The compliance cost like setting up effluent plants, clean energy, and many more is too high for smaller garment factories to bear. Many of these factories would be forced to close down due to non-compliance.
The pressure on supply chains to reduce CO2 emissions intensifies as dates for meeting global climate targets inch closer. The one thing common in measures that can be introduced is the cost. It is easier to build a completely new factory to the highest possible environmental specifications than to “retrofit” an existing production unit.
As global fashion supply chains are “greened” more new build-compliant factories would come up. The cost of a newly built garment factory can vary around the world depending on various factors, such as location, size, construction quality, labor, machinery and equipment, and any additional features or requirements specific to the factory.
Bangladesh once had more than 5,000 garment factories. That number has diminished in recent years and it is doubtful as to whether we will ever reach 5,000 again. Smaller operators go bust or find themselves unable to keep up with the pace of change. Sub-contracting has also reduced as buyers have demanded that less production is outsourced to poorly regulated operators. It is worth pointing out that, in recent years, we have already seen some of the world’s largest textile chemical companies merge. Joint ventures and acquisitions have become common in that segment as the cost of regulation makes economies of scale vital.
Garment production itself follows suit. We could see the rise of the super-factory, not just in Bangladesh, but also in other textile production hubs such as India, Pakistan, and Vietnam.
At the same time, size and scale might also bring benefits. Larger players are better structured at an operational level. They are more sophisticated in terms of human resource management, marketing, public relations, and legal issues.
This, in turn, could ensure they are treated more fairly as equal partners than in the past when the buyer-supplier relationship felt unequal and adversarial at times. Another factor is that the more factories you have, the more likely there will be one factory prepared to undercut the rest on pricing issues.
By way of contrast, a smaller batch of genuinely world-class operators is arguably a much better fit for our country moving forward. Such an industry will be better suited to evolve, innovate and introduce the kind of continuous improvement and best practice programs that our global client base is increasingly demanding as a prerequisite for doing business.
Environmental compliance lethal for small factories
