Asia’s textile manufacturers at risk of going out of fashion

Pressure is mounting on Asia’s textile and clothing manufacturers to improve their sustainability following efforts by the European Union (EU) to drive more sustainable practices within the fashion industry¹, particularly aimed at tackling the impact of fast fashion. At Lombard Odier, we see this as a step in the right direction, though there must be a shared responsibility that includes consumers and the world’s fashion brands, many of which have benefited from cheap Asian labour.  

The new European Union Strategy for Sustainable and Circular Textiles² mandates that, by 2030, companies selling textiles to the EU must meet minimum standards for durability and the absence of hazardous substances, and must use mainly recyclable materials. Manufacturers will also be responsible for the waste their products generate, with a ban on destroying unsold or returned textiles³.

Unsustainable industry

In its current form, the fashion industry is unsustainable - it is currently the world’s third most polluting industry after fossil fuel-based energy and agriculture⁴. The industry emits 10% of the world’s total annual carbon emissions, a figure that is expected to grow to 25% of emissions by 2050⁵.

The rise of fast fashion also poses challenges. Consumers are buying 60% more clothes now than in 2000 yet keeping each garment just half as long⁶. The amount of fast fashion waste is expected to soar to 134 million tonnes a year by the end of the decade⁷.

The new European framework is set to have a seismic impact on Asian manufacturers, which supply over 70% of the EU’s textiles⁸, and are significant employers in countries such as China, Bangladesh and Vietnam⁹.

The new European framework is set to have a seismic impact on Asian manufacturers

Complying with the new rules is likely to be costly, a further burden for manufacturers already dealing with myriad challenges, such as pressure from their respective governments to clean up their operations – for example, in 2018, Bangladesh put in place regulations to protect the safety of factory workers¹¹ – and the ongoing trend of supply chains shifting back to Europe¹⁰.

Already textile manufacturers across Asia are looking to minimise their environmental impact. This includes exploring ways to cut down on water usage¹², produce textiles and clothing that do not shed microfibres, use renewable energy to power production, and recycle materials for export¹³. New farming methods such as producing cotton organically without the use of synthetic fertilisers or pesticides are also being tested¹⁴.The 2030 timeframe set by the EU will create pressure to shorten the runway for testing and rolling out these innovations.

New business models

Across the fashion industry, alternative business models are now on the rise.

Public consciousness of the amount of waste that fashion produces is growing, and consumers are increasingly preferring to buy clothing that is more sustainably and ethically produced.

As a result, many fashion brands are starting to rethink their operating models, for example by minimising their use of materials or switching to materials that have been sourced sustainably. Recent years have seen brands move from animal leather to new alternatives in the production of bags, and turning materials such as abandoned fishing nets and recycled plastics into a wide array of apparel¹⁵.

‘Re-commerce’ has also gained traction, increasing the options for clothes-buyers without creating more textile waste. A trend largely driven by Gen Z and Millennials, 65% of people aged between 18 and 40 shopped for second-hand apparel in 2023, and the global second-hand apparel market is expected to reach USD 350 billion by 2028¹⁶.

This has led to a growing number of companies and businesses that are focussed on recommerce, or have incorporated recommerce into their business models. Online marketplaces where people can buy and sell used clothes, rather than buy a new product, have flourished.

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Asia’s manufacturers need help to make production more sustainable

However, with a large proportion of Asian manufacturers based in developing countries, more support is needed. Governments can play their part by implementing more supportive policies and regulation, tax incentives, and subsidies, to encourage the adoption of eco-friendly technologies and promote green supply chain practices¹⁷.

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Investors also have a role to play. The market for sustainable fabrics is still relatively young, and available options are often expensive. Meanwhile some technologies – such as textile-to-textile recycling, a promising technique that uses waste produced by textile manufacturing to produce new clothes – are in their nascent stage. Investments and subsidies can make these new technologies more viable and stimulate more sustainable production.

Fashion – an investible opportunity

At Lombard Odier, we believe that all industries must embrace the transition to a circular economy, one of the most tangible solutions available for achieving global and domestic net-zero targets. Regulation that aims to boost biodiversity and preserve ecosystems is also essential – we believe policymakers and the global community are increasingly recognising the importance of protecting nature.

Policy, new business models, and demand from consumers are all driving the rise of a more sustainable fashion industry

Policy, new business models, and demand from consumers are all driving the rise of a more sustainable fashion industry. However, we believe more can be done, and consumers, brands, governments and investors need to work together to help Asia’s textile and clothing manufacturers adapt to a sustainable world.