Inadequate political support slowing the green transition
The apparel sector’s green transition needs to accelerate further as the policies, regulatory measures and economic instruments proposed by the government are too inadequate to make the industry and the economy environmentally friendly, according to the Center. for Policy Dialogue (CPD).
For textile and ready-to-wear factories to take a green leap forward, it takes a significant financial investment – for improved production processes and resource-efficient productivity – that many cannot afford. allow, the think tank said in a dialogue on Sunday.
Many small and medium-sized factories are no longer able to make green investments, which may lead them to a disadvantaged position after being shunned by garment buyers, RMG entrepreneurs said at the launch of the program to secure the green transition of textiles and ready-to-wear. area in Bangladesh at Brac Centre.
The CPD and Sweden Sverige organized the event for green garment factories in Bangladesh.
Apparel entrepreneurs said they spent 30% more money to build the green factories, but buyers and brands are reluctant to pay higher prices for products they make in EU-compliant units global scale.
They have built green factories with a view to protecting the environment and improving the image of the sector by saving 30 percent in energy and water consumption, they noted.
“However, we are not getting the best prices from retailers and brands,” said Fazlul Hoque, managing director of Plummy Fashions Ltd, the world’s greenest knitwear factory located in Narayanganj.
Referring to a study conducted by BKMEA in 2018, Mohammad Hatem, Executive Chairman of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said that a garment entrepreneur has to invest around Tk 30 crore on average to convert a factory into a green factory.
It is difficult for medium-sized factories to obtain a green finance loan, which is one of the obstacles to their adoption of sustainable manufacturing practices, he noted.
Another important factor on the road to green industrialization is that a green building costs 15-20% more than a normal building, but it also does not bring instant benefits of the money invested, added Hatem.
The BKMEA Executive Chairman said that RMG exporters do not get adjusted prices for their products, let alone high prices for goods produced in compliant factories, which is a barrier to adopting the green transition.
Based on an estimate by BKMEA, Hatem said Bangladeshi garment entrepreneurs receive only 10-15% of the retail price of a t-shirt sold in Western markets. In recent times, the costs of raw materials, such as gas, electricity, cotton as well as transportation costs, shipping container costs, have increased significantly, putting them in a difficult situation.
“Increased political support from the government will help green transformation, as we know that buyers will not pay extra for the initiative,” he said.
For this, Hatem suggested removing the withholding tax for green factories, which is currently 0.5%.
Fazlul Hoque said, “RMG green factories pay 10% corporate tax, while others pay 12%. But a 2% exemption for us is too little to encourage the green transition, which is very costly.
Buyers and brands are proud to source their garments from green factories in Bangladesh, but they are unwilling to pay a single penny more for the products, he pointed out.
On the other hand, buyers pay extra prices for products made from organic cotton and charge customers up to 30% more, he said, adding that they have the option of paying more for products made in green factories and sell them to consumers at higher prices.
Some funds, such as the Bangladesh Bank Green Transformation Fund and the Global Green Climate Fund, are available, but most garment manufacturers cannot benefit from these financial instruments due to many difficult conditions, a added Fazlul Hoque.
The number of green clothing factories in the country stood at 157. Of the total number, 47 are platinum rated, 96 are gold standard, 10 are silver rated and 4 are just certified by the United States Green Building Council (USGBC), according to the data. of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Nearly 500 other garment factories are waiting to be LEED certified by the US Green Building Council.
In his remarks, BGMEA Chairman Faruque Hassan said, “The environment is high on our agenda at BGMEA, and the progress towards environmental sustainability over the past decades is testimony to this.
“These green factories are equipped with all eco-friendly features and emit around 40% less carbon than a conventional factory,” he added.
BGMEA was recently awarded the USGBC Leadership Award 2021, which is by far the first of its kind for any association in Bangladesh in recognition of the committed efforts of the association.
BGMEA has joined the United Nations Fashion Industry Charter for Climate Action with a commitment to facilitate an additional 30% reduction in greenhouse gas emissions across the industry.
He further stated, “We need technical assistance in terms of access to technologies and capacity building of our human resources to adopt green technologies and processes.”
Christine Johansson, Deputy Chief of Mission and Head of Development Cooperation at the Swedish Embassy in Dhaka, said it was important for Bangladesh and the larger garment sector to prepare and equip themselves. for green transformation to meet future increased demands to continue to be an important trading partner of Sweden and the European Union.
It is clear that unsustainable economic development cannot be solved by government alone. All stakeholders must play their part. With its know-how and expertise, the private sector can play an important role, she also said.
To clearly set the agenda and move things forward, evidence-based research and multi-stakeholder dialogues are needed, added Christine Johansson.
Saber Hossain Chowdhury, chairman of the parliamentary standing committee of the Ministry of Environment, Forests and Climate Change, said at the event that garment exporters will need to reduce their reliance on intermediaries, rather than they can focus on selling their products directly online.
Mentioning that the size of the global e-commerce market now stands at $5 trillion, he suggested exploring this opportunity.
The profit margin of RMG producers through direct sales should be at least 30 percent, he added.
There are possibilities to further reduce income tax for green factories and provide them with more incentives, Saber Hossain also said, suggesting that BGMEA and BKMEA submit a concrete proposal to relevant authorities in this regard.