Inadequate policy support slowing down green transition

The apparel sector's green transition has yet to speed up because policies, regulatory measures and economic instruments offered by the government are too inadequate to make the industry and economy environment-friendly, according to the Centre for Policy Dialogue (CPD).

For textiles and readymade garment factories to go for the green leap forward requires a large financial investment – for improved production processes and resource efficient productivity – that many cannot afford, the think-tank said at a dialogue on Sunday.

Many small and medium factories are now not in a position to make green investment, which may in turn lead them to a disadvantageous position after being avoided by apparel buyers, RMG entrepreneurs said at the launching programme of securing green transition of the textile and readymade garments sector in Bangladesh at Brac Centre.

The CPD and Sweden Sverige organised the event for the green garment factories in Bangladesh.

Apparel entrepreneurs said they have spent 30% more money to construct the green factories, but buyers and brands are reluctant to pay higher prices for products they make in the globally compliant units.  

They have constructed green factories with a view to protecting the environment and brightening the sector's image by saving 30% energy and water consumption, they noted.

"However, we are not getting the premium prices from the retailers and brands," said Fazlul Hoque, managing director at Plummy Fashions Ltd, the greenest knitwear factory in the world located at Narayanganj.

Referring to a study conducted by the BKMEA in 2018, Mohammad Hatem, executive president at the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said a garment entrepreneur needs to invest about Tk30 crore on an average to convert a factory into a green one.

It is difficult for medium-sized factories to obtain a green finance loan, which is one of the barriers for them to embrace sustainable manufacturing practice, he noted. 

Another important factor on the path of green industrialisation is that a green building costs 15%-20% more than the normal building does, but it also does not bring instant benefits from the invested money, Hatem added. 

The BKMEA executive president said RMG exporters are not getting adjusted prices for their products, let alone the premium prices for the goods produced in the compliant factories, which acts as hindrance to embracing the green transition. 

Siting a BKMEA estimation, Hatem said Bangladeshi garment entrepreneurs get only 10%- 15% of the retail price of a T-shirt sold in the Western markets. In recent times, costs of raw materials, such as gas, electricity, cotton as well as the transport costs, shipping container costs, have increased substantially, putting them into a tight corner. 

"More policy support from the government will help drive green transformation as we know that buyers will not pay extra for the initiative," he said. 

For that, Hatem suggested withdrawing tax at source for green factories, which is currently 0.5%.

Fazlul Hoque said, "Green RMG factories pay 10% in corporate tax, while others are levied 12%. But a 2% exemption for us is too little to encourage green transition, which is very costly." 

Buyers and brands take pride in sourcing apparel items from Bangladeshi green factories, but they are unwilling to pay a single penny extra for the produce, he pointed out. 

On the other hand, the buyers pay extra prices for products made from organic cotton and charge up to 30% more from customers, he said, adding that they have a scope to pay more for products manufactured in green factories and sell those to consumers at higher prices.

Some funds, such as Bangladesh Bank's Green Transformation Fund and global Green Climate Fund, are available, but most apparel makers are unable to benefit from those financial instruments owing to many hard conditions, Fazlul Hoque added.

The number of green garment factories in the country stood at 157. Of the total number, 47 are platinum rated, 96 are gold standard, 10 silver rated and 4 are just certified by the United States Green Building Council (USGBC), according to data from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Nearly 500 more garment factories are waiting to be LEED certificated by the US green building council.

In his address BGMEA President Faruque Hassan said, "Environment sits at the top of our agenda in the BGMEA, and the strides towards environmental sustainability in past decades testify to the fact. 

"These green factories are equipped with all the eco-friendly features and emit around 40% less carbon than a conventional factory," he added. 

The BGMEA has recently been awarded with the USGBC Leadership Award 2021, which is by far the first of its kind for any associations in Bangladesh as a recognition of the committed efforts of the association. 

The BGMEA has joined the UN Fashion Industry Charter for Climate Action with a commitment to facilitate a further 30% reduction in greenhouse gas emission in the industry. 

He further said, "We need technical assistance with regard to access to technologies, and building capacity of our human resources to embrace the green technologies and processes."

Christine Johansson, deputy head of Mission and head of Development Cooperation at Swedish Embassy in Dhaka, said it is important that both Bangladesh and the apparel sector on a larger scale prepare and equip themselves for the green transformation to respond to increased future requirements 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 the government alone. All stakeholders must play their parts. With its know-how and expertise, the private sector can play an important role, she also said. 

To set the agenda clearly and to take this forward, evidence-based research and multi-stakeholder dialogues are needed, Christine Johansson added.

Saber Hossain Chowdhury, chairman of the Parliamentary Standing Committee on Ministry of Environment, Forest and Climate Change, at the event said apparel exporters will have to reduce dependence on middlemen, rather they can focus on direct online sales of their produce. 

Mentioning that the global e-commerce market size now amounts to $5 trillion, he suggested exploring the opportunity.

The profit margin of RMG producers through direct sales should be at least 30%, he added.

There are opportunities to further reduce income tax for green factories and provide them with more incentives, Saber Hossain also said, suggesting that the BGMEA and BKMEA place a concrete proposal before the authorities concerned in this regard.