Bangladesh faces potential 30% drop in EU exports due to ESG non-compliance, warns Sanem

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The South Asian Network on Economic Modeling (Sanem) has warned that Bangladesh could see a sharp decline of around 30% in its exports to the European Union if the country fails to meet emerging ESG (Environmental, Social, and Governance) standards mandated by the bloc.

Sanem Programme Director Zubayer Hossen emphasized that non-compliance with EU sustainability regulations could have sweeping economic consequences. “We estimate that exports to the EU would fall by 30% due to the economy-wide effects of exporters not adhering to EU sustainability measures,” he stated during the launch of the Sanem Sustainability Centre in Dhaka. He added that overall exports from Bangladesh might decrease by approximately 10 to 12% as a result.

The EU has been at the forefront of enforcing strict ESG and sustainability reporting requirements through various regulations. Notably, Germany’s supply chain act mandates companies to ensure human rights and environmental due diligence throughout their supply chains. Hossen noted that other major markets such as Japan and the United States are also increasingly integrating environmental considerations into their trade practices.

Given these developments, he stressed the importance of strengthening compliance within Bangladeshi industries, improving supply chain transparency, investing in green technologies, and building institutional and human capacity to meet these standards.

The new Sanem Sustainability Centre aims to support Bangladesh’s transition toward sustainable development by conducting high-quality research and fostering systemic change through stakeholder engagement. The centre will collaborate with government agencies, private sector actors, development partners, research institutions, and civil society organizations to promote evidence-based policies aligned with international sustainability benchmarks.

Prof. Lutfey Siddiqi, special envoy on international affairs to the chief adviser, highlighted the need for coordinated action. “Give us some rigorous, analytical basis for taking action; and bring people together,” he urged during the event.

Bangladesh is currently preparing for its graduation from least developed country (LDC) status, a process that is increasingly complicated by global regulatory pressures around ESG standards. Sanem Executive Director Selim Raihan emphasized the importance of aligning policies and efforts across all sectors to meet these challenges fairly and inclusively, particularly protecting vulnerable workers from bearing disproportionate costs.

Md Abdur Rahim Khan, additional secretary (export) at the Ministry of Commerce, underscored the urgency of adapting to new global standards. “Europe’s Green Deal, digital passports, and other initiatives are shaping the future of international trade. Bangladesh must embrace sustainability and circularity in its supply chains,” he said.

Representatives from various government ministries, including Industries, Environment, and Bangladesh Bank, as well as officials from prominent international organizations such as the World Bank, Asian Development Bank, UNDP, and ILO, attended the event, highlighting the broad consensus on the need for a collaborative approach to sustainable trade practices.

The launch of the Sanem Sustainability Centre marks a significant step toward ensuring Bangladesh’s readiness for a future where ESG compliance is integral to international trade, safeguarding the country’s economic growth and development prospects.

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