also developed various international compliance standards on health and safety compliance. Exporters should follow these compliance codes to survive in the global market. Moreover, regular practice of compliance codes of conduct can bring higher price of products, less employee turnover rate, smooth industrial relation as well as global image & reputation.

Need for compliance codes

There is a direct impact of social compliance on company’s financial results, especially for organisations in consumer market where brand name and reputation are most critical assets. Companies should adopt compliance code to protect their goodwill in the market. The Indian garment industry needs to be tough on compliance rather than competing with other developing countries manufacturing inexpensive garments.

Compliance code guidelines

Garment factory should consider the following guidelines while complying with safety and health compliance codestandards:

  • Industries should comply with international standard code, such as ISO or importing countries standard code to become competitive in international markets
  • Young persons (between 15 to 18 years) are not supposed to work on any dangerous machine without adequate training and supervision
  • Wiring should be in good condition with no broken junctions or wires sticking out at the ends of the conduit
  • Eye‐wear and face shields should be provided in areas with danger of flying objects, sparks, glare, hazardous liquids and excessive dust
  • Ear plugs or muffs should be given in places with excessive noise such as generator rooms and embroidery rooms
  • Hard hats and protective shoes are necessary for workers involved in loading and unloading operations
  • Factories should have effective fire extinguisher with proper usage instructions

Role of Apparel Export Promotion Council in India

In India, the Apparel Export Promotion Council (AEPC) is committed to legal compliance and ethical business practices and encourages members / exporters to comply with all applicable laws and regulations of the country to meet international compliance standards.

Further, the council has designed a garment factory compliance program ‘Disha’ (Driving Industry towards Sustainable Human Capital Advancement) that aims to spread awareness regarding the importance of compliance among garment exporters.

India is increasingly focusing on compliance programs

India is being considered as the next pioneer country in the readymade garment export business. The country is showing positive signs of growth as the foreign buyers are continuously dealing with Indian garment exporters. In the face of such demand, Indian garment manufacturers and exporters constantly have to maintain high quality in finished products and continuously provide variations in style and design to attract the attention of prospective buyers.

With the growing efforts of media, buyers in the US and the EU have increasingly become very conscious towards global standards particularly related to women and children. Therefore, Indian manufacturers need to provide customers with ethically manufactured products in order to survive in the international markets.

Codes of conduct have become increasingly common in recent years, particularly in the apparel sector. Corporations voluntarily develop such codes to inform consumers about the principles that they follow in the production of the goods and services they manufacture or sell. These codes usually address many workplace issues such as child labour, health and safety issues, etc.

The apparel export promotion council of India (AEPC), an apex body of Indian apparel exporters under the textiles ministry is helping domestic textile industry to adhere to global norms through development and implementation of tools to help factories certify, monitor and improve universal standards.

Further, the council has designed a garment factory compliance program ‘Disha’ (Driving Industry towards Sustainable Human Capital Advancement) that aims to spread awareness regarding the importance of social compliance amongst textile exporters. The programme will encourage members to follow better social practices, which will give them a competitive edge in the international market where social compliance is gradually becoming an important buying decision.

“We will develop intensive training on legal requirements on core issues like child labor, trafficked labor, wages amongst others and enable accreditation by international agencies like the International Labor Organization to ensure global acceptance of the program,” as per Lakshmi Bhatia, Director, Free Labor Association.

Need of Compliance Audit

Compliance auditing has become an important task to ensure if the company meets standards of various environmental laws. It is needed to check the welfare of the people working within the boundaries of the garment factory if they are getting wages at the right time, check on working hours and health and safety of the work force.

In order to measure the company’s performance, it is important to continuously adhere to quality standards and employee satisfaction in garment industry. The compliance program team with regular auditing can bring the desired change in the code of conduct, ethics and other issues based on compliance. Further, they provide training on the code of business conduct, violence in the work place, different competition laws, prevention of drug abuse and several other important matters.

Basic Areas of Compliance

  • Proper working conditions, minimum wages & standard working hours
  • Non-discrimination
  • Restriction on child or forced labour
  • Freedom of association
  • Environmental protection and other safety laws
Increasing Adherence to CSR in Apparel Industry

Globalisation has influenced trade all over the world. Companies are looking for new opportunities for doing business outside their home country. In recent years, Corporate Social Responsibility (CSR) has gained a lot of importance as foreign companies are demanding for ethically manufactured products particularly in the garment sector.

The trend of increasing accountability for corporate social responsibility is promoting companies to develop more socially conscious compliance codes so that they remain viable in global markets. It relates to the steps companies take to ensure that their goods have been produced under acceptable conditions, which includes lawful production under fair and honest dealings.

CSR has come into public awareness more recently as result of globalisation, advancement in communication technology, media coverage and ethical investment opportunities. It is already established in a global context with various international standards set by the United Nations. Some of the international organisations that provide CSR standards for Multi-national corporations are following:

  • International Labour Organization (ILO)
  • UN Global Compact
  • The Organisation for Economic Co-operation and Development (OECD)
  • The Universal Declaration of Human Rights (UDHR)

In Indian apparel industry, the role of corporate social responsibility has been a topic of increasing concern for at least a decade. India is a sourcing destination for many international brands for garment products. As the export of garment products from India has increased, the demand for corporate social compliancehas also risen. CSR activities in Indian garment industry include the following:

  • Fair remuneration
  • Proper working conditions
  • Training and staff development
  • Equal opportunities and diversity
  • Employee participation in business decisions
  • No child or bonded labour
  • Freedom of association

Benefits of CSR/ Business Compliance

When business complianceis taken into consideration, it gives immense benefits to both employees and the organisation. CSR can positively influence enterprise competitiveness in many ways such as:

  • Cost savings and increased profitability due to a more efficient deployment of human and production resources
  • Improved products / production processes result in better customer satisfaction
  • Higher motivation and loyalty of employees
  • Enhanced corporate or brand reputation, image and value
  • Improved culture within the organisation
  • Enhanced word-of-the-mouth communication
  • Increased turnover due to competitive advantage
  • Better access to public funds due to a better corporate image

Enterprises undertake business compliance, not necessarily out of a need to act generously, but more so for survival in a globally competitive and legally complex modern environment. The Indian garment industry needs to be tough on compliance rather than competing with other developing countries manufacturing inexpensive garments. Every export business needs an adequate understanding of the compliance guidelines for the foreign trade.

The Apparel Export Promotion Council of India (AEPC), the apex industrial body that promotes apparel exports, aims at making India the global benchmark for corporate social compliance in apparel manufacturing and export. With this objective, the Council has embarked on a project - Driving the Industry towards Sustainable Human Capital Advancement (Disha). This programme will encourage members to follow better social practices, which will give them a competitive edge in the global market.

Compliance Code Guidelines for Indian Garment Industry

The Indian apparel industry contributes substantially to India’s export earnings. In recent years, India has emerged as a major sourcing destination for various buyers. The USA and the EU continue to be the most important markets for Indian apparel industry, accounting for about two-third of India’s textiles exports. These countries have been insisting upon compliance to certain social, environmental and safety standards and norms by the production units involved in export business. Corporate codes of conduct that address labour standards vary from company to company.

Some of the common Indian Garment industry compliance code guidelines are:

  • Exporters must not be involved in unfair labour practices including but not limited to interferences in matters concerning freedom of association
  • There shall be no differences in workers remuneration for work of equal value on the basis of gender, race, religion, age, disability, sexual orientation, nationality, political opinion, or social or ethnic origin
  • Exporters shall not threaten female workers with dismissal or any other employment decision that negatively affects their employment status in order to prevent them from getting married or becoming pregnant
  • Exporters shall ensure that proper ventilation systems are installed within their premises to prevent airborne exposures which may affect the health of workers
  • Members shall not use any form of physical or psychological violence, threats, harassment, or abuse against workers seeking to form organisations or participating in union activities, including strikes
  • Workers shall be entitled to at least 24 consecutive hours of rest in every seven-day period. If workers must work on a rest day, an alternative consecutive 24 hours rest day must be provided
  • Exporters shall provide workers with paid annual leaves as required under local laws, regulations and procedures. Exporters shall not impose any undue restrictions on workers’ use of annual leave or taking any type of sick or maternity leave
  • Exporters shall pay workers at least the legal minimum wage or the prevailing industry wage, whichever is higher. In today’s scenario, it is the most essential code of compliance for Indian Industry
  • Exporters shall compensate workers for all hours worked. Workers on a piece rate payment scheme or any other incentive scheme should be paid accordingly
  • Exporters shall not unreasonably restrain the freedom of movement of workers, including movement in canteen during breaks, using toilets, accessing water, or to access necessary medical attention, as a means to maintain work discipline
  • Garment exporters must ensure that the minimum age requirement to non-hazardous employment shall not be less than 14 years. This is the most important concern in India nowadays. Further, each worker has the right to enter into and to terminate their employment freely

Indian apparel makers need to follow all the compliance guidelines to comply with global standards. Often companies adopt industry compliance codes to project a positive image and protect their goodwill in the market. The Indian garment industry needs to be strong on compliance rather than competing with other developing countries manufacturing inexpensive garments.