Many textile companies now face intense pressure to adopt transparent ESG practices, driven by tightening legal requirements and a growing consumer demand for ethical brands. This article builds on VPEG’s original discussion, offering deeper insights and real-world examples from Vietnam’s textile sector on how ESG is reshaping operations, supply chains, and market access. Key focus: the tangible benefits of ESG for competitiveness and sustainability.
Global textile and garment corporations are currently required to implement ESG transparently, not only due to increasingly stringent legal requirements but also pressure from consumers. Buyers, especially the younger generation, are increasingly concerned about “green” brands that respect people and demonstrate transparency in production.
Introduction to ESG and its Importance for the Textile Industry
In the context of globalization and rising demands for sustainable development, ESG (Environmental, Social, and Governance) has become a crucial factor for businesses in the ESG in textile industry. Implementing ESG not only helps businesses meet legal and market requirements but also enhances their position, contributing to increased competitiveness and sustainable growth.
What is ESG? The Three Pillars: Environmental, Social, and Governance
ESG stands for Environmental, Social, and Governance.
- E – Environmental: The environmental pillar relates to how businesses manage resources, reduce emissions, and handle waste. This includes minimizing environmental impact through activities such as utilizing renewable energy, water management, and waste treatment, crucial for environmental sustainability.
- S – Social: The social pillar focuses on working conditions, employee rights, and community engagement. These aspects highlight the social responsibility of businesses towards their employees and the broader society.
- G – Governance: The governance pillar addresses how organizations operate transparently, responsibly, and efficiently. This forms the foundation for sustainable corporate governance, ensuring ethical and compliant business operations.
These three pillars provide a framework for businesses to operate sustainably and meet international standards.
ESG – Three pillars: environmental, social, and governance
ESG Implementation in the Global and Vietnamese Textile Industry
The textile industry is one of the most resource-intensive sectors, generating significant carbon emissions throughout its production, consumption, and post-consumption stages. Globally, many textile corporations have adopted ESG implementation to reduce environmental impact, improve working conditions, and enhance corporate governance. This drive is central to the movement towards sustainable fashion.
- Fast Retailing (Uniqlo, GU): Fast Retailing, the parent company of Uniqlo and GU, is transforming its supply chain and increasing the use of recycled materials (achieving 47.4% recycled polyester). The company aims to reduce 90% of greenhouse gas (GHG) emissions at stores/offices and use 100% renewable energy. On the social front, it implements “The Heart of LifeWear” (donating over 532,000 products) and the “PEACE FOR ALL” project. In Vietnam, the group also supports clean water initiatives, builds schools, and employs people with disabilities.
- H&M Group: H&M is committed to reducing 56% of GHG emissions (Scope 1, 2, 3) by 2030 and aiming for Net-Zero by 2040. Currently, they have reduced Scope 3 emissions by 24% compared to the 2019 baseline. 89% of materials are recycled or sustainable (with 29.5% being recycled). The brand prioritizes renewable energy (achieving 96% in operations) and aims to eliminate coal from its garment supply chain by 2026. Socially, H&M promotes labor rights, occupational safety, and collective bargaining.
Some apparel corporations implementing ESG
In Vietnam, where the textile industry accounts for a significant portion of exports, ESG in textile industry is a prerequisite for accessing high-end markets, retaining customers, and enhancing brand value. Furthermore, to export to demanding markets like the US and Europe, textile enterprises need to clearly demonstrate carbon neutrality. Notably, the EU’s Carbon Border Adjustment Mechanism (CBAM), effective from January 1, 2026, makes ESG implementation even more urgent for textile companies. Learn more about how the industry is adapting in the article Greening the Textile Industry.
Pressure for ESG Implementation on Textile Enterprises Today
International Market Requirements and Global Trends
European, US, and Japanese markets are increasingly imposing stringent ESG requirements on supply chains. Businesses failing to fully implement ESG risk being excluded from potential markets. Concurrently, the trend of sustainable investment encourages investors to prioritize ESG-compliant companies.
Legal and regulatory pressures and import barriers (typical examples):
- Europe – Corporate Sustainability Due Diligence Directive (CSDDD / EU): The EU has issued the Corporate Sustainability Due Diligence Directive, requiring companies within its scope to identify, prevent, and mitigate human rights and environmental risks throughout their value chains. This approach means EU importers will demand evidence of impact assessments, policies, and remedial measures from suppliers (including textile manufacturers). This increases the need for transparency and traceability from exporting country manufacturers.
- Europe – Carbon Border Adjustment Mechanism (CBAM): CBAM is a mechanism designed to calculate and collect import carbon taxes to equalize carbon costs between domestic EU products and imports. While its initial scope targets carbon-intensive sectors, the impact of CBAM (and related legislative amendments) is prompting fashion importers and brands to request embedded emissions data from textile suppliers to assess future cost and compliance risks, driving carbon border adjustment efforts.
- Europe – EU Deforestation Regulation (EUDR) & Sustainable Textile Strategy: The EUDR mandates proof that agricultural and forest-based raw materials (e.g., certain types of viscose, wood, cotton from forested areas) are not linked to deforestation. Simultaneously, the “Textiles Strategy” and proposals like Ecodesign / Green Claims increase pressure for supply chain transparency, limiting hazardous substances in fabrics, and combating greenwashing. This means that from the import of fiber/viscose/cotton raw materials, businesses must have traceability documents and independent evidence, essential for EU ESG regulations.
- Europe – Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH): REACH is a regulation concerning the registration, evaluation, authorization, and restriction of chemicals, applicable to all products imported into the EU, including textiles. This regulation requires businesses to control and eliminate hazardous substances (such as azo dyes, heavy metals, or PFAS) in their production processes. Consequently, European brands and importers increasingly demand that Vietnamese textile suppliers demonstrate REACH compliance through chemical dossiers, regular testing, and safety certifications, to ensure products meet ESG standards and EU environmental regulations.
- Japan and other Asian markets: Japan and some other Asian countries require compliance with chemical safety, recycling, and waste treatment standards, reinforcing the importance of environmental sustainability.
ESG Legal Framework and Policy in Vietnam
In recent years, Vietnam has continuously refined its legal system related to environmental, social, and corporate governance (ESG) to promote sustainable development and international integration. Particularly, new regulations are significantly impacting the textile industry.
Regarding the environment, the 2020 Law on Environmental Protection, along with guiding decrees and decisions, has tightened control over emissions, wastewater treatment, and hazardous waste management. Many important documents, such as Decree 06/2022/ND-CP (on greenhouse gas emission reduction), Decree 08/2022/ND-CP (guiding the Law on Environmental Protection), Decisions 888/QD-TTg, 896/QD-TTg, 841/QD-TTg, and most recently Decision 13/2024/QD-TTg on greenhouse gas inventory, all aim to reduce emissions and adapt to climate change in line with the Net Zero 2050 commitment, fostering carbon footprint reduction in fashion.
On the social aspect, the 2019 Labor Code serves as a fundamental framework for protecting employee rights, clearly stipulating standards for safe working conditions, non-discrimination, and prohibition of forced labor. Concurrently, the law also encourages workplace dialogue, collective bargaining, and trade union rights, creating a foundation for a transparent and humane working environment, essential for social responsibility.
This increasingly comprehensive ESG policy framework is creating both pressure and motivation for Vietnamese businesses – especially in manufacturing and textiles – to invest in clean technology, transparent governance, and sustainable human resource development. This drives ESG compliance for Vietnamese textile firms.
Pressure from Customers, Investors, and Partners in the Supply Chain
Currently, global fashion corporations are obliged to implement ESG transparently, not only due to increasingly stringent legal requirements but also pressure from consumer demand. Buyers, especially the younger generation, are increasingly interested in “green” brands that respect people and are transparent in production.
A 2024 study by Verónica Baena, titled “The shift from fast fashion to socially and sustainable fast fashion,” indicated that customers respond very positively when the Zara brand engages in ESG and social responsibility activities. When Zara implemented specific programs such as creating jobs for people with disabilities (For&From), developing environmentally friendly product lines (Join Life), and transparently communicating its ESG efforts, customer purchase intent, trust, and loyalty significantly increased.
ESG implementation pressure on textile companies from customers, investors, and partners
This demonstrates that to maintain reputation and competitive advantage, major brands are compelled to disclose their carbon footprint and ensure transparency throughout their entire production process – from raw materials to finished products. Therefore, they also require manufacturing businesses and suppliers in Vietnam to meet similar ESG criteria: stringent environmental management, guaranteed employee rights, and clear information disclosure.
Consequently, ESG is no longer an option but a mandatory condition for Vietnamese garment factories and suppliers to continue participating in global supply chains. Proactively engaging in the green transition, efficient energy use, chemical control, and transparent production processes not only helps businesses meet partner requirements but also creates long-term advantages, enhances credibility, and expands export opportunities to high-end markets. More insights on this topic can be found in this resource: ESG – Nền tảng phát triển bền vững cho các doanh nghiệp
Typical Examples of Vietnamese Textile Enterprises Implementing ESG
Vietnamese textile enterprises are increasingly focusing on implementing ESG standards, not only to meet market demands but also to enhance their competitiveness. Below are some typical examples of Green textile production projects through the integration of solar energy for textile factories and solutions for carbon footprint reduction in fashion.
Green TG – Tien Giang, Vietnam
A solar power system was installed on the rooftop of the Green TG factory in Tien Giang – a South Korean company specializing in exporting garments to European, American, Korean, and Japanese markets. The project utilizes 2,240 450Wp solar panels along with 8 SMA Sunny Tripower CORE 2 inverters, each with a capacity of 110kW – a new generation of inverters from SMA (Germany) offering numerous outstanding advantages. The system helps the factory reduce approximately 1,200 tons of CO2 emissions annually, contributing significantly to environmental sustainability.
Green TG factory solar power project – Tien Giang – 1MWp
Eclat Fabric – Vung Tau, Vietnam
Eclat – Fabrics Vietnam is an enterprise belonging to the Eclat Textile Group – a major textile conglomerate in Taiwan. Its factory has a capacity of 6,000 tons of fabric/year, specializing in producing fashion knitted fabrics, sports fabrics, high-end apparel fabrics, and multi-functional technical fabrics with UV protection properties for major brands like Nike, Adidas, Lululemon, and others.
The solar power system uses 2,682 450Wp solar panels, designed and installed according to international standards, ensuring strict technical criteria and high aesthetics. The solar power system helps the factory reduce 1,400 tons of CO2 annually, demonstrating a strong commitment to carbon footprint reduction in fashion and the adoption of renewable energy.
Eclat Fabric factory solar power project – Vung Tau – 1.2 MWp
Total Men Chuen – Dong Nai, Vietnam
The project was implemented in 2020 with a capacity of 1 MWp, comprising 2,348 high-efficiency Jinko 405W solar panels, 9 Huawei inverters, and a high-quality auxiliary frame and wiring system designed for over 30 years of durability. This solar power system helps the client save monthly electricity costs, increase production capacity, and contribute to environmental protection.
This project was executed under a PPA (Power Purchase Agreement) model, which involves build-lease-transfer. Vu Phong Energy Group invests in and constructs the rooftop solar power system at the client’s factory, then leases it back to sell electricity to the client at a preferential rate. After a specified period, Vu Phong Energy Group transfers ownership of the entire system to the client.
Total Men Chuen factory solar power project – Dong Nai – 1 MWp
