MGC Group Assignment Garment Industry

7/21/2019 MGC Group Assignment Garment Industry

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Global

ComplianceReport for

Indian

GarmentIndustry

Submitted by:

Alok Vyas-3C Sandeep-33B

Sanchay Puri-34C Gokul-18A

Ajay Kumar Singh-2C

Arjun Yadav-9C

Ankit Kumar-8B



Table of Contents

INTRODUCTION ............................................................................................................................................. 2

COMPLIANCE CODE GUIDLEINES FOR INDIAN GARMENT INDUSTRY ........................................................... 4

COMPLIANCE IN INDIAN GARMENT INDUSTRY ............................................................................................ 6

SOCIAL COMPLIANCE .................................................................................................................................... 9

HEALTH AND SAFETY COMPLIANCE ............................................................................................................ 11

TBT AND OTHER NON-TARRIFF BARRIERS .................................................................................................. 12

REQUIREMENTS FOR ENVIRONMENTAL LABELLING -SPECIFICATION. ....................................................... 12

INDIAN GARMENT IMPORTING COUNTRIES AND INTERNATIONAL COMPETETION .................................. 13



INTRODUCTION

The export of garments has become the main source of revenue for the industry and

has augmented the Indian apparel economy for a bright future. The export from Indian

market has increased from US$ 14 million last year to US$ 17 million this year. This hasincreased the share of India in the world's total export market. Garment exporters from

India are making several efforts to provide quality apparels to the end users. Bulk of

India‟s exports of apparels goes to the US, Canada and the European Union.

Many garment exporting countries in Asia and elsewhere facing problems related to

increased requirements for multiple compliance accreditations. As the globalization of

the economy has augmented, the concerns from consumers, investors, labour, religious

and other groups regarding the conditions under which products for export to abroad

are made, have grown or processed. The chief concerns among buyers are

environmental laws and regulation, labour reforms, wage differentiation and

discrimination, working hours, child labour, freedom of association, health and safety

issues, working conditions, etc. To address all these issues, many foreign companies

have adopted codes of conduct to influence the practices of their global business

partners. Codes of conduct typically set guidelines on these issues.

The Common compliance code issues are generally classified under social,

environmental and technical categories. Apparel Export Promotion Council (AEPC), an

apex body of Indian garment exporters, works with suppliers to develop a common

social and environmental compliance code that can position India as a preferred ethicalsourcing destination. The project not only aims at developing code of ethics for the

garment industry but also offers training and capacity building after conducting a gap

analysis or systems assessment of factories.

The government thinks that India has the potential to increase its textile and apparel

share in the world trade from the current level of 4.5 per cent to 8 per cent and reach

US$ 80 billion by 2020.

Addressing labor standards has become an important aspect with the rise of corporate

social responsibility. Common compliance codes have become key instruments inensuring minimum labor standards in global production.

In India, children were involved in the production of garments for export to the United

States. Many of the major apparel manufacturers and retailers have developed various

codes or business policies that address child labor and other working conditions.



India's apparel export sector and the textiles ministry have taken an initiative to help

manufacturers to focus on good work practices and prevention of child/forced labour.

This would help to improve country‟s image as an „ethical sourcing destination‟.

Increase in pressure from developed countries, to meet global standards on labour has

pushed Indian apparel manufacturers to take legal compliance matters in their own

hands to change the negative image of the country.

The apparel export promotion council of India (AEPC) helps the garment industry to

follow various global norms, which help the factories to improve their universal

standards through development and implementation of tools.



COMPLIANCE CODE GUIDLEINES FOR INDIAN GARMENT INDUSTRY

The Indian apparel industry contributes substantially to India‟s export earnings. In recentyears, India has emerged as a major sourcing destination for various buyers. The USAand 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 andnorms by the production units involved in export business. Corporate codes of conductthat 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 toprevent them from getting married or becoming pregnant

Exporters shall ensure that proper ventilation systems are installed within theirpremises 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 organizations orparticipating 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 24hours 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 unduerestrictions on workers‟ use of annual leave or taking any type of sick ormaternity leave

Exporters shall pay workers at least the legal minimum wage or the prevailingindustry wage, whichever is higher. In today‟s scenario, it is the most essentialcode of compliance for Indian Industry

Exporters shall compensate workers for all hours worked. Workers on a piecerate 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, orto 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 mostimportant concern in India nowadays. Further, each worker has the right to enterinto and to terminate their employment freely

Indian apparel makers need to follow all the compliance guidelines to complywith global standards. Often companies adopt industry compliance codes toproject a positive image and protect their goodwill in the market. The Indian

http://www.aepc-disha.com/






garment industry needs to be strong on compliance rather than competing withother developing countries manufacturing inexpensive garments.



COMPLIANCE IN INDIAN GARMENT INDUSTRY

Compliance is all about the quality of products from the factory which must meet theaudits 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 theglobal markets are insisting on ethically manufactured products. As the export ofgarment products from India has increased, the demand for social compliance has alsorisen in the Indian garment Industry.

Social ComplianceSocial compliance refers to how a business treats its employees, the environment andtheir perspective on social responsibility. It refers to a minimal code of conduct thatdirects how employees are treated with regards to wages, working hours and workconditions. 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 SafetyManagement, Process Security Management, and Risk Management Programs. Auditsfocus on the policies and procedures to verify compliance with regulatory requirementsand industry standards. They help to ensure programs are properly designed andimplemented. Further, audits also identify program deficiencies so thatrecommendations can be developed for corrective action.

Compliance audit in India includes an examination of rules, regulations, orders andinstructions for their legality, adequacy, transparency and prudence. Auditors gather

information through visual observation at the site, document reviews and interviews ofstaff. This data is then compared to the applicable permits and regulations to evaluatehow well the operation is conforming to the applicable legal requirements.

Phases of AuditThere are three main phases of compliance audit in India:

Pre-audit: It includes planning and organizing the audit; establishing the auditobjectives, scope and etiquette; and reviewing the design of the program byinspecting 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, andsocial compliance standards not only within their sphere of operations, but also insisttheir vendors, distributors, and other collaborators involved in the supply chain to do thesame.





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 engageforced or child labour and get the supply chain of the suppliers audited. Apparel ExportPromotion Council (AEPC), an apex body of Indian apparel exporters, has designed agarment factory compliance program „Disha‟ (Driving Industry towards SustainableHuman Capital Advancement) to make India a global benchmark for socialcompliance in apparel manufacturing and export. This Common Compliance Codeproject will prepare the Indian apparel industry on a common platform towards a more

social and environmentally compliant industrial environment.

Role of AEPC in Indian Garment Industry

Indian apparel industry is one of the important export sectors and enjoys good globalranking because of its quality and price competitiveness. However, there is a growingneed to increase competitiveness in the social domain as the industry faces variouslabour, 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 textilesministry is helping domestic textile industry to adhere to global norms throughdevelopment and implementation of tools to help factories certify, monitor and improveuniversal standards.

AEPC’s assistance to garment exporters AEPC provides invaluable assistance to Indian garment exporters as well asinternational buyers who select India as their preferred sourcing destination forgarments. The body today has grown to become the most powerful association forpromotion and facilitation of garment exports. With an objective of building a strongground for the Indian exporters, AEPC is committed to provide various platforms which

would help in increasing garment exports.

AEPC- Disha Init iat ive

AEPC in its continuous efforts to make India a preferred sourcing destination plans toundertake a series of activities to strengthen the compliance code capacity in the Indianexport garment industry. Further, the project DISHA has been initiated with the aim tounify the Indian apparel manufacturers for mutual co-operation, global alignment andresource optimization. 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 DishaCommon Code of Conduct (Disha-CCC)

Major components of Disha

Environmental, social and safety related compliance issues are going to assumeincreasing importance in textiles and apparel sector as the competiveness in the sector

moves to new emerging economies. Creating an environment for better compliancestandards and improved social sustainability of the industry can give India the requirededge over its competitors in the global market. Some of the major components of theprogram Disha are:

Common Code of Conduct (CCC) AEPC-Disha‟s common code of conduct is designed to guide the Indian apparelmanufacturers on legal, social and environmental issues. The programestablishes the principles for business responsibility, based on applicable Indianlaws and International labour organization (ILO) conventions approved by theGovernment of India.

Factory Capacity Building & TrainingThe common code of conduct involves orientation for the owners of apparelfactories and capacity building for factory-nominated personnel on Disha-CCCand towards applying the management systems for Disha-CCC.

Baseline & Impact AssessmentInitially, a factory shall undergo a pre intervention baseline assessment for gapanalysis against the Disha-Common Code of Conduct (CCC) principles andbenchmarks. Afterwards, post intervention assessments on operationalization ofthe 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 managementsystem.





SOCIAL COMPLIANCE

Indian apparel trade and compliance standards:The Indian apparel industry is working with an objective of reaching 7.5 billion by theend 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 globalization, a lot of importance has been placed on internationallyrecognized compliance standards in the garment industry. Factories involved in theinternational trade must keep a proper check of the garment factory compliance atregular intervals. Therefore, every apparel export business needs to have adequateunderstanding of compliance guidelines for foreign trade.

The code of ethics is all about the quality of the products from the factory and theworking environment that should meet the requirements of audits and inspections. Anindividual 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 overtimework

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 tobe allowed a compensatory holiday for each holiday so lost

Every worker is to be allowed at least half an hour rest interval after a maximumworking of 5 hours at a stretch

Workplace & work environment compliance

Organizations should ensure proper ventilation, sufficient light and air to providethe employees with standard work environment

Indian garment industries should provide the workers with comfortable sittingchair with back support and proper leg space





Non-discrimination compliance

Organizations should not discriminate employees on the basis of physicalcharacteristics, beliefs and cultural characteristics. All the terms and conditions ofemployment should be based on an individual‟s ability to do the job. They should

provide equal employment opportunities for all employees and associatesirrespective of the employees‟ race, color, religion, age, sex, creed, nationalorigin, marital status, etc.

Social compliance in India

The demand for social compliance is increasing day-by-day. However, we can attain arobust compliance system only when the workers are provided with an equal platform tovoice 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 globalstandards. The council also trains and guides factories to upgrade the workplaceconditions and labour standards.

Disha-CCC for child labour

Disha- 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 andyoung 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





HEALTH AND SAFETY COMPLIANCE

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

Nowadays, continuous adherence to quality standards and employee satisfaction hasbecome important parameters for measuring the company‟s performance. Enterprisesundertake business compliance, not necessarily out of a need to act generously, butmore so for survival in a globally competitive and legally complex modern environment.

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

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

There is a direct impact of social compliance on company‟s financial results, especiallyfor organizations in consumer market where brand name and reputation are mostcritical assets. Companies should adopt compliance code to protect their goodwill in themarket. The Indian garment industry needs to be tough on compliance rather thancompeting with other developing countries manufacturing inexpensive garments.

Compliance code guidelinesGarment factory should consider the following guidelines while complying with safetyand health compliance codestandards:

Industries should comply with international standard code, such as ISO orimporting countries standard code to become competitive in international markets

Young persons (between 15 to 18 years) are not supposed to work on anydangerous machine without adequate training and supervision

Wiring should be in good condition with no broken junctions or wires sticking outat the ends of the conduit

Eye‐

wear and face shields should be provided in areas with danger of flyingobjects, sparks, glare, hazardous liquids and excessive dust

Ear plugs or muffs should be given in places with excessive noise such asgenerator rooms and embroidery rooms

Hard hats and protective shoes are necessary for workers involved in loadingand unloading operations

Factories should have effective fire extinguisher with proper usage instructions





TBT AND OTHER NON-TARRIFF BARRIERS

Impositionof high levels of port fees and taxes significantly add to the cost ofexports. Fees for authentication of export documents by the consulates of theimporting countries similarly add to the cost

Customs procedures including valuation rules in certain countries have beenidentified to be acting as trade barriers

Inclusion of provisions relating to preferential conformity assessment for technicalregulations and standards. These provisions tend to give RTA Memberssubstantial time and procedural advantages

REQUIREMENTSFOR ENVIRONMENTAL LABELLING -SPECIFICATION.

IS 15651:2006 GARMENTS –

Covers quality requirements as specified in therelevant product standard or asagreed betweenthe buyer and the seller• environmental requirements includelimitsforfollowing as per international norms:

urea formaldehyde insecticides and pesticides chlorinated hydrocarbons opp and other phenolic compounds heavy metals organo tin compounds compliance to environmental legislation pcpl banned arylamines



INDIAN GARMENT IMPORTING COUNTRIES AND INTERNATIONAL

COMPETETION

Bulk of India‟s exports of apparels goes to the

US Canada European Union.

The government thinks India has the potential to increase its textile and apparel share inthe world trade from the current level of 4.5 per cent to 8 per cent and reach $80 billionby 2020. India has the highest number of looms – 1.8 million shuttle looms (at 45 percent of global capacity) and 2,00,000 shuttle-less looms (at 3 per cent of globalcapacity).

We also have 3.9 million hand looms (at 85 per cent of global capacity) and the secondhighest number of spindles at 23 per cent of global capacity.

Exporters are enjoying good demand and the industry players are booked with ordersthrough June and July 2011, which is exceptionally good for the Industry. The USaccounts for about 40 per cent of India‟s total garment exports. Exports started growingin August 2010 after witnessing deceleration in the initial months of the current fiscal.

Indian exports have become competitive, thanks partly to the government‟s restrictionson exports of cotton and cotton yarn which lowered the raw material prices.

rising cost of labour in China and marginal price difference in fabric prices in Indiaagainst China, are helping India. Chinese apparel industry is also plagued with strikesand production delays. “If India can grab 10 per cent of their business, Indian apparelexports will double to $20 billion in coming years,” he added.

International competition

Other countries are not sitting idle either. According to Sangam India Limited ExecutiveDirector V K Sodani, Global giants such as Wal-Mart, VF Corporation, GAP and H&Mhave begun flocking India to source fabric as China, the largest supplier, is slowlyretreating from denim production due to cotton crunch. India has a golden opportunity tograb a share in the world denim market. This is because the Chinese government hasreduced cotton acreage. Instead of being a mass supplier, China is trying to be a valuesupplier.

The opportunity is huge as China makes 3 billion metres of denim a year, miles aheadof India‟s 650 million metres output. The biggest hit we take is on the productivity whencompared to China and Bangladesh. Average labour productivity of India is around 45



per cent, whereas productivity in other countries is at 65-70 per cent. This is actually adouble hit our cost is high and productivity is low.

India has a better and longer history of textiles compared to any other country but stillour roots are not known in global business. Since garments exports do not have large

profit margins, investments from private entrepreneurs are low and this is why thisindustry has not grown much in India compared to many countries.

MGC Group Assignment Garment Industry

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