In qualità di maggiore esportatore di abbigliamento al mondo, la Cina svolge un ruolo cruciale negli sforzi di sostenibilità dell'industria della moda. Mentre alcuni dei produttori del paese rimangono altamente inquinanti, altri stanno ora sperimentando soluzioni a basso impatto. [Can ‘Made in China’ Fashion Go Green? – BoF] (Photo: Can leather go green? - Vogue Business 2 May 2019)
As the world’s largest apparel exporter, China plays a crucial role in the fashion industry’s sustainability efforts. While some of the country’s manufacturers remain highly polluting, others are now pioneering
China isn’t necessarily the first country that comes to mind when fashion industry leaders debate where the next big sustainable innovation will come from, but it is where several companies currently having a ‘green moment’ hail from — and their common origin is by no means a coincidence.
Last month, Guangzhou-based Veshin Factory, which specialises in making handbags and accessories from leather alternatives, partnered with Ralph Lauren-backed material science company Natural Fiber Welding to use its plastic-free leather-like textile Mirum. Chemical recycling start-up Qingdao Amino Material Technology recently became the first Chinese winner of H&M Foundation’s Global Change Awards. Meanwhile, small-batch, made-to-order textile supplier Recyctex, based in Jiaxing, has become a mainstay in global trade shows and sustainable fashion summits thanks to its synthetic fibres made from traceable plastic waste and ventures into bio-based leather alternatives.
“China has the potential to become number one [in certain areas of sustainable innovation], but so far it still lags behind [leading hubs like Scandinavia], Germany, Switzerland and Japan,” said Shaway Yeh, founder of Shanghai-based sustainable fashion consultancy Yehyehyeh. “But now we’re at an [inflection point] because, there’s demand from Chinese consumers [and most importantly] from the Chinese government.”
Several prominent players in Chinese manufacturing have also become pioneers in the field — often quietly or gradually — in recent years. Hong Kong-listed Crystal International Group, which has a sizeable manufacturing footprint on the mainland supplying for brands including Levi’s, is now a standout for sustainability experts and advocates on account of climate goals that are ambitious relative to its peers. So far, it has reduced the carbon footprint of its products by 40 percent since 2007, when it first began its sustainability strategy, and reduced freshwater consumption per garment by 52 percent compared to 2017 levels.
Other Chinese firms such as Chenfeng, Erdos, Esquel and High Fashion Group have grown from specialising in one product (such as yarns) to become vertically integrated operations, a transition that has been characterised as a move for stronger traceability and accountability across the value chain. It should be noted, however, that a subsidiary of the Esquel Group is currently facing criticism from workers’ rights advocates, a reflection of the complexities and contradictions that are sometimes inherent in the search for suppliers with both environmentally and socially responsible credentials.
Esquel Group has been heralded for its recently constructed green manufacturing park in Guilin, China, described by sustainable innovation heavyweight Edwin Keh as “state of the art sustainable” in an emailed exchange with BoF. But the manufacturing group’s Xinjiang-based subsidiary spinning mill, Changji Esquel Textile Co. Ltd., has been embroiled in forced labour allegations since 2020. More recently, it was among the more than 30 entities blacklisted under the US Government’s Uyghur Forced Labor Prevention Act, effectively banning imports that can be traced back to the Chinese province.
Esquel, which employs some 1,300 people in Xinjiang, is currently in litigation to challenge the move and has redoubled its “commitment” to operating there, despite concerns from its Western brand partners.
The current climate presents a thorny issue for manufacturers looking to push their sustainability credentials while toeing the line on domestic politics. “[T]he reality for companies operating in China is that they will face an increasingly hostile political environment should they be seen by Beijing as divesting from Xinjiang,” wrote Sofia Nazalya, a human rights analyst at risk consultancy Verisk Maplecroft, in a 2021 report.
Meanwhile, China has also been in the spotlight for its broader environmental record and commitments. It is by far the biggest global emitter of greenhouse gases (though not per capita) and its bold commitment to be carbon neutral by 2060, reaching peak emissions by 2030, surprised the global community — though experts warn it still falls short of necessary efforts to stave off the worst effects of global warming.
This has nevertheless increased awareness around sustainability issues in the country — and created a sense of purpose among the manufacturing sector at large. “In China, it’s very top-down,” said Yeh, referring to the influence of public policy and regulation on private-sector agendas.
A Mainstay in Global Supply Chains
In recent years, Chinese manufacturing has taken some significant hits. The Chinese government’s zero-Covid policy, as well as supply chain disruptions exacerbated by the war in Ukraine, have added to longer-term trends of fashion companies looking to diversify and near-shore their manufacturing bases amid rising geopolitical tensions between China and the West.
As labour and operating costs increased in China, fashion exporters from sourcing hubs like Bangladesh, Vietnam and Sri Lanka have been able to undercut their Chinese counterparts on price for ready-made garments. But beyond the final tier of apparel supply chains (where garments are assembled ready to be shipped to retailers), China’s vast infrastructure of raw material and textile production, which requires more sophisticated and expensive equipment, is hard to replicate elsewhere.
Despite the many well-documented challenges facing the local manufacturing sector, China is still the world’s largest exporter of apparel, according to World Trade Organisation data. And since the ripple effect of Chinese supply chain shifts can be felt around the world, the country plays a critical role if the global fashion industry is to clean up its act in environmental terms.
To that end, the government has established aims to recycle 25 percent of the country’s textile waste by 2025, which would result in the production of 2 million tonnes of recycled fibre. Looming regulation of fashion’s circularity and traceability requirements in the European Union, a major importer of Chinese textiles and clothing, has further pushed it up the agenda for manufacturing executives.
A Quiet Evolution
Bolstered by its joining the World Trade Organisation in 2001, China rose to prominence as “the world’s factory” in recent decades, thanks to its competitive offering on price, speed and efficiency in its manufacturing sectors — often at the cost of operating in an environmentally and socially responsible way. But speak to any Chinese manufacturing executive with a robust present-day sustainability plan and they will likely reveal that it has been an area of focus for 15 to 20 years, albeit mostly behind closed doors.
At the beginning, we had to get management buy-in — that was very, very difficult.
This was typically brought about by a new, more progressive generation of management in family businesses, says Christina Dean, founder of Hong Kong-based sustainable fashion NGO Redress. “They’re third generation, they’re Ivy-League educated, they’re coming back [to China] at the top of their game… Looking back, some businesses were way ahead of [their time].”
The experience of Catherine Chiu, general manager of corporate quality and sustainability at Crystal International, similarly recalls the denim maker’s engagement with sustainability, which dates back nearly two decades. Building the capacity for necessary auditing and reporting was an uphill battle internally — even with the support of company chairman Kenneth Lo. “At the beginning, we had to get management buy-in — that was very, very difficult,” she told BoF. “Because we are garment manufacturers, our margins are very low.”
This kind of generational clash took more extreme tolls on less successful manufacturers due to “older generations not really understanding why the new upstart young leaders of these businesses, their children, wanted to rattle things up,” said Dean. In some cases, it resulted in businesses folding. “The sadness of that is that, had those companies been doing [the same innovations] now, possibly it would have been different.”
Return on Green Investment
A long-standing challenge of implementing sustainable practices in any part of the fashion industry is that it costs money — an issue made all the more salient by the demands fashion brands put on their manufacturers to deliver cost-competitive products. Yuen estimates that the capex required to build Esquel’s new campus in Guilin was about two to three times that of a conventional factory with the same production capacity.
“There’s a real palpable frustration amongst many suppliers, I would say, for the fact that they’ve got many of the answers, but they’re not being paid to put the answers into practice,” said Dean of Redress.
However, some suppliers are beginning to reap the benefits as brands, especially from Western markets, set their own sustainability commitments, such as increasing the proportion of products with lower-impact materials. Manufacturers like Hong Kong-listed High Fashion Group, which has been doing work on natural, biodegradable and recycled material production for years and built an impressive roster of certifications, stands poised to benefit from this shift.
There’s a real palpable frustration amongst many suppliers... for the fact that they’ve got many of the answers, but they’re not being paid to put the answers into practice.
“Because [brands] have a certain percentage of sustainable [products] to achieve as a minimum… they have a minimum allocation for us,” said Will Lam, High Fashion Group’s managing director. As a result, he added, “we have a more stable business, and we can see growth because they need to invest more and more in these resources.”
Shifts to energy-efficient operations and squeezing productivity out of energy units have obvious intrinsic benefits for manufacturers’ balance sheets. The improved sophistication — and lower costs of implementation — of key technologies like solar panels over the years has also made renewables a more attractive area of investment.
“We use the return on investment concept for sustainability,” said Chiu. For Crystal International, that means incrementally bringing in better technology and equipment and rolling them out more aggressively as their benefits become evident. “For all our sustainability initiatives, if the return on investment is five years, we are happy to invest.”
A Growing Innovation Market
The proliferation of start-ups in recent years has created a culture of entrepreneurship and innovation in the Chinese market. “I [now] see a lot of very good environments for entrepreneurs to make their own business in China,” said Wenjian Hu, a member of the six-person team behind Qingdao Amino Material Technology founded in 2020.
Earlier this year, the start-up became the first mainland Chinese winner of H&M Foundation’s Global Change Award for its chemical recycling technology that successfully breaks down polyester-elastane blends commonly found in activewear. Its recycled elastane has a 70 percent lower carbon footprint than virgin counterparts, Hu claims, and after proving the technology in the lab, the company has its sights set on securing funds to accelerate production capacity for factory scale.
Larger businesses are also looking to boost their efforts in sustainable innovation, as executives look to reduce exposure to risk by diversifying their revenue streams. Within the coming decade, Esquel aims to make sustainability-focused research and development a third of its business (alongside its traditional manufacturing arm and burgeoning direct-to-consumer business), while Crystal International has sought out start-ups to collaborate with, with a view to implementing their green technology in wider operations.
A Troubled Labour Market
Chinese manufacturing’s sustainability push, no matter how ambitious or progressive, is still fraught with labour rights concerns. Allegations of widespread forced labour and internment of Uyghurs and other minority groups in China’s Xinjiang region have put the country’s labour practices under the microscope and cast a pall over its global standing on the issue; China is one of just six G20 countries with “no guarantee of rights” for workers, according to ratings by the International Trade Union Confederation released in June.
Xinjiang aside, other Chinese provinces also carry a high risk of modern slavery, as well as other labour abuses relating to wages, working time and freedom of association, according to Verisk Maplecroft. While not as extreme as fellow textile and garment exporters Bangladesh and India, the risk of finding modern slavery in Chinese supply chains remains high, the firm found in its 2021 annual report.
To be sure, forward-thinking manufacturers will seek out their own social responsibility policies that place them as frontrunners compared to less-than-desirable industry averages. Crystal International, for example, became the first global manufacturer to partner with Better Work, a labour standards initiative spearheaded by the International Labour Organisation (ILO) and International Finance Corporation, in December 2019. It has also put nearly 50,000 of its female employees through empowerment programmes.
But the current state of play in China’s labour market is also shifting manufacturers’ approach to sustainability in more lateral ways. Rising labour costs and the current labour shortage have pushed executives to seriously look at implementing automation and drive efficiencies across the board.
In order to retain talent, we need to redefine jobs.
“People are still looking for more solutions; how to [operate sustainably] with less people,” said Lam of High Fashion Group.
Manufacturers are also putting stock into creating a talent pool of highly skilled professionals with sustainability training. High Fashion Group’s Womenswear Institute in Hong Kong, for example, has introduced more classes focused on equipping students with a technical knowledge of environmental sustainability.
“In order to retain talent, we need to redefine jobs,” said Yuen of Esquel.
More Regulatory Incentives
Major sustainability transitions, especially in carbon emissions, often require public-private partnerships and a strong supporting infrastructure at the municipal or national level.
Increasingly, that is an area where China has the upper hand compared to other Asian nations. The country’s net-zero carbon emission commitments and textile waste recycling goals have helped establish a sense of direction and impetus for the manufacturing sector to align with.
That has been further bolstered by the recent introduction of subsidies and tax incentives, executives say. “This year, and last year, there are more and more incentives,” said Lam of High Fashion Group. “At the time when we started [working on sustainability initiatives] ... The government supported us by giving us awards, but not a lot of obvious incentives.”
Where on-site renewable energy sources like solar power are not feasible for a manufacturer, financing mechanisms like Power Purchase Agreements (PPAs) and Energy Attribute Certificates (EACs) allow businesses to sign long-term contracts to buy renewable energy in China. This is not always the case in other sourcing markets.
For its Vietnam-based operations, Crystal International was on the verge of signing a PPA contract in the Southeast Asian nation but hopes of this were dashed by last-minute policy changes by the Vietnamese government. Cambodia and Bangladesh similarly have limited supporting policies for successful renewable energy transitions, Chiu added.
Back in China, if Crystal International’s denim factory in Zhongshan, Guangdong, successfully reduces its wastewater output, it will receive government sponsorship and be encouraged to increase production capacity. And with the costs of labour and other overheads in China’s first-tier cities rising, municipalities in lower-tier cities are enticing manufacturers to set up shop for new state-of-the art factories with low or no rent and renewable energy sources.
But with or without regulatory incentives, a growing number of Chinese manufacturers see sustainability as a necessary future-proofing exercise.
“If we are not able to invest in this kind of technology, we are not able to survive,” said Chiu.
