Circular Textile Value Chains Through a Comprehensive Policy Approach under a UNIDO-led project in Bangladesh

In recent years, the concept of a circular textile value chain has gained momentum globally, offering a promising solution to these issues, but also posing new regulatory requirements. The circular economy approach seeks to minimize waste, reduce unsustainable resource consumption, and promote sustainability through recycling, reuse, and responsible production practices. (photo: Textile waste recycling at Flamingo Fashion Limited, DBL group) 

Despite its significant role in the global textile market, Bangladesh's textile sector faces a multitude of hurdles that impede the transition towards a circular economy. The absence of inadequate policy direction and a centralized framework for circular economy activities is one of the primary challenges. However, there is optimism as the Ministry of Commerce, in collaboration with the UNIDO-led SWITCH to Circular Economy Value Chains (SWITCH2CE) Project, has taken a leading role in coordinating a unified approach towards developing a circular textile policy framework in collaboration with Chatham House as global project partner. 

In Bangladesh's pursuit of a circular textile value chain, four significant hurdles must be addressed.  

Firstly, there is a lack of awareness among textile businesses regarding the environmental and economic benefits of circular practices, particularly for garment waste (‘jhut’) valorization. With the nation's prominence as the second-largest garment exporter, it generates a substantial 600,000 tons of textile waste yearly, which could contribute an extra US$ 3 billion per year to the country's GDP through import substitution of raw materials and product diversification.  

Second, the informal sector plays a critical role in collection and sorting of post-production textile waste, although workers face challenging conditions and limited safety measures. Recognizing the informal sector's importance, integrating it into the circular textile value chain and improve working conditions, especially for vulnerable female workers, is crucial for a just transition.  

Third, the industry faces an alarming scarcity of investment in recycling facilities and advanced processing technology. Without these, the transition to circularity remains distant. Investment in these areas is a significant opportunity for promoting sustainability and efficient resource utilization. 

Fourth, Bangladesh exports a significant amount of post-production textiles to neighboring countries, undermining domestic recycling infrastructure.  

A National-level comprehensive Policy Framework and implementation for circular textiles would be the way forward  

Such an overall policy framework would need to address the following issues: 

Factories' Jhut Handling Practices 

• Currently no guidelines or regulations for sorting and collection of jhut within and from factories (leading to contamination, loss of quality, non-transparent pricing structures, etc.) 

Policy Solution: Develop specific industry guidelines applicable across the country for sorting, collection, and reuse/recycling of post-industrial waste in the RMG sector, covering all aspects of waste management, from waste reduction, sorting, collection to the use of alternative materials. 

• Lack of data and transparency, no national reporting on volumes of jhut generated by garment factories 

Policy Solution: Increase transparency and traceability of 'Jhut' through a mandatory disclosure system for garment factories. Create a national online platform on jhut resources with open access for all stakeholders to address the lack of data on volumes, types of jhut, quality and prices.  

• Lack of compliance with existing waste management regulations 

Policy Solution: Strengthen enforcement mechanisms to ensure compliance with existing waste management regulations, including regular inspections and penalties for non-compliance. 

Informal Sector & Women (including youth): Women entrepreneurs and workers have particular challenges in accessing jhut and women are often discriminated as low-cost labor in informal sorting facilities. 

• Informal collectors and sorters lack incentives to upgrade and formalize operations to be transparent and offer decent work opportunities 

Policy Solution: Provide economic incentives and political protection for informal sector operators to improve their operations and become qualified to work in transparent and accountable ways. 

• No access to finance for informal operators in collection and sorting 

Policy Solution: Offer access to finance and credit facilities for informal sector participants to upgrade operations in line with new government requirements and guidelines of circularity for collection and sorting. 

Economic Structures for investments (Prices/Taxation): 

• Current taxation structure is not friendly for investments into high-quality recycling facilities 

Policy Solution: Make changes in taxation structure to ensure high-quality recycling and reuse of post-industrial textile waste. Offer tax credits and subsidies to promote the growth of the domestic garment recycling industry. 

• Non-transparent pricing for jhut at different stages of the value chain (collection, sorting, aggregation, resale, and trade) 

Policy Solution: Implement standardized supply chain for jhut to enable market development and transparency in the pricing process. 

• No foreign direct investment into state-of-the-art garment recycling facilities; outdated technologies prevalent for processing 

Policy Solution: Adjust regulations on foreign direct investment to encourage both foreign and local investors to invest in circular businesses and garment recycling, unlocking technological advancements in the sector. 

Trade/Export of jhut and textile waste resources  

• High-quality jhut is exported for valorization through downcycling in non-garment industries 

Policy Solution: Introduction of non-financial incentives to encourage domestic processing of jhut (e.g. tax breaks) and disincentivize exports with higher tariffs on jhut exports. Require export licenses to increase transparency and include jhut trade in the exporters' database. 

• No legal or financial responsibility for textile waste and jhut generation and ownership 

Policy Solution: Identify Extended Producer Responsibility (EPR) options for jhut and textile waste to engage brands and factories with jhut sector development. 

No need to wait: Emerging circular business opportunities 

In the midst of these challenges, there are various business opportunities for the BGMEA members and the private sector. By actively participating in the development of a circular textile value chain, companies can not only contribute to sustainability but also strengthen their competitive position:  

Investment in Recycling Facilities: Private sector enterprises can invest in state-of-the-art recycling facilities that specialize in turning post-production textile waste into high-quality materials. This not only helps in reducing dependence on virgin resources but also creates a new revenue stream. 

Innovation in Circular Design: Companies can focus on circular design principles, creating products with longer lifecycles, ease of disassembly, and the potential for recycling or reuse. Such designs contribute to a reduction in waste and the efficient use of resources. 

Education and Training Programs: Private sector players can develop and deliver education and training programs to inform the industry about the benefits and practices of circularity. These programs can cater to workers, managers, and decision-makers in the sector. 

Integration of Informal Workers: Businesses can work towards integrating informal workers into formal systems, providing them with better working conditions and social protections while enhancing the efficiency of waste management. 

Collaboration and Partnership: Collaboration within the industry and with governmental and non-governmental organizations is essential. Companies can participate in national and international initiatives aimed at shaping policies and practices that promote circularity. 

The transition to a circular textile value chain in Bangladesh's garment sector is an ambitious and transformative endeavor. It requires a comprehensive policy approach that addresses the multifaceted challenges that the industry faces. The government's involvement in coordinating a unified approach is a positive step forward. Businesses in the private sector also play a pivotal role, as they have the capacity to drive change, invest in sustainable practices, and innovate for a more sustainable and circular future. 

The global Switch to Circular Economy Value Chains project, co-funded by the European Union and the Government of Finland, and led by UNIDO, supports the circular transition in selected value chains and countries. In Bangladesh, the project works with international and national partners from the private sector, government, academia, and business associations to support circularity in the textile and garments value chain. In the efforts to build an enabling environment for circularity, Chatham House leads the policy dialogue, Circle Economy Foundation implements capacity development activities, while the European Investment Bank (EIB) will support local financial institutions to design and deliver financial products for circular approaches. More info: www.switchtocircular.eu  

This publication has been co-authored by:

Patrick Schröder, Senior Research Fellow, Environment and Society Centre, Chatham House

Md. Abdur Rahim Khan, Additional Secretary, Head of Export Wing, Ministry of Commerce Bangladesh

Asadun Noor, SWITCH2CE National Project Coordinator, UNIDO Bangladesh