Navigating ESG in the apparel trade

Supply chain series: Navigating ESG in Bangladesh and Vietnam’s apparel trade

Alphinity is launching an insight series to share perspectives on ESG considerations within various supply chains. In the first note of this series, we delve into the trends and obstacles encountered by apparel players in Bangladesh and Vietnam. By drawing on first-hand experience we have gained valuable insights on the different social challenges in each country and have deepened our understanding of primary focus areas within our investments.

In March, Alphinity’s ESG analyst visited Bangladesh and Vietnam to engage directly with apparel factory workers, NGOs, industry bodies and companies. The purpose was to gain a better understanding of the ready-made garment (RMG) industry and identify specific ESG issues that require attention within our portfolios.

Accompanied by Impactt, a consultant group specialising in human rights management, we visited five factories in Dhaka and Ho Chi Minh City supplying the likes of H&M, Calvin Klein, Big W and Just Jeans. We held discussions with key stakeholders including the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Vietnam Chamber of Commerce and Industry (VCCI) and Vietnam Textile and Apparel Association (VITAS) which reaffirmed the industry’s growth and consideration of sustainability matters moving forward.

This report summarises four key insights from the ground and proposes questions that investors can explore to enhance their management of ESG issues within the apparel supply chain.

Key insights

  1. Garment production in Vietnam and Bangladesh is set to grow, demanding more attention on human rights
  2. There are hidden consequence of ESG targets set by brands
  3. Low wages and working conditions require specific attention
  4. Equality is an emerging consideration under the human rights banner

Visiting two countries provided a useful comparison of the different human rights issues and social dynamics in each region. This reiterates the value to take a country-specific approach when investigating these complex issues.

Modern slavery is a complex issue that is region specific, dependent on a number of interrelated factors and will take many years to overcome. We therefore encourage companies to take a staged approach to manage specific issues that are material to the garment type and manufacturing region.

Click here to read the full report.

Author: Moana Nottage, ESG & Sustainability Analyst