Partnering: Supporting the green transformation of textile and footwear businesses

DNHN - The green and circular economy is currently an unavoidable global trend. Therefore, the best and quickest solution is for Vietnam's textile, garment, and footwear industries to collaborate with partners offering support services.

The green and circular economy has become mandatory for textile and footwear companies. According to the General Statistics Office, in the first five months of the year, Vietnam's exports of textiles and garments plummeted, putting tremendous pressure on businesses in the industry.

The exports of textiles and apparel decreased by 17.8% to $12.32 billion, while fibre exports decreased by 27.0% to $1.73 billion. During the same period last year, exports of bags, suitcases, and umbrellas decreased by 5.5% to $1.55 billion, while exports of footwear declined by nearly 14% to over $8.18 billion. The textile, apparel, and footwear industries are experiencing difficulty finding export orders, and it is anticipated that this situation will persist throughout the year.

According to the Chairman of the Vietnam National Textile and Garment Group (Vinatex) Le Tien Truong, a 20% stronger currency relative to competing nations and high-interest rates in Vietnam are among the primary causes of this decline. The cost of electricity increased by 3 per cent. This is exerting significant pressure on industry businesses.

Mr Tran Nhu Tung, Chairman of the Board of Directors of Thanh Cong Textile - Investment - Trading Company and Vice Chairman of the Vietnam Textile and Apparel Association, determined that the decline in the textile and apparel industry is due to several factors. First, global consumption is declining, with large markets such as the United States and the European Union (EU) experiencing a severe recession.

In addition, it is significant that textile companies in Bangladesh have obtained global "green" certifications such as ESG (environmental, social, and governance indicators) and LEED (energy and environmental design orientation) standards. has created a competitive advantage for this country's textile industry. This allows Bangladesh to continue to attract orders and experience a modest expansion in the first quarter of 2023.

Mr Diep Thanh Kiet, Vice Chairman of the Vietnam Leather, Footwear, and Handbag Association (LEFASO), shared this opinion. According to him, the market situation continues to deteriorate, particularly in the EU market, which has been severely impacted by the military conflict between Russia and Ukraine, the post-Covid-19 economic recession, and other related issues. In addition, he emphasised that green and circular economic development is no longer merely an incentive, but a requirement for businesses.

Using the Carbon Border Adjustment Mechanism (CBAM) law, the European Union (EU) has implemented green and circular economy standards. CBAM is currently limited to a handful of high-pollution-risk commodities, such as steel, cement, fertiliser, aluminium, electricity, and hydrogen, but it will eventually be extended to other commodities. This has significant repercussions for Vietnam, as the EU, the United States, and Japan are our three largest export markets. If companies in the textile and footwear industries wish to continue exporting to these major markets, they must comply with these standards.

Tran Nhu Tung, chairman of Vinatex's board of directors, suggested that to increase the competitiveness of the industry, businesses require state support. He proposed a temporary reduction in the corporate income tax rate from 20% per year to 18% per year to encourage businesses to adopt global green standards. In addition, he suggested implementing an investment loan policy with a more favourable interest rate for textile and apparel businesses than the market average.

Linking with service providers is an essential means of assisting businesses (DN) in the textile and footwear industry to meet market requirements and standards. This not only expedites businesses' transition to a green economic model but also creates immediate benefits and enables them to take advantage of scientific and technological advances and digital transformation.

Several large enterprises in the textile and apparel industry have transitioned to green criteria by partnering with service providers. To create a sustainable supply chain, the Vietnam National Textile and Garment Group, for instance, has developed industrial parks that invest in textile dyeing according to green standards. Thanh Cong Textile - Investment - Trade Company invests approximately 10% of its annual profit in the transformation and digitization processes.

According to Dr Nguyen Quoc Viet, Deputy Director of the Institute of Economic and Policy Research (VEPR), the textile, garment, and footwear industries in Vietnam face small project sizes and low average basic technology, making it challenging to change energy inputs and switch to renewable energy. These issues create numerous obstacles to the transition to green production and the use of renewable energy. This becomes even more challenging when the global supply chain requires evidence of green production and renewable energy use.

According to Dr Vo Tri Thanh, green transformation is no longer merely a slogan, but a tangible benefit for businesses. Connecting with service providers is a good and speedy solution for meeting market standards and requirements quickly and effectively. With the rapid development of science and technology and digital transformation, businesses can accelerate their transition to a green economy by applying and capitalising on these advancements.

At the same time, the state's role in the transition is also crucial. The state should assume the role of market leader and information provider, while simultaneously developing policies to support and advance the green transition in the textile and footwear industries. State support can consist of creating incentives and incentives, as well as providing guidance and regulatory support for green production and renewable energy use.

Future associations with service providers and state support will play a significant role in assisting Vietnam's textile, apparel, and footwear industry to overcome challenges and adapt to new fashions. green economy and sustainable development in the region.

Chau Giang