Thursday Dec 12, 2024
Thursday Dec 12, 2024
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In our global village, global trends impact local communities and economies. All nations, industries and citizens must face this reality. Growing global population and increasing consumer purchasing power means a staggering demand for apparel. If they are manufactured in how most apparel is made today, this will lead to unacceptable levels of hazardous chemicals, emissions and discharges, depletion of natural resources including water and increased fossil fuel use.
Fortunately, the Sri Lankan apparel industry knows a better way. Larger manufacturers serving global fashion brands have been using more sustainable manufacturing practices for decades. They have adopted sustainability strategies and a host of tools and technologies to optimise resource use and minimise environmental damage. Most importantly, as a result, they have become more profitable business operations with ability to attract and retain green-conscious global brands.
The challenge – lack of sustainable financing
Our challenge now is to capitalise on this invaluable industry experience for scaling up sustainable practices across the entire apparel sector.
A key obstacle to greening Sri Lankan apparel is the lack of sustainable financing. This impacts Sri Lanka in a number of ways. Firstly, the lack of green financing puts Sri Lankan apparel at a disadvantage vis-a-vis those of nations who can deliver more sustainable products to the global market. The use of imported fabrics also puts us at a disadvantage. For example, of € 1,555 million worth of exports to Europe in 2019, only 47% were eligible for GSP+ benefits.
The lack of financing for green initiatives impacts small and medium-sized (SME) manufacturers wishing to attract environmentally conscious global brands. The sustainability or lack thereof of SMEs who provide inputs and services to the entire apparel industry also has a direct impact on the costs and the sustainability footprint of the industry. Access to financial and technical inputs can help SMEs achieve greener operations.
The solution – sustainable financing
HSBC-IUCN report, ‘A Roadmap Towards a Greener Apparel Sector: A Sustainable Financing Strategy for Sri Lanka,’ has identified multiple areas where sustainable finance could transform the apparel industry.
Development finance institutions including the International Finance Corporation (IFC) and global banks like HSBC and have financing programs that Sri Lankan manufacturers can use to leapfrog to a sustainable future, enhancing their profits along the way.
In developing sustainable financing options for Sri Lanka, we can borrow from emerging global best practices. Sustainable Financing would help Sri Lankan manufacturers to capitalise on own green strategic initiatives as well as brand led sustainability programs.
Resource efficiency financing
Resource Efficiency Financing (REF), for example, is an evolving area of sustainable financing that the local apparel industry is well-positioned to capitalise on. It covers energy and resource efficiencies and cleaner production. The comprehensive REF process could include identification of opportunities, matching technical solutions, support to feasibilities and pre-feasibilities, strengthening and networking of service providers and the integration of financial, operational and environmental benefits to justify the investments.
A boon to Sri Lankan banking
Similarly, the other sustainable financing options can be used and adapted for the benefit of all Sri Lankan manufacturers. As such, the long-term advantages of developing capacity on sustainable financing options would prove to be a boon for the banking sector as well.
Widespread use of sustainable financing would make Sri Lanka an attractive manufacturing destination for more sustainable investors and buyers including global brands.
HSBC and IUCN have been working together to formulate a strategy to build a more resilient apparel industry through adoption of greener practices. “A Road Map Towards a Greener Apparel Sector” report is the result of an extensive research conducted by the project team in partnership with the Joint Apparels Association Forum, Board of Investment Sri Lanka, National Cleaner Production Centre and Sri Lanka Bankers’ Association.
To access the full report visit www.hsbc.lk/ApparelSectorResearch.
