Traceability Readiness in Bangladesh’s RMG Supply Chain and the SME Exclusion Gap in EU Digital Product Passport Compliance

Abstract

Bangladesh’s ready-made garment (RMG) sector exports over USD 19.71 billion annually to the European Union (EU). Under the EU Ecodesign for Sustainable Products Regulation (ESPR), these exports will soon require Digital Product Passport (DPP) compliance. However, institutional initiatives, such as the May 2026 BGMEA-AWARE™ Memorandum of Understanding, focus primarily on large, Tier-1 exporters with existing digital capabilities. This focus leaves small and medium-sized enterprise (SME) subcontracting factories without a viable compliance pathway, creating an SME Exclusion Gap. Using an exploratory qualitative case study design (Yin, 2018), this paper evaluates traceability readiness across five purposefully selected RMG factories in Chittagong and Narayanganj using a 27-question cross-functional assessment and four operational datasets. The findings reveal a significant gap between external buyer pressure (averaging 3.8 out of 5) and internal technology capacity (averaging 2.4 out of 5, the lowest among all evaluated dimensions). While all five factories reported regular buyer compliance demands, past order cancellations, and financial constraints, operational data showed severe structural deficits: only 40% maintained formal chemical tracking, 40% could identify export shipments at the vessel level, and zero demonstrated high DPP awareness. To explain why demand-driven pressure fails to spur digital adoption, this study models a Six-Barrier Causal Chain: financial exclusion induces skills deficits, which prevent foundational data capture; this lack of structured data renders technology investments ineffective. Consequently, subsidizing software or blockchain licenses alone cannot close the compliance gap. To resolve this issue, the paper introduces a Minimum Viable Traceability (MVT) framework featuring four cost-tiered implementation steps, alongside a repeatable Traceability Readiness Score (TRS) tool. Ultimately, the SME Exclusion Gap is fundamentally an information infrastructure and operational capability challenge rather than a blockchain adoption hurdle; verified DPP compliance cannot occur without certified supplier records, structured procurement data, and digitized logistics documentation.