The industry's slow shift to renewable energy in manufacturing countries

As one of the most significant contributors to global carbon emissions and environmental deterioration, it comes as little surprise that some of the fashion industry's largest players are investing in new initiatives to reduce their impact. With several companies adjusting their sustainability strategies to include net-zero carbon emissions, many are making the switch to renewable energy.

Over 70 percent of the industry's greenhouse gas emissions stem from upstream activities, with several suppliers in manufacturing countries remaining predominantly reliant on non-renewable energy sources, such as petroleum, gas, oil, and coal. But how do complex supply chains and local legislation impact the fashion industry's green energy campaign?

Thankfully, support for shifting fossil fuels to renewable energy in the fashion and textile sector has never been higher. Last week at COP28, Danish fashion company Bestseller joined forces with Swedish giant, the H&M Group and the Global Fashion Agenda (GFA) to develop the first offshore wind project in Bangladesh. Developed in partnership with the Copenhagen Infrastructure Partners (CIP), the wind farm project is estimated to reduce greenhouse gases (GHG) by ~750,000 tonnes annually.

Highlighted as the first renewable energy project to be developed on such a large scale in a key manufacturing hub, the proposed wind farm would provide an estimated output of 500 megawatts. In line with Bangladesh's ambitious objective to generate 40 percent of its electricity from renewable resources by the year 2041, GFA is calling on other fashion brands to co-invest with Bestseller and the H&M Group, the former of which has invested 100 million US dollars, the minimum amount needed to invest in the project to begin the construction phase.

However, investing in the project is not that easy. Currently in early-stage development by CIP in collaboration with a local partner Summit Power, there are some requirements fashion companies must adhere to if they wish to participate, including aligning with the UNFCCC's Fashion Industry Charter for Climate goal to cut emissions by 50 percent by 2030 and achieve a net positive impact by 2050.

In addition, they have to invest at least 10 million US dollars or more. While these requirements rule out certain brands and retailers from participating in the initiative, the GFA stresses that this collective approach "not only represents the shared responsibility for the value chain but also incentivizes other market participants to contribute."

Collective large scale investments paving the way for reneweable energy in manufacturing hubs

Unlike RE100, a campaign co-founded by the Ikea Group in 2014, which sees businesses commit to sourcing 100 percent of their energy by 2050 from renewable suppliers, this new initiative seeks to scale up the availability of renewable energy in manufacturing countries.

Although industry players from Gap to Adidas are investing in renewable energy sources like solar by installing panels on the roofs of their headquarters, stores, and distribution centers, these individual measures only offset carbon emissions from downstream activities, which account for 30 percent of the industry's GHG emissions. On the other hand, the new wind project enables collective investments from the industry and the CIP's Growth Market Fund into renewable energy infrastructures.

With farm operations predicted to begin in 2028, the project has been given in-principle approval. At this point, the contingency of the entire project depends on the outcomes of "feasibility studies" that will be carried out over the coming years, such as wind measurement, environmental impact assessments, and seabed assessment. These studies are intended to ensure that the selected site by the coast of Cox Bazaar is the ideal site for constructing an offshore wind farm. In addition, the project is also dependent on customary permitting, contracting, and other development activities.

The green project announcement comes at a pivotal time as power demand across the country increases. With textiles and apparel remaining the largest industry in Bangladesh, fuel shortages and an increasing energy import bill see the South Asian country struggling with one of the worst power crises in years as businesses fight against rolling blackouts and sky-high inflation. Heavily reliant on liquefied natural gas (LNG), the country has struggled with global prices following Russia's invasion of Ukraine and its own dwindling natural reserves.

As Bangladesh faces financial challenges in securing LNG, significant funds continue to be allocated to capacity payments for projects, some of which have been on hold for more than a year, according to a report by FT. Moreover, electricity demand across the country is still falling behind its booming growth, with total capacity now exceeding demand by 50 percent.

Although suppliers can choose to purchase renewable energy from solar and wind farms, the total capacity of renewable energy sources installed in the country currently sits at 950 MW, less than 3 percent of its total electricity. Falling short of plans to reach 10 percent by 2020, much of the country's legislation still supports the use of fossil fuels, in particular LNG as a transition fuel.

At the same time, concerns surround the influence of the few companies spearheading these private gas power plants. Some, like the Summit Group, are beneficiaries of Bangladesh's energy policies. With Bloomberg NFT arguing that the country's energy policy document has "ignored or underestimated" its renewable energy potential, external investments like the wind project offer another solution.

Declining solar power prices may also help suppliers with their current energy issues. Solar energy is projected to become Bangladesh's most affordable power source by 2025, thanks to the decreasing solar technology costs, according to a report by BloombergNEF. Earlier this year, Saudi Arabia's ACWA Power agreed to a joint venture to build a solar plant, and fashion giant H&M Group is currently working with sustainable development agency GIZ to install solar panels with suppliers in five production markets, including Bangladesh.

With solar and wind power offering a green solution to Bangladesh's energy crisis, these sources align with the fashion industry's global emission reduction goals. Representing a crucial step in addressing both the environmental impact of the fashion industry and the pressing energy challenges in key manufacturing regions, we can only wait and see how things further develop.