A case for green transition in our apparel sector

In today's world, business is not only about profit, employment, income, and growth. Hence, it is not only about economic sustainability—it is also about social and environmental sustainability. In the run-up to the 26th session of the Conference of Parties (COP26) of the United Nations Framework Convention on Climate Change (UNFCCC), the green transition of all economic activities has gained more momentum. Several global leaders have reiterated their commitment to reduce greenhouse gas (GHG) emissions, and set ambitious targets to reach net-zero levels of emissions in an attempt to keep the global temperature rise within 1.5 degree Celsius. The private sector, including large businesses, has also made a commitment to reduce carbon emissions and set timelines to become carbon neutral.

One may refer to the findings of a McKinsey report in 2018, which indicated that the global fashion industry emitted about 2.1 billion metric tonnes of GHG—which is equivalent to about four percent of total global GHG emission. The fashion industry has to reduce its GHG emissions by 1.1 billion metric tonnes of carbon equivalent by 2030. Unfortunately, at the current trajectory of its GHG emission, the targets of 2030 will not be met.

Bangladesh is a small player in the global fashion industry. In fact, Bangladesh's national contribution to global GHG emission is 0.45 percent. However, despite its negligible GHG emission, Bangladesh has to play its part and make efforts towards the green transition of its economy, including the ready-made garment (RMG) sector. Producers, buyers and consumers worldwide are more aware of climate and environmental issues than ever before. Hence, sustainability has become a core agenda among brands. Many high-end brands have also started using recycled fabrics. Over 40 brands have committed to cut their GHG emission by 30 percent within 2030.

The RMG sector is not only human resource-intensive, but also natural resource-intensive, at every stage of the life cycle. The sector generates large amounts of waste—it requires volumes of clean freshwater for washing, dyeing, and finishing (WDF) of textiles. The textile sector is also energy-intensive. For WDF-related activities, hot water and steam have to be generated, which contributes to GHG emission. Besides, a number of harmful chemicals—including nitrous oxides, sulphur dioxides, carbon monoxide, and chlorine dioxide—are also released from factories through various activities. Therefore, the environmentally sustainable production process in the RMG sector involves waste management, water conservation, and energy efficiency.

The government of Bangladesh is committed to achieving higher economic growth in an environment-friendly manner, and will work to reduce the impacts of climate change. Its medium- and long-term plans, such as the eighth five-year plan and the Bangladesh Delta Plan 2100, have spelt out strategies and action plans in that direction. Among others, monitoring and controlling pollution, higher investment in industrial effluent treatment plants, and the adoption of cleaner technologies for economic activities are among the few important promises of the government.

In the recent past, Bangladesh's RMG sector took a number of initiatives towards a green and sustainable industry. The Bangladesh Garments Manufacturers and Exporters Association (BGMEA) signed the United Nations Fashion Industry Charter for Climate Action in 2019 with the UNFCCC for reducing GHG emissions by 30 percent by 2030. It also entered into partnership with a number of international organisations to promote environmental sustainability. One of its pledges to be a part of the "Green Button Initiative" of the government of Germany is a state-owned seal on environmental sustainability.

Bangladesh has 148 Leadership in Energy and Environmental Design (LEED) green garment factories, certified by the US Green Building Council. Nine out of the world's top 10 green RMG factories are located in Bangladesh. Also, 40 out of the top 100 green industrial projects in the world are situated in Bangladesh. More than 500 factories are in the pipeline to achieve the green factory status. It must be noted that in a highly cost-competitive environment, it is a challenge to be LEED-certified companies that are designed and built in a way to use less energy and water, have good indoor air quality, and improve the quality of life. These standards are much above the national requirements and are also expensive. Also, RMG factories have entered the Partnership for Cleaner Textile (PaCT) programme of the International Finance Corporation (IFC), which aims to lower environmental impact and resource consumption in the sector. Factories under PaCT have adopted cleaner production practices, which have helped reduce their GHG emissions.

The RMG sector is one of the major driving forces of the Bangladesh economy. It is the source of employment and income for about four million workers, the majority of whom are women. It is a key source of foreign exchange income. Currently, about 81 percent of export income comes from this sector. Bangladesh is the second largest exporter of apparels in the world, following China. During the ongoing Covid-19 pandemic, the sector faced challenges in terms of reduced exports due to the nationwide lockdown in an attempt to contain the spread of the coronavirus, and also cancellation and postponement of orders by a number of international buyers. However, as soon as the global markets started to open up, RMG exports started to pick up too. In recent months, the growth of RMG exports has been significant. In September 2021, RMG exports grew by 41.7 percent compared to the previous month.

During the last decade or so, the sector has worked towards improving various compliances in partnership with brands. As the country is going to graduate from the Least Developed Country (LDC) status by 2026, the compliance requirements on Bangladeshi exports will become more stringent. With higher commitments of governments and private sectors and higher awareness of consumers around the world, social and environmental issues are taking the centre stage of production and consumption.

However, green economic transition also involves costs. To remain competitive in the global market, productivity enhancement and cost minimisation are needed. Some of the LEED factory owners are not happy, since they have not seen returns on their green investments in terms of higher revenues. There is a demand on buyers for higher prices of apparels for the supply chains to be climate neutral. Also, it will be difficult for many factories to be climate-positive through energy-efficient technologies because of the additional costs involved.

Therefore, technology transfer and finance are two major requirements for the green transition of the RMG sector in Bangladesh. Higher productivity and lesser wastage of resources through better technology can reduce cost. However, technological upgradation has to be associated with capacity development of workers as it may lead to displacement of unskilled workers—particularly female workers. Indeed, environmental compliance has to be coupled with social compliance. It has to ensure a decent living for its workers.

Catalysing green finance is crucial for green transformation of the RMG industry through environment-friendly technologies. Global sources such as the Green Climate Fund have been less effective as the disbursement process is slow. However, given the scale of requirements for a green path, green financing will have to be mobilised from multiple sources. Public resources can never fulfil the demand; private investment is more crucial. A blended finance package comprising grants, green loan guarantees, subsidised loans, and also support from buyers can de-risk environmental investment and catalyse private funds. Higher green investment in the RMG sector will not only make the RMG sector sustainable, but will also help achieve Bangladesh's commitments towards implementing the Sustainable Development Goals (SDGs), including two important SDGs: SDG 12 on responsible consumption and production, and SDG 13 on climate action. Hence, commitments for a green RMG sector are also commitments for intergenerational equity.

Dr Fahmida Khatun is executive director at the Centre for Policy Dialogue (CPD).