A senior Cambodian government official urged the private sector, especially in the textile, garment, footwear and travel products sector, to observe the environmental, social and governance (ESG) principles, which would become an obligation required by big buyers in future.
Chea Vuthy, deputy secretary-general of the Cambodian Investment Board and Cambodian Special Economic Zone Board under the Council for the Development of Cambodia (CDC), said the country’s key economic sectors - agriculture, garment manufacturing, textile, footwear and travel products - would be at risk if industry players fail to comply with ESG.
“This is important as many large or well known companies place orders in countries that require companies to practise ESG principles. According to IDC (International Data Corporation)’s forecast, by 2025 big brands might insist on ESG standards before placing product orders in any country, including compliance with carbon neutrality and the use of clean energy and technology,” he mentioned during a business forum on August 11.
On August 15, Textile Apparel Footwear and Travel Goods Association in Cambodia (TAFTAC) deputy secretary-general Kaing Monika told The Post that environmental protection has become a “very serious issue” now with many factories installing solar panels on the rooftop.
“Respect for human rights and sustainability through environmentally sound technology in manufacturing is no longer voluntary, but a requirement by international markets. This is a mega trend and we are fully aware of it,” Monika said.
The German Due Diligence Law came into effect on January 1, 2023, and he expects that soon other EU countries would follow, legally binding brands and their suppliers along the value chain.
With the support and collaboration of GIZ FABRIC and TAFTAC, the European Chamber of Commerce in Cambodia (EuroCham) created a Responsible Business Hub (RBH) to ensure that Cambodian companies have the resources to understand and comply with the standards, which are becoming mandatory.
“Cambodia’s first RBH, a one-stop-centre launched on November 28 last year, would assist local exporters adhere to evolving social and environmental due diligence standards,” said Monika.
In September 2022, EuroCham white paper noted that the industrial sector should be encouraged to implement effective renewable energy (RE) policies and called on the government to remove capacity charges on solar energy and fully embrace renewable sources.
“For international manufacturers and investors in higher quality production, those with high carbon neutrality targets and those who consider investing into sustainable production in attractive markets, RE is the most important factor for their continuity, renewal or initial investment into a market. This is followed by affordability and reliability,” it said.
Cambodia had also submitted a roadmap called “Long-term Strategy for Carbon Neutrality (LTS4CN)” to the UN Framework Convention on Climate Change (UNFCCC) on December 31, 2021. It is expected to contribute to gross domestic product (GDP) growth by about three per cent and create 449,000 jobs in 2050.
In 2022, Cambodia was the first country in ASEAN to launch the Strategy for Carbon Neutrality 2050. The submission of the roadmap was to honour the commitment made by the Cambodian government during the 2021 UN Climate Change Conference in November in Glasgow to reduce greenhouse gases by 40 per cent in 2030.