Sustainable Development for Vietnam’s Footwear Industry

The sustainable footwear industry in Vietnam is experiencing rapid expansion, yet a notable gap persists between the global supply chain positions of domestic companies and their foreign direct investment (FDI) counterparts. To bridge this divide and enhance competitiveness, Vietnamese enterprises are increasingly focusing on sustainable development, environmental protection, and technological innovation. Adopting modern clean energy solutions is proving to be a critical driver, enabling businesses to meet global green standards and strengthen their market position. This strategic shift is not just about compliance but is a motivating force for improving production capacity and achieving long-term growth in a demanding international market.

According to statistics from the General Department of Customs, Vietnam’s export turnover for leather and footwear products grew by an average of 7% annually between 2016 and 2020. Despite a temporary decline in 2020 due to the COVID-19 pandemic, the industry has shown a strong recovery since 2021. In the first seven months of 2022 alone, the industry’s export turnover reached over 14 billion USD, a 15.1% increase compared to the same period in 2021. Industry forecasts for the full year anticipated a total growth of 10-15%, reaching an estimated 23-25 billion USD.

Vietnam’s primary export markets for footwear include the United States, Europe, China, Japan, and Korea, with the U.S. remaining the largest single market, accounting for over 6 billion USD in export turnover. Notably, exports to countries within Free Trade Agreements (FTAs) have also seen significant growth. For instance, exports to the EVFTA member market increased by 18.2%, the UKVFTA market grew by 10.9%, and the CPTPP bloc saw a 10.5% rise.

Footwear export turnover from 2011 to 2021, in billion USD. Source: Lefaso.

While Vietnamese footwear enterprises have significant opportunities to deepen their integration into the global supply chain, domestic firms lag behind FDI enterprises. Although domestic businesses constitute 80-90% of the approximately 1,700 footwear enterprises in Vietnam, most are small to medium-sized. In contrast, FDI enterprises, which make up only 10% of the total number, generate 70-80% of the industry’s entire export turnover. This highlights a critical need for domestic companies to enhance their production capacity and product quality to remain competitive.

Strategic Solutions for Vietnam’s Leather and Footwear Industry

To achieve sustainable growth and secure a stronger position in the global supply chain, industry experts recommend that leather and footwear companies become more involved in high-value stages such as design and R&D. Furthermore, securing a stable source of raw materials and focusing on sustainable, green, and clean manufacturing processes are essential. This includes adopting new materials like the TPU class, which is replacing EVA in footwear accessories used by major international brands. Enterprises can also leverage FTAs to import high-quality raw materials from markets like the EU and invest in modern, clean technologies to upgrade their equipment.

Many leading global brands are now committed to addressing environmental challenges by integrating sustainability into their business objectives, production processes, and corporate communications. These sustainability criteria are rapidly becoming standard requirements for both export and domestic markets. Consequently, Vietnamese leather and footwear businesses must make strategic, long-term investments and allocate the necessary resources to meet these stringent environmental and sustainable development standards.

To overcome financial hurdles, footwear businesses can proactively seek preferential policies, credit capital, and green finance. Flexible collaboration models, such as the Power Purchase Agreement (PPA) model for solar power, offer a powerful solution. Many FDI enterprises are already using this approach to access clean energy solutions without the upfront capital investment in a solar power system. This allows them to meet green production criteria and protect the environment while prioritizing capital for technology upgrades and improving production capacity.

A rooftop solar power system at the Golden Victory Vietnam factory, an FDI enterprise in the leather and footwear global supply chain.

Through the PPA cooperation model, Vu Phong Energy Group and its investment fund partners will finance and install a high-quality solar power system on an enterprise’s factory roof. The business can then purchase electricity at a competitive price or lease the system long-term. This allows companies to utilize idle roof space to access clean energy for their operations. At the end of the contract, the entire solar power system is transferred to the enterprise at no cost, with a performance commitment of over 80-90% depending on the terms.

By capitalizing on the opportunities presented by FTAs, supportive government policies, and flexible collaboration models, Vietnam’s leather and footwear companies can significantly bolster their position and integrate more deeply into the global supply chain, ensuring a more sustainable and prosperous future.

Vu Phong Energy Group

For further details, you can read the original analysis in Vietnamese.