Dhaka, Tuesday, 25 January 2022

Developing Bangladesh’s Textile Industry

A strong business case for investing in sustainability

A strong business case for investing in sustainability

by Michael Arretz (VFI, Hamburg, Germany) and Reinier de Man (Sustainable Business Development, Leiden, The Netherlands) :

Bangladesh holds a key position in the global apparel business. In 2017, it was the no. 2 exporter (29.3 billion US$) after China (158.4 billion US$), followed by Vietnam, India and Turkey (26.7, 18.4, 15.1 billion US$). Since 2000 Bangladesh’s clothing exports have grown by almost a factor 6, an annual growth of 11% for 16 years. China’s exports after 2000 have been growing by a factor 5 until 2014, but are now gradually declining. Vietnam is closely following Bangladesh’s path with an even more spectacular average growth rate of 18% leading to 2016 export figures comparable with Bangladesh.

Bangladesh’s exports arecompletely dominated by clothing. Whereas exports increased about a factor 5 between 2000 and 2016, the share of clothing increased from about 80% to more than 90% of total export value. There is no need to say that the Bangladesh clothing and textile industry is the main lifeline for the country’s economic and social development in the foreseeable future.

Only by improving continuously, can the clothing/textile sector keep and improve its position on international markets. If it cannot prove to be better than competing countries on quality, timely delivery and price, it risks losing profitable export market segments to countries such as Pakistan, Turkey or Eastern Europe. But this is not enough: it should give convincing answers to increasing market demands for socially and environmentally responsible production, including themes such as fire safety, workers health, climate change, water use and pollution.

Under pressure from politics and consumers, western markets, especially in European countries, are setting social and environmental standards well above the Bangladesh legal minimum. Brands and retailers are requiring extensive audits (SA8000, BSCI, WRAP, ETI, FLA, FWF and SEDEX… …) for checking the production companies’ compliance. They require ever more details on production practices, including social conditions, workers’ rights, wages, carbon footprint, chemicals and water use. The requirements tend to be more demanding every year.

Unfortunate safety events in recent years have put the health and safety issues in the textile industry high on the agenda of brands, retailers and consumers, especially in European countries. In the aftermath of the Rana Plaza building collapse (2013), a legally binding agreement between global brands, retailers and trade unions was signed: ACCORD on Fire and Building Safety in Bangladesh (2013). Most of the North American retailers didhave not signed ACCORD due tobecause of different law structure of America to that of Europe. OnIn July 2013, a group of major North American bBrands was signed to form the ALLIANCE for Bangladesh Workers Safety.

The pressure on the textile industry in general and on Bangladesh’s industry in particular – through auditing schemes, ACCORD and company specific requirements – to implement many social and environmental improvements has been steadily increasing. Although some Bangladesh manufacturers may have become tired of complying with the loads of detailed regulation coming from the importers, many others have discovered that investing in social conditions and environmental responsibility turns out to be an investment in highly needed production modernization and securing customer loyalty. Western markets are now rewarding the Bangladesh textile industry for its ongoing modernization process. Although the Rana Plaza collapse still serves as a symbol of a backward industry, especially in the mind of consumers, brands and retailers are fully aware of the modernization that is taking place and they continue to trust all Bangladesh suppliers that show commitment to improvement. A number of 65 factories under ACCORD and 275 factories under ALLIANCE have fully completed the remediation process.

All Bangladesh textile companies should have a strong interest in improving social and environmental conditions of the production process, not because an auditor from Hamburg, Paris or New York requires so, but because it contributes to good business: stability, quality, customer loyalty and as a result, good profits. The reason for modernizing the production process is not because the company wants to tick a box in an audit form. It is because modernization is the condition for business success. Just ticking the boxes will normally not result in optimum results. Measures just based on complying with audit requirements will often lack coherence. Examples from good Bangladesh textile companies show that it is often much better to plan for social and environmental measures even before customers and their auditors force them to do so. Many measures only require minor investments, butinvestments but deliver considerable returns. Just a few examples of social and environmental improvements:

1. As the textile industry is in the first place a people industry, investing in the employees’ well-being always pays off. When not only a sufficient number of toilets are provided but also their quality (cleanliness, availability of soap, etc.) is assured, people feel better, which has a direct positive impact on productivity. Moreover, the risks of lowering production output because of dirty hands, polluted machines and spoiled garments of losing productionbecause of dirty hands are reduced.

2. Another example is the free provision of hygienic towelssanitary napkins to the dominant female part of the employees. It will, apart from contributing to the well-being of the women, contribute to higher productivity. Cost will be earned back quickly.

3. The (free) provision of beverages and the opportunity to buy food for the whole family for reasonable prices will contribute to welfare and and a better relationship with the company based on the principle: if the company cares for me, I will carre for the company.

4. The Similary Similarly, free provision of health services, provision of spectacles, etc. will only contribute to improvements in production (quantity, quality).

5. Increasing water efficiency can produce multiple economic advantages, not only reduced water supply costs, but also reducing waste water costs and costs for chemicals, storage and handling as well.

6. Increasing Reducing energy efficiencyuse and, as a consequence, reducing the company’s CO2 footpritntand directly contributes to cost reductions, even if there may be considerable investment costs (in equipment, lamps, etc.) involved.

7. Promoting waste management and recycling directly contributes to lowering input costs and requires intelligent process redesign that inevitably opens many paths to cost saving.

In the following articles, we will come back in detail to these live examples of profitable investments in social and environmental responsibility. They show that textile companies no longer wait for the auditors to dictate how they should implement social and environmental responsibility. It is time that companies include these issues in the core of their business development.