The Ministry of Industry and Trade (MoIT) considers textiles and footwear as one of Vietnam’s primary manufacturing and export sectors, with average annual growth exceeding 10 per cent. Despite the ongoing severe effects of the global economic downturn, textile exports are projected to remain at $44 billion this year, with footwear to reach $27 billion.

In light of the increasing demands from various brands and major import markets for more stringent product standards, along with Vietnam’s international commitments to reduce emissions and rising domestic production costs, a green transformation has become a necessity for all businesses, management systems, and policy frameworks within the sector. This shift is essential for those looking to engage more meaningfully in the global marketplace, especially since the sector is one of the most significant contributors to environmental pollution.

Green pressure

At the recent “Drivers for Greening the Textile and Footwear Supply Chain” seminar, Mr. Le Xuan Thinh, Director of the Vietnam Cleaner Production Center (VNCPC), highlighted that textile and footwear value chains are now significantly integrated into the global market. Most Vietnamese textile products are sent to more than 100 different markets, which creates pressure that textile companies simply must navigate.

As these companies engage with the global value chain, the most significant pressure arises from evolving trends. There is an increasing need to meet environmental expectations, often referred to as “greening” products, as well as to reduce greenhouse gas emissions in response to the ongoing climate crisis.

Textile enterprises currently face pressure from international brands that impose increasingly stringent requirements related to energy consumption, waste recycling, and sustainable product design to minimize material use and ensure products are recoverable and recyclable, thereby reducing environmental impacts.

Additionally, national commitments to lower greenhouse gas emissions add further pressure. Vietnam has pledged to achieve net-zero emissions by 2050, necessitating that textile companies develop pathways to contribute to these emission reduction goals.

Vietnam’s textile industry emits approximately 5 million tons of CO₂ each year, which calls for a comprehensive reduction plan. Under Decision No. 13/2024/QD-TTg, issued recently by the Prime Minister, companies are required to inventory their greenhouse gas emissions, with nearly 100 textile and footwear enterprises specifically tasked with accounting for their emissions as part of the goal to achieve net-zero emissions.

In addition to international pressure, Mr. Thinh pointed out that domestic challenges include rising costs for energy, labor, and materials. To remain competitive, companies must utilize energy and resources more efficiently to cut costs. “The challenges also act as a catalyst for change within textile and footwear companies,” he believes. “To pursue sustainable development and extend our longevity, we must establish plans to minimize costs related to materials, resources, and water, while implementing recycling and circularity measures that help companies reduce expenses and align with environmental standards and current consumer demands.”

Ms. Phan Thi Thanh Xuan, Vice President and General Secretary of the Vietnam Leather, Footwear, and Handbag Association (Lefaso), noted that the footwear industry is highly integrated, so compliance with sustainable standards is essential and large companies have begun to take appropriate action. Sustainability demands previously originated mostly from brands, but now they are being formalized into law, especially in key markets like the US and the EU, which impose very high standards.

The EU has also initiated green transition requirements, with several laws recently enacted, including the Supply Chain Act and the EU Deforestation Regulation. Furthermore, more legislation is forthcoming, addressing issues such as extended producer responsibility, eco-labeling, and eco-design. This presents a significant challenge for the footwear industry, as these two markets account for 70 per cent of export revenue.

Necessity for business incentives

From a business perspective, Ms. Nguyen Thi Minh Hai, Head of Sustainable Development at the Bac Giang LGG Garment Corporation, emphasized that the shift towards “greening” is essential for all businesses in the global textile supply chain. While Bac Giang LGG acknowledges the challenges ahead, they see it as an opportunity to create a transparent production chain, adopt advanced technologies, and utilize clean energy for sustainable growth.

From the outset of new projects, the Corporation has prioritized solar energy, which currently supplies some 40 per cent of its factory’s peak monthly energy needs. It is also transitioning to LED lighting, switching from coal to biomass boilers, and enhancing wastewater treatment systems for reuse in agriculture and aquaculture.

Moreover, it is committed to obtaining global recycling certifications and other social responsibility accreditations to meet customer demands. Ms. Hai noted that engaging in the green supply chain has led to cost savings, improved customer recognition, and enhanced competitiveness, while also fostering trust with employees and the local community.

Given the pressure to adopt greener practices, many experts agree that this scenario poses both challenges and opportunities for companies looking to transition towards sustainability and enhance their competitiveness within the supply chain. On the opportunity side, there is potential for energy savings, as typical textile waste can be repurposed into valuable by-products, increasing the overall value of final products. Moreover, waste that cannot be utilized can serve as fuel for boilers to generate electricity. However, the challenges include the substantial investment required for green development initiatives, the limited technological capabilities of the workforce, and the lack of clear guidelines and standards for implementing green practices, which can leave businesses feeling uncertain.

To navigate challenges and seize opportunities in sustainability, Mr. Thinh spoke of the need for specific green standards in the textile and footwear sector, along with supportive guidelines for businesses. Financial incentives should clarify the benefits of adopting green practices, including favorable loans, easier capital access, tax breaks, and opportunities for advanced technology use.

Additionally, support from industry associations is crucial to develop a skilled workforce for green transformation, as many employees, particularly technical staff, lack exposure to relevant technologies. Continuous training and skill development are essential to prepare them for this shift.

Ms. Xuan suggested that the government introduce appropriate policies to encourage businesses to transition while also establishing a consistent system of standards and regulations. The greening process involves numerous requirements, which can lead to significant compliance costs for businesses. Therefore, a comprehensive approach is needed to create a clear framework of conditions and standards, allowing companies to effectively understand and execute the transition.

Furthermore, the State should implement specific support mechanisms and policies regarding land use, encourage the development of supportive industries, and establish environmental financial funds. This would facilitate access to resources for businesses pursuing greener practices, offering them more favorable financing options, thus accelerating investments and enhancing their competitiveness in the international market.

While there are advantages in green transformation, Dr. Nguyen Van Hoi, Director of the Vietnam Institute of Strategy and Policy for Industry and Trade at MoIT, highlighted significant challenges within Vietnam’s textile and footwear production chain, including a reliance on imported raw materials that hinders traceability for sustainability efforts. There is also a need for more effective mechanisms and policies for energy use, particularly in green energy, to support businesses in the industry.

Technological challenges persist as Vietnam continues to import advanced technologies, including wastewater treatment and recycling systems. Dr. Hoi noted that the challenges and opportunities are interconnected, and overcoming the former will enable businesses to move towards sustainable development and enhance their participation in both domestic and global supply chains.

Over the next five to ten years, he continued, it will be imperative to effectively implement the strategy for the development of the textile and footwear sector by 2030, with a vision extending to 2035, as approved by the Prime Minister. The strategy outlines numerous objectives and directions for growth, emphasizing that government management must align closely with business interests. In particular, State regulatory agencies play a crucial role in negotiating and collaborating with partners to establish criteria or standards and regulations, helping companies clearly identify the steps they need to take to better engage with international markets.