Apparel sector needs $6.6b investment to cut carbon emission by half: Report

Bangladesh's textile and apparel industry needs an approximate investment worth US$6.6 billion to help reduce the level of carbon emissions by half by 2030 through renewable energy and energy efficiency measures, according to a global report.

Of the required amount, only $1.8 billion is currently available or anticipated while there has been a gap of $4.8 billion, said the report titled 'Landscape and Opportunities to Finance the Decarbonization of Bangladesh's Apparel Manufacturing Sector'.

As of 2023, Bangladesh was among the top five countries having the highest level of potential in reduction of greenhouse gas emissions in the apparel and textile industries.

Apparel Impact Institute (Aii) in collaboration with Development Financial International, Inc (DFI) published the report on May 08 outlining how the country can close that gap and realize its decarbonization potential through strategic finance tools.

Aii is a global non-profit organisation, dedicated to identifying, funding, scaling, and measuring the apparel and footwear industry's proven environmental impact solutions and works with over 50 brands and retailers including Target, PVH, Lululemon and H&M Group that are leading the sector's global decarbonization efforts.

Bangladesh's textile and apparel industry contributes more than 80 per cent of the country's foreign export earnings, said the report.

The sector has significant potential to contribute to the goal of a 50 per cent reduction in greenhouse gas (GHG) emission by 2030, taking the industry's scale-- key production stages, including raw material processing, weaving, knitting, dyeing, finishing, manufacturing and distribution and continued reliance on fossil fuels, into consideration.

Despite its economic significance, local textile and apparel industry faces considerable environmental challenges and the high consumption of energy, water, and chemicals across the supply chain has contributed to significant environmental degradation and GHG emissions, according to the report.

In Bangladesh, natural gas burning remains the country's primary source of energy and RMG sector alone accounts for 8.2 per cent of Bangladesh's total electricity consumption, it said, adding that the textile and garment sector represents 27.8 per cent of Bangladesh's primary energy consumption.

Besides, there is growing pressure from brands and emerging global and local regulations for the industry to adopt cleaner and sustainable practices, it said.

Explaining the possible credit lines, it said as of September 2024, some 12 credit lines and revolving fund schemes have been identified, with close to $1.6 billion in available funding and $175 million in upcoming funding from International Financial Institutions (IFIs) and the national government.

"This leaves a financing gap of US$4.8 billion," it said, adding IFIs are also partnering with the government and private sector to improve energy policies, build local technical capabilities, and support decarbonisation initiatives," said the report.

It, however, found financial constraints, limited technical expertise, insufficient energy policies and inadequate infrastructure as major challenges that manufacturers face in transitioning to sustainability.

A lack of technical experts such as energy auditors in Bangladesh drives up costs and prolongs inspection processes, with energy audits averaging $10,000 - approximately double the cost in neighbouring India.

Building local expertise can help reduce costs and generate quality local jobs, the report suggested.

It further said the renewable energy market is still in its early stages, with limited renewable energy service companies (RESCO) activity and no energy service companies (ESCO) operations in Bangladesh recommending "Growth capital is needed to scale renewable energy and energy efficiency solutions."

The report also recommended, among others, enhanced support from brands, active involvement of manufacturers to address barriers like higher level of debt and perceived risks by encouraging brands to offer stronger incentives and support through various financing and de-risking instruments.

Talking to the FE, Shams Mahmud, managing director of Shasha Denims Ltd, said the industry itself has, so far, invested to help cut emissions, taking the EU regulations into consideration.

"It is difficult to make funds available mostly for small and medium enterprises as they (SMEs) don't have enough capacity and lengthy documentation procedures," he said. He went on: "The rate of interest also remains high."

Mr. Mahmud, however, said the green transition fund is not industry-friendly.

The main issue is to measure as how much decarbonization is done, he said, adding that there is a lack of skilled manpower in government agencies concerned.

About the measures, he said, his factory has undertaken to decarbonise, while they are installing new energy-efficient technology that can help reduce usages of water and chemical.

Such technology using tri-generation systems of power generation to reduce carbon footprint, enhancing the efficiency level to 85 per cent from 60 per cent in two years back.

Munni_fe@yahoo.com