Climate Risks Loom Large over 4 Asian Apparel Hubs; Fashion Brands Treat Disasters as Externalities

Researchers mapping the supply chain footprint across four production hubs in Global South  reveal that workers and manufacturers face productivity impacts from extreme heat and flooding, and risk foregoing $65 billion in export earnings by 2030—equivalent to a 22% decline.

Long Story, Cut Short
  • Flooding and extreme heat pose significant risk to every constituency in global apparel production — workers, manufacturers, regulators, investor and brands themselves.
  • Investors must begin to engage with apparel companies and their stakeholders to ensure they start to measure and address the significant challenges of physical climate impacts on workers and business models.
  • Investment and transition finance strategies for the apparel industry must write new costs into their plans.
Extreme flooding and heatwaves are already affecting the four production hubs that were part of the research.
CLIMATE VAGARIES Scenes from Dhaka. Extreme flooding and heatwaves are already affecting the four production hubs that were part of the research. Pexels / Pixabay

Climate vagaries like extreme heat and flooding could put over $65 billion worth of export earnings at risk across four key apparel hubs by 2030, warns a new report.

THE RESEARCH: The research by Cornell University’s Global Labor Institute (GLI) and global asset management firm Schroders about the economic impact of climate breakdown—specifically, extreme heat and flooding—on apparel manufacturers and workers, looked at the climate vulnerable apparel industries in 4 countries.

  • The countries—Bangladesh, Cambodia, Pakistan and Vietnam—collectively represent 18% of global apparel exports, house approximately 10,000 apparel and footwear factories and employ 10.6 million workers
  • Extreme flooding and heatwaves are already affecting these regions. In 2022, a third of Pakistan was underwater due to unprecedented flooding while earlier this year, Dhaka experienced an eleven day heatwave with temperatures reaching 40.2 degrees °C/ 104.3°F.
  • Using projections, the researchers analysed future heat and flooding levels in the 4 countries and the data was then used to estimate industry-level outcomes for 2030 and 2050 by comparing a ‘climate adaptive’ scenario with a ‘high heat and flooding’ scenario.
  • The results show that extreme heat and flooding will result in significant earnings and jobs foregone across all four countries, due to slower industry growth as a result of lower productivity. 
  • Compared with a ‘climate adaptive scenario’, the ‘high heat and flooding’ scenario shows a $65 billion shortfall in projected earnings between 2025 and 2030, representing a 22% decline in export earnings
  • Similarly, the high heat and flooding scenario analysed shows that over 950,000 fewer new jobs would be created, representing a 7% decline. 
  • These projections rise significantly for 2050, representing a 68.6% in foregone export earnings and 8.64 million fewer jobs under the ‘high heat and flooding’ scenario.
  • The authors of the report Higher Ground were Jason Judd, Angus Bauer, Sarosh Kuruvilla and Stephanie Williams.

NOT EXTERNALITIES:  Climate ‘loss and damage’ for manufacturers and workers are treated by brands as externalities—someone else’s problem. 

  • New Due Diligence rules in Europe shift some liability to brands and retailers can lead to bigger investments in adaptation – cooler workplaces, flood prevention and basic social protection systems. 
  • However, heat and flooding measures do not appear in initial drafts, due to the industry’s focus on mitigation. 
  • Key will be introducing set standards and protocols for working hours, effort levels, rest and hydration to be collected and reported daily, as well as enforcing meaningful sanctions for violations of standards.
  • Workers need these investments now because extreme heat standards and flood protections are non-existent, or the systems are easy to game. And, in order to deal with the day-to-day costs of climate breakdown, workers need social protection systems in place and living wages. And ultimately, regulators and brands need to treat heat and flood events as health hazards.

Table 1: Heat and flood projections by apparel and footwear production center, 2030 – 2050

Major production centers Annual exceedance     
days at 30.5 CWBGT
Annual exceedance     
days at 35 C (dry bulb)     
daily maximum
Riverine flood     
population     
% inundated
Coastal flood     
population     
% inundated
City Country 2030* 2050 2030 2050 2030 2050 2030 2050
Karachi Pakistan 189.95 202.71 17.76 19.59 13.02 13.02 0.27 0.29
Colombo SriLanka 144.52 157.76 1.12 1.65 24.07 24.29 0.15 0.15
Managua Nicaragua 133.29 151.9 3.41 6.82 0.01 0.02 - -
PortLouis Mauritius 104.29 104.43 0 0 - - 0.64 0.64
Dhaka Bangladesh 64.81 104.48 69.94 82.88 36.86 37.09 14.64 17.86
Yangon Myanmar 58.9 91.62 37.12 48.76 11.32 11.53 2.97 3.27
Delhi India 55.14 75 164.35 176.41 28.55 28.95 - -
HoChiMinh Vietnam 55.14 97.76 22.82 29.59 25.78 25.73 3.74 6.23
Chattogram Bangladesh 50.1 84.86 6.53 9.65 40.08 41.21 16.95 18.07
SanSalvador ElSalvador 42.33 57.29 0.76 1.12 0.1 0.1 - -
Bangkok Thailand 42.19 74.48 37.59 46.35 41.53 42.44 3.37 3.66
PhnomPenh Cambodia 41.38 75.05 19.94 24.65 41.7 42.28 - -
Hanoi Vietnam 37.29 55.86 36.53 43.94 40.49 40.69 0.59 0.82
Guangdong China 33.29 48.81 1 1.82 42 42.13 8.96 11.44
Dongguan China 33.29 48.81 1 1.82 41.22 41.91 17.74 20.06
Shenzhen China 33.29 48.81 1 1.82 3.96 4.12 12.63 12.98
KualaLumpur Malaysia 22.86 57.1 13 15.41 7.82 7.72 - -
Izmir Turkey 17.9 18.71 6.41 9.41 18.77 18.77 1.81 1.82
Tiruppur India 15.38 29.14 50.88 59.59 0.94 0.94 - -
Manila Philippines 10.43 27.24 9.76 12.35 10.55 10.75 2.51 2.59
Jakarta Indonesia 9.81 38.29 2.35 2.18 29.12 29.05 2.99 3.71
Ningbo China 8.52 17.52 6.41 9.41 57.13 55.83 26.97 32.18
Monastir Tunisia 6.67 11.24 62.35 71.24 2.71 2.71 0.12 0.37
Tangier Morocco 2.05 2.48 13.12 14.76 10.69 10.67 0.63 0.63
Cairo Egypt 1.52 4.24 118.47 128.29 9.56 9.81 - -
Istanbul Turkey 0.86 1.29 21.06 23.47 0.13 0.13 0.08 0.76
MexicoCity Mexico 0.57 2.14 36.65 45.12 7.02 7.04 - -
Taipei Taiwan 0.48 1.9 0.41 0.88 16.25 16.26 0.74 0.74
Amman Jordan 0.33 0.62 83.71 93 - - - -
Prato Italy 0.24 0.24 15.76 17.29 41.63 41.36 - -
San Pedro Sula Honduras 0.19 1.48 38.06 44.82 25.26 25.13    
Blumenau-Florianopolis Brazil 0.1 0.33 3.29 4.41 35.26 35.39 - -

Sources: Schroders, WorldPop, World Resources Institute, Copernicus EU. Flooding based on RP-10 Event, RCP4.5. Heat levels are based on Wet Bulb Globe Temperature, SSP 2-4.5. Analysis undertaken July 2023

BEYOND THE FOUR PRODUCTION CENTRES: The analysis also notes that flooding and heat risks are a widespread issue for apparel production and are not limited to these four regions. 

  • Researchers analysed the climate-vulnerability of 32 apparel producing hubs, in terms of their exposure to extreme heat and humidity and riverine and coastal flooding. 
  • Several other production centres stood out for their vulnerability to both, most notably, Colombo (Sri Lanka), Managua (Nicaragua), Chittagong (Bangladesh), Port Louis (Mauritius), Yangon (Myanmar), Delhi, Bangkok and the Dongguan-Guangdong-Shenzhen regions of China.

PUTTING ANALYSIS TO THE TEST FOR SIX GLOBAL APPAREL BRANDS: Furthermore, the analysis also explored how these issues manifest for brands and retailers. 

  • Researchers mapped the supply chain footprint of six global apparel brands representing a wide variety of business models, across the four production centres. 
  • Looking specifically at how the disruption translates to production, researchers looked at the productivity costs for heat and flooding impacts for one sample brand as an example. 
  • The analysis suggests that the estimated productivity headwind of heat stress and flood impacts in Ho Chi Minh and Phnom Penh alone could equate to five percent of group operating profits per year. The findings reiterate the need for brands to support adaptation measures.
  • The analysis noted that investment and transition finance strategies for the apparel industry must write new costs into their plans.

WHAT THEY SAID:

No one is factoring the on-the-ground costs of climate breakdown into their planning. The apparel industry and regulators have mostly framed their climate responses around mitigation issues - emissions, water usage, and recycled fabrics. They are ignoring the climate issues that are dramatically and directly affecting suppliers and their workers now. The Global North’s climate nightmares are already in evidence in Bangladesh, Pakistan, Cambodia and elsewhere. Life, let alone work, will become very difficult in these and many other hotspots that apparel brands and retailers depend on for production.

Jason Judd
Executive Director
Cornell Global Labor Institute

Rising heat stress and intense flooding represent $65 billion in would-be export earnings and nearly one million forgone jobs for key apparel producing regions for 2030, increasing significantly for 2050. These issues pose material risks for brands, retailers and investors as they manifest either through productivity losses, stranded assets or both. This research highlights the urgent need for action. Investors must begin to engage with apparel companies and their stakeholders to ensure they start to measure and address the significant challenges of physical climate impacts on workers and business models. Furthermore, apparel companies must look to partner with suppliers, and work with peers, worker organisations and policy makers to design suitable adaptation strategies that consider the impact on workers. Adaptation planning could have positive returns on investment for the industry and is a critical addition to mitigation efforts.

Angus Bauer
Head of Sustainable Investment Research
Schroders

 
 
  • Dated posted: 14 September 2023
  • Last modified: 14 September 2023