SL urged to build shared compliance framework for export survival

 Attorney-at-Law Shyamali Ranaraja

• Legal expert Shyamali Ranaraja calls for national action on EU due diligence law; proposes collaborative model involving Govt., JAAF, EDB, NCE and others to build reporting and compliance mechanism 
• Suggests revisiting idea of 
• Sri Lanka-specific compliance standard, possibly under SLSI, to meet evolving global due diligence expectations
• Highlights exporters’ risk exclusion from EU supply chains unless urgent, coordinated action is taken 
• Notes cost and complexity of compliance too high for MSMEs to manage alone, calling for collective responsibility
• Points to importance of centralised platforms for monitoring environmental and human rights standards, enabled by digital tools like blockchain, QR traceability and digital product passports
• Asserts exporters not wait for EU buyers to demand documentation, as retrospective compliance will be expected

By Charumini de Silva

As exporters face mounting pressure to meet the European Union’s (EU) Corporate Sustainability Due Diligence Directive (CSDDD), legal expert Attorney-at-Law Shyamali Ranaraja recently made a strong case for a shared national compliance infrastructure to support the country’s predominantly small and medium-sized manufacturing sector. 

Delivering a comprehensive analysis of the implications of the CSDDD during a multi-stakeholder awareness initiative organised by the Sri Lanka Apparel Exporters Association (SLAEA), she warned that exporters, particularly in key industries such as apparel, risk being sidelined from European supply chains unless urgent and coordinated action is taken.

With the Directive already underway and expected to be fully enforced by 2027, she said the time to prepare is now.

Noting that the cost and technical complexity of compliance could overwhelm micro, small and medium enterprises (MSMEs), Ranaraja proposed a collective solution.

“Sri Lanka is mainly composed of MSMEs. There are a few big players, but you have MSMEs who cannot afford this compliance initially. This is where collaboration becomes essential between the Government, the Joint Apparel Association Forum (JAAF), and other industry associations to develop a common mechanism where compliance becomes a shared responsibility and an internal reporting mechanism, maybe with the Export Development Board (EDB), the National Chamber of Exporters (NCE)—all these units coming together,” she said.

Ranaraja also noted that one idea worth revising is the development of a Sri Lanka-specific compliance standard. 

“We explored developing a Sri Lanka standard in the early 2000s, where the Sri Lanka Standards Institution (SLSI) also came on board. But it was rejected by international buyers at the time. However, given today’s advancements in oversight and transparency, it may be time to reconsider this approach,” she stressed.

 

Ranaraja who is a Legal and HR Consultant-Labour, Gender, Migration, said such platforms could offer centralised tools for mapping, monitoring, and reporting on environmental and human rights standards. Though previously dismissed by some global buyers as redundant or too rigid, she suggested that the CSDDD now provides both the urgency and the framework to justify its revival. 

Sri Lanka’s apparel sector, which contributes over 40% of the country’s merchandise exports, relies heavily on key markets like the EU and Germany. With the introduction of new due diligence laws—the CSDDD and Germany’s Supply Chain Due Diligence Act, known as Lieferkettensorgfaltspflichtengesetz (LkSG)—Ranaraja said it places greater responsibility on upstream suppliers and local exporters must proactively invest in compliance to maintain export sustainability. 

She explained that the CSDDD aims to align international trade with the Sustainable Development Goals (SDGs), embedding principles of justice, environmental stewardship, and stakeholder engagement across global supply chains. It applied not only to EU-based companies, but also to non-EU companies, whose turnover in the EU exceeds the € 450 million threshold. 

“Many of Sri Lanka’s major export partners like Marks & Spencer and H&M are already covered by the CSDDD. This means that suppliers across Sri Lanka need to prepare irrespective of their buyers’ immediate location,” she stressed. 

Ranaraja asserted that exporters should not wait for these buyers to request compliance, as some may not yet be fully aware of their obligation under the CSDDD. However, once they are, they could demand retrospective documentation of environmental, labour, and governance practices, placing unprepared suppliers at immediate risk. 

Despite Sri Lanka’s well-known reputation for maintaining strong labour protections and ethical manufacturing standards, Ranaraja highlighted a longstanding frustration within the export community, who undergoes expensive audits without receiving commercial benefits or preferential treatment from buyers. 

She cited findings from a 2016 study in which exporters complained of undergoing costly audits without seeing corresponding commercial or reputational benefits. 

In many cases, buyers continued to source from lower-standard countries like Bangladesh, while keeping Sri Lanka as a “fallback option,” a kind of ethical insurance in case of security and in times of dispute. 

Ranaraja hopes the CSDDD will force a shift in this power dynamic by legally requiring buyers to prioritise ethically sourced goods and take full responsibility for violations within their supply chains. 

She opined that technology will play a crucial role in this transformation. “Tools like blockchain supply chain mapping, QR code enabled traceability, and digital product passports (DPPs) will be instrumental in helping suppliers document origin, certify components, and report on labour and environmental conditions,” she suggested. 

Ranaraja also raised important scenarios that could trigger liability under the CSDDD, even if they technically conform to domestic law. “For example, if a manufacturer was to shut down a plant employing 400 workers without engaging unions or providing fair notice despite paying legally required compensation, it could be deemed non-compliant under the CSDDD due to the lack of ethical labour standards and stakeholder consultation. Similarly, environmental negligence such as toxic waste discharge affecting local communities could expose both the exporter and their EU buyers to legal action,” she said.

She stressed that Sri Lanka’s response to the CSDDD must be urgent, coordinated, and future-focused. “Exporters must immediately begin adopting digital traceability systems, collaborate with buyers on joint audits, explore the possibility of a common standard through industry/regional groups, train local staff on compliance standards, negotiate contracts to share risk/liability, and advocate for national support for Small and Medium Enterprise (SME) compliance.”

Highlighting success stories, Ranaraja noted Sri Lanka’s apparel sector is already showcasing leadership in supply chain innovation. One example is the successful pilot of the ADB-GS1 Digital Link technology, which enabled seamless and real-time exchange of product-level data across supply chains. “This advancement not only enhances traceability, but also reduces the environmental impact by cutting down on paper-based documentation. The initiative was recognised as a best practice at COP28 for its integration of digital sustainability into textile production,” she stated.

She warned that if Sri Lanka does not collectively act, the country risks exclusion from the very markets where its commitment to ethical production could have been its strongest competitive advantage. “The CSDDD is not just a compliance requirement but a wake-up call and an opportunity for us to rethink how we do trade,” she added.