Viet Nam Facing Critical Challenges in Energy Consumption, Carbon Emissions and Resource Efficiency

ENERGY CONSUMPTION: The apparel and footwear industry accounts for 8% of industrial energy demand, emitting around five million tons of CO2 annually. It remains heavily dependent on coal (12% of plants) and grid electricity (93% of facilities).

• Under a recently issued mandate, companies must track their greenhouse gas emissions. Nearly 100 textile and footwear businesses have been specifically designated to report their emissions, aligning with the country’s broader goal of reaching net-zero emissions.

Sustainability Data: Higg Facility Environmental Module (Higg FEM) submissions in 2023 highlighted issues such as uncertified biomass use and poor wastewater treatment in textile facilities.

• As the price of rice husks (sustainable biomass) has increased, some suppliers are moving to uncertified wood waste that, when taking biogenic emissions into account, has a higher impact than coal and presents additional reputational and environmental risks.

RENEWABLE ENERGY: There is a growing emphasis on transitioning to renewable energy sources within the industry. The goal is to increase the share of electricity from renewable sources to 10% by 2025, with ongoing efforts to reduce overall energy consumption by 0.4% to 0.7% annually from 2021 to 2030.

• After years of development, Direct Power Purchase Agreements (PPAs) in Viet Nam became available in July 2024, allowing electricity consumers above a certain threshold to bypass Viet Nam Electricity (EVN) as their only source. After electrification, a typical textile wet-processing facility would be eligible for Direct Power Purchase Agreements (DPPAs).

SUSTAINABILITY GOALS: The industry is actively working towards sustainability, aiming for a 15% reduction in energy consumption and a 20% reduction in water usage by 2023 as part of its green transformation initiatives.

• A September 2024 agreement aims to drive sustainable development in Viet Nam’s textile and footwear industries through 2024–30, focusing on sustainable consumption and production, energy efficiency, circular economy growth, and climate adaptation, with a target of at least a 10% annual reduction in energy consumption.
• By collaborating on initiatives like the IDR, apparel and footwear companies can play a pivotal role in Viet Nam’s transition to a sustainable, low-carbon economy while simultaneously driving business performance.

RECOMMENDATIONS TO LEAD THE CHANGE

• Engage in low-carbon transitions with focus on driving renewable energy adoption and circular economy solutions.
• Brands are encouraged to foster long term relationships with their supply chain partners, driving both greater equity and transformative business practices.
• To support skill  development, Invest in workforce upskilling, particularly in sustainability and green technologies.
• Keep abreast of Viet Nam’s evolving regulatory environment to ensure compliance and capitalise on market opportunities.

ABOUT IDR: Cascale and AII’s Industry Decarbonisation Roadmap (IDR), developed with the support of RESET Carbon, prioritises action in the 10% of facilities across the textile and apparel supply chain that account for over 80% of manufacturing emissions globally, ensuring resources are targeted where they can drive the greatest impact.

• The IDR unites manufacturers, brands/ retailers, and stakeholders around shared goals, emphasising collective accountability and pre-competitive collaboration to accelerate systemic change across the supply chain.
• With a science-based target of reducing supply chain emissions by 45% by 2030, the IDR drives measurable progress through various interventions, solutions and programs.