Global Compliance Shifts Challenge Cambodia’s Garment Industry on Climate, Labour, Governance

Heat stress, mass fainting, and flooding are highlighted as recurring issues in Cambodian factories. Beyond the humanitarian concern, how much of an economic liability are these conditions becoming in terms of lost productivity and brand confidence?
Andrew Crawford: Both lost productivity and brand damage are expensive. Laurie Parsons and his team from Royal Holloway, University of London are actively studying the impact of heat stress and his recent report found that unsafe temperature led to a 30% decline in mean productivity of each garment factory worker. He has shown that heat mitigation strategies (such as fans and water) are effective and thus economically beneficial.

Flooding is similarly expensive since it can shut down factories for weeks and months in extreme cases. Even after the water has subsided it takes time to check equipment and get a factory back online. Such economic impacts will continue to increase with climate change which is why some brands seek shorter and shorter contracts so that they are not tied to certain factories if they experience such weather shocks.

The report points to illegal forest wood still being widely burned in factory boilers. Why has this persisted despite international scrutiny, and how damaging is it for Cambodia’s image as buyers increasingly scrutinise supply-chain emissions?
Andrew Crawford: Sadly, native logging in Cambodia continues with the country having one of the highest deforestation rates in the world. It persists because wealthy interests in Cambodia and the Cambodian Department of Environment block any attempts to shut down the industry and instead imprison or deport environmental activists. International buyers are well aware of the issue of native timber in factory boilers and I suspect they will keep investing in timber technology, such as WoodAI, to verify that non-native timber is used.

Better Factories Cambodia has been central to compliance monitoring for two decades, yet your report suggested gaps—especially around environmental indicators. Has BFC’s role plateaued, and does it need reinvention to remain credible?
Andrew Crawford: Indeed, BFC has lost relevance somewhat since there are no longer real economic incentives behind it. At its creation, it was tied to US quotas and quota 'bonuses' where improved labor standards led directly to increased garment exports to the US markets. Now that this leverage is gone, BFC has become comparable to a labour certification that is also done by many voluntary standard associations (such as WRAP). These certifications are still important, and labour audits are still valuable to buyers for due diligence, but apart from such audits and flagging major labour rights or safety abuses there is no leverage to improve standards in the factories since the previously existing trade incentives are gone.

The 2016 Trade Union Law, which weakened independent unions, is described as a reputational and compliance risk under Germany’s due diligence law. Do you think external legal pressure might succeed where domestic advocacy has struggled?
Andrew Crawford: Yes, if German and EU companies begin to leave Cambodia due to the Trade Union Law, I believe the Cambodian government would make changes to the law to avoid losing business. However, this might not improve the situation on the ground since the whole union system is already so dysfunctional and messy.

You outlined a hypothetical joint-liability model where brands, factories, and unions share responsibility for compliance. In practice, what incentive would brands have to join such a scheme, given their ability to source elsewhere?
Andrew Crawford: Despite Cambodia's difficulties, there are various large buyers that continue to source from the country for various reasons (cost, product, quality etc). Now that Cambodia has avoided the worst US tariffs with a rate of 19% then the industry will remain attractive. Considering their continued presence in Cambodia, the joint-liability model would allow them more agency and flexibility than only dealing with the Cambodian government. However, since it is difficult and costly to set up, they are reluctant to build such a model themselves.

The paper mentioned grievance mechanisms but also noted that most Cambodian workers lack access to them. How realistic is it that new compliance frameworks could genuinely empower workers, rather than just adding another audit layer?
Andrew Crawford: Most grievance mechanisms allow a worker to make a complaint at any point, compared to an audit layer which is simply a regular inspection. Companies such as Labor Solutions collect such data and pass it on to factories or directly to brands. In the German case, such a grievance can, theoretically, be passed to the German government and they will be under a legal responsibility to investigate it.

Research has also suggested there are economic returns to grievance mechanisms with improved staff retention and engagement. For these reasons I would argue grievance mechanisms are more valuable than a regular audit layer and will become more prevalent in Cambodia.

Regional competition is fierce—Vietnam, Bangladesh, even Ethiopia are offering alternatives. In the context of stricter compliance costs, where can Cambodia differentiate itself to remain attractive to buyers?
Andrew Crawford: Cambodia will continue to compete based on low costs, low tariffs, and the political stability of its authoritarian government. If it can create a smoother compliance environment this would also be a competitive advantage but right now it is behind Bangladesh, Vietnam, Pakistan and others.

And, your conclusion hinted at a fork in the road: either Cambodia leverages compliance to upgrade its industry, or brands quietly shift production elsewhere. Ten years from now, which future do you honestly think is more likely?
Andrew Crawford: It is difficult for me to judge. In my opinion, Cambodia has a young population that is able to adapt quite quickly to new trends and new technology. I can imagine the younger generation recognising the economic potential of an 'easy compliance' garment sector and embracing the necessary changes to make it happen. The risk I see is that short-term interests of the elite ignore such a long-term payoff and simply focus on short contracts at minimum costs and the 'race to the bottom'. I can envision both futures for Cambodia so it's tough for me to answer.