A case for green transition in our apparel sector
Fahmida Khatun
Mon Oct 11, 2021 12:00 AM
A green RMG factory in Gazipur. File photo: Star
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).
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Longer TRIPS transition period for LDCs overlooks post-graduation challenges
Fahmida Khatun
Sun Jul 4, 2021 10:58 PM
On June 29, members of the World Trade Organization (WTO) extended the deadline for Least Developed Countries (LDCs) to protect intellectual property under the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) until July 1, 2034.
Members agreed to extend the present transition period, which was scheduled to end on July 1, by 13 years. The TRIPS Agreement that facilitates trade in knowledge and creativity, covers areas such as copyright, trademark, geographical indicators, industrial design, patents, layout designs of integrated circuits and undisclosed information.
It may also be mentioned that the transition period for pharmaceutical products was earlier extended by the Council for TRIPS until the end of 2032.
On behalf of the LDC Group in the WTO, Chad requested the extension on October 1, 2020. The LDC Group requested an extension of the transition period so that LDCs are exempted from applying TRIPS provisions till an LDC graduates instead of a fixed period which is applicable to all LDCs. Article 66.1 of the TRIPS Agreement provides flexibility to LDCs. These countries have been exempted from applying the provisions of the TRIPS Agreement twice since 2005—the first time from 2005 to 2013 and then from 2013 to 2021. While granting such exemptions, the special requirements of LDCs were taken into consideration. Their economic, financial and administrative constraints and the need to create a technological base have been mentioned by the WTO for such exemptions.
The other request from the LDC Group was exemption of an additional 12-year period after an LDC graduates so that the country can graduate in a smooth manner by overcoming shocks during the new circumstances. However, WTO members did not agree to the LDC request for continuation of the transition period after a country graduates from LDC status to the developing country category.
This is unfortunate since during the initial period after graduation, LDCs face challenges in terms of the loss of several international support measures. These include loss of preferential market access for LDC products in several developed and developing countries, access to concessional finance, TRIPS waiver, LDC-specific funds and technology transfer, among others.
It is widely discussed that though the pandemic has affected all economies, LDCs are more vulnerable to the crisis. These countries are facing health and economic shocks which are reflected through low economic activities, loss of employment and income of people, financial stress, fiscal deficit, and increased poverty. Social challenges such as poor healthcare, learning loss of students, violence against women, burden of unpaid care work, increased child marriage, and greater inequality have also become prominent in these countries during the pandemic. According to the United Nations Conference on Trade and Development (2020), the pandemic could create an additional 32 million extreme poor by 2020 in 47 LDCs. This will increase the number of extreme poor to 377 million people, more than half of the number of poor worldwide. The pandemic is feared to take away some of the achievements in case of the Sustainable Development Goals (SDGs). Under such circumstances, LDCs require even more flexibility than before. A shorter transition period as provided to graduating LDCs in the past is not enough.
LDCs have become more vulnerable in view of the ongoing Covid-19 pandemic. Several studies have apprehended that achievements made by LDCs so far could be reversed due to the impact of the pandemic. This may not be reflected in the average statistical numbers but the inherent strength of their economies will be weaker. Hence, newly graduated LDCs will require a longer time to graduate in a sustainable manner. In such circumstances, LDC-specific support measures need to be continued for a longer period. One of these measures is the continuation of the TRIPS transition period during post-LDC graduation.
Advanced countries are working towards building their economies in a better way than the pre-pandemic period. Not only do they have access to enough vaccines to fight the pandemic, they are also investing heavily in human capital and green technology. LDCs do not have access to affordable knowledge products, healthcare facilities, and green technology. Article 66.2 of the TRIPS Agreement refers to technology transfer to LDCs by developed countries so that a sound and viable technological base is created in LDCs. This is yet to be observed in a significant way. There has been a general lack of interest on the part of the developed countries in transferring technology. Rather, redundant and obsolete technologies are often dumped onto LDCs.
As the advanced countries aspire to "build back better" as part of their recovery plan and remain committed to global goals such as the SDGs, their commitment towards enhanced support to LDCs will be crucial. LDCs are facing uncertainty in getting vaccines while several developed countries have purchased more than their requirements. Therefore, the post-pandemic period will not only exacerbate inequality within countries but also between the rich and poor countries in the world. This requires conscious efforts of the global community.
Bangladesh played an important role in driving the extension of the exemption period for LDCs to implement the obligations of the TRIPS Agreement. Though Bangladesh has fulfilled LDC graduation criteria during the triennial reviews of the United Nations in 2018 and 2021, and is expected to graduate in 2026—it will need the LDC-specific flexibilities for a few years during its post-graduation period. This will help the country to prepare for absorbing the shocks to be felt due to the sudden withdrawal of various international support measures.
At the national level, Bangladesh will have to work towards preparing itself to overcome the challenges following graduation. These include a host of issues, such as diversification of its exports and markets, higher resource mobilisation and its efficient utilisation, increased capacity and productivity, technological adoption, and stronger institutions. As far as TRIPS is concerned, Bangladesh should also develop and strengthen its IP regime with support from the WTO and also by engaging national experts. At the global level, Bangladesh will have to continue its engagement along with the LDC Group for the extension of TRIPS flexibilities both for current and graduating LDCs.
Dr Fahmida Khatun is the Executive Director at the Centre for Policy Dialogue.
