85 Voices: Insights From Chinese Textile Manufacturers

By Dawn McGregor 17 August, 2017

CWR's McGregor on takeaways from our upcoming report

China Water Risk has just released a new report titled “Insights From China’s Textile Manufacturers: Gaps to overcome for clean & circular fashion” on the 30th of August at World Water Week. The report sponsored by the C&A Foundation analyses the insights of 85 Chinese textile manufacturers on their challenges to going clean and circular, as well as what assistance they want from industry actors.

Both China Water Risk and the C&A Foundation hope that this report will support the fashion industry to fast track the transition to a circular apparel economy by raising awareness of manufacturers’ needs and enabling actors to further identify practical solutions.

Access the English report here and Chinese report here.

We believe there is a unique opportunity now to lay the foundations for a new fashion business model as the goals of Chinese textile manufacturers and leading fashion brands are converging; both need to clean-up and want to go circular. This opportunity is made even more real as China is still a major supplier of fashion raw materials. The country produced 65% of the world’s synthetic fibres in 2014.

To help the industry fast track the transition to a clean & circular model we conducted a survey of China’s textile manufacturers…

…our survey received over 140 responses. 85 of these were complete

To highlight this opportunity and help the industry fast track the transition to a clean and circular model we conducted a survey of China’s textile manufacturers to identify what their challenges to achieving this are and what assistance they need and from who. Manufacturers are a crucial part to achieving the new fashion model but less is known about them compared to brands and so this is why they were surveyed.
Positively, in just three weeks, our survey received over 140 responses. 85 of these were complete and analysed to form our report “Insights From China’s Textile Manufacturers: Gaps to overcome to clean & circular fashion”. The report will be launched at our event at World Water Week on the 30^th of August so if you are at the conference or in Stockholm come join! In this article we share five key findings from the report.
Before we dive into the five key findings, we would like to say how grateful we are to all the 140+ manufacturers that took part in the survey and all the experts and contributing organisations and companies to the project. We are pleased that 85 responses were complete as the survey was comprehensive taking around 45 minutes to an hour to complete. We are also pleased that the 85 come from key textile manufacturing regions and from a wide range of manufacturing processes so to form a rounded on-ground consensus. Now for the five key findings:

1.  Manufacturers are well on their way to becoming green

Positively, we found from the survey that manufacturers are largely on track on going clean and tackling their water risks, as well as starting to move circular. Indeed, 98% say they are taking actions to be green, 74% are recycling water, 88% have upgraded their wastewater equipment and 84% upgraded equipment for chemicals.

2.  They are also on their way to going circular 

68% say they have heard of the circular economy & 72% report seeing business benefit in moving to the circular model

As for the circular economy, positively, 68% say they have heard of it and 72% report seeing business benefit in moving to the circular model (see their comments below).

Moreover, our survey identified which circular economy actions manufacturers are doing most (see chart below). Check out the full report for more on the circular economy, including how much manufacturers are investing towards this.

3.  Wastewater, chemicals & circular economy top manufacturers’ challenges

While manufacturers are clearly moving towards the clean and circular model, they still face significant challenges and gaps as our survey identified. The results show that wastewater, chemicals and circular economy are their top challenges (see chart below). These three challenges were prevalent throughout survey responses and featured heavily in comments.

In addition to these challenges, manufacturers’ responses show they face significant challenges and pressure from regulations. 14% say they feel they face shutdown risk and 74% say they have felt more pressure from regulations over the last two years. Because of this pressure and to avoid being shutdown, 88% have had to upgrade their factory (see chart below).

In the report, we look more at the sources of manufacturers’ challenges from brands to NGOs and owners, as well as which regulations and standards are their most challenging. Will Chinese regulations or international brand standards top the list?

4.  Manufacturers’ three wishes

To help seize this unique opportunity our survey also asked manufacturers what assistance they want to overcome their challenges. Manufacturers believe their challenges need input from brands, as well as industry associations. Manufacturers also say the Chinese government can help.
The survey identified three overarching wishes from manufacturers. These are looked at in detail individually in the report. Their three overarching wishes are:
1) More training across three key areas: wastewater, chemicals & regulations;
2) More help with sourcing (particularly chemicals), and
3) More financial support.
In addition to these, manufacturers’ also have wishes specific to individual actors, which are covered in the report.

5.  Manufacturers currently carrying the cost of move to clean & circular production

Underlying all of manufacturers’ challenges and wishes is how to be compliant within the current low price model. Indeed, as the survey found brand and government standards and regulations are increasing costs for manufacturers but prices offered by brands/sourcing agents are not reflecting this.  As a result, manufacturers are being squeezed through low margins and are currently carrying the costs of shifting to cleaner and circular production (see their comments below).

Indeed, over 50% of respondents have made significant CAPEX investments of more than RMB2 million (~USD300,000) to upgrade their factories (see chart left below).

CAPEX investments of >RMB2mn are having material impacts on operating costs; 28% report increases of 20-40%

As a result of these CAPEX investments, the majority of manufacturers are reporting material impacts on operating costs (see chart right above). 30% of respondents say their operating costs increased by 0-20% and 28% by 20-40%. Moreover, 81% say they have plans for future investment.
Numbers like the above and the insights from manufacturers highlight the fundamental question here: how sustainable is this current business model?

While there are clear questions around the long-term business mode, there are shorter-term actions that can be done to advance the clean & circular model

While there are clear questions around the long-term business model and it remains to be seen if actors will seize this unique opportunity, it needs to be noted that there are lucrative opportunities in doing so for manufacturers and brands. These include being market leader to shoring future supply and protecting brand reputation to exploiting untapped markets.
Moreover, as actors consider the longer-term questions, they should note there are shorter-term actions that can be done in the meantime to advance the clean and circular model. They can start by overcoming the gaps highlighted in this report.

Further Reading

• Toward Better Industrial Water Management – The HSBC Water Programme for Industrial Water Management is now complete. We sat down again with Hong Kong Productivity Council’s Dr Anthony Ma to get key takeaways from the programme and find out what textile factories in China can do to reduce their water exposure
• The Status Of Fashion’s Redesign – Fashion, an industry not often associated with climate change & technological innovation has been redesigning itself to change just that. With growing global focus on the environment China Water Risk’s Dawn McGregor takes a look at the status of this redesign
• Circular Economy: From Theory To Action – As we move outside the ‘safe operating space of our planetary boundaries’, Ellen MacArthur Foundation’s Nick Jeffries explores what is a circular economy & implications for water
• Fashion’s New Cycle – With 12,000 garments entering landfills every hour, the USD3 trillion fashion industry is ripe for a disruptive overhaul. FINCH Designs’s co-founder Heather Kaye shares how this Chinese brand is doing this through their swimwear made from recycled PET
• A Decade Of Dedication – As Redress turns 10 years old, its founder Dr Christina Dean reflects on the victories achieved in driving circular thinking in fashion including the EcoChic Design Award and TV show Frontline Fashion. Plus, check out their initiatives going forward

In our brief, “Today’s Fight for the Future of Fashion – Is there room for fast fashion in a Beautiful China?”,  we look at the pre-existing but now more robust risks as well as new ones, with the backdrop of China’s aim of building a “Beautiful China”; “where the sky is blue, the land is green and the water runs clear”. Risks and opportunities are covered in the brief through:

-Dirty thirsty fashion: a clear target in ‘Beautiful China’;
-Short-term risks: Water Ten Plan;
-Stricter enforcement: new environmental law & policies;
-Long-term risks: high raw material exposure, soil clean-up & ‘Made In China 2025’;
-High reputational risk: continued NGO pressure & the new Chinese consumer;
-Brand rankings on sustainability: leaders & laggards; and
-The future of fashion: closing the loop & who can help.

• Future Fashion & ‘Beautiful China’ – Together Forever? – With fast changing regulatory landscape moving against pollution from the textile industry, is there really room for fast fashion in a ‘Beautiful China’? China Water Risk’s McGregor on why it’s time for fashion to become beautiful inside and out
• Fast Fashion: Sucking Aquifers Dry? – Groundwater is over-extracted to grow cotton. As the world’s largest importer of cotton, is it China’s fault? Or is fast fashion to blame? China Water Risk’s Tan explores trends in the growth across major brands, China’s imports & global cotton production
• Circular Fashion Today – Closing the loop in the fashion is not new. But perhaps now that China,  the world’s largest manufacturer of garments, wants to go circular, it might become a reality. Get on top of the latest trends with leading circular fashion innovators
• 1 Year On: Where Are The Top Fashion Brands? – It’s one year on but have brands upped their sustainability actions? We take a closer look at who’s not going circular and who’s leading the pack with more initiatives and engagement with NGOs