Rana Plaza and Turkey’s textile growth plan?
MAXIMILIAN MARTINThe global textile and garment industry is booming. As fast fashion has conquered consumer markets around the world, Turkey has had an amazing run over the last decade: the fourth largest supplier of clothing in the world, it is now firmly established as the world’s leading sourcing location serving Europe, and has graduated from competing on cost only. Textile and garments are important drivers of Turkey’s economic success and prospects and contribute about 8 percent to the country’s GDP and $30 billion in production value. It is hardly surprising that the Turkish Clothing Manufacturers Association has ambitious plans to raise exports to $100 billion by 2023.
To achieve this, Turkey is thinking through its long-term niche, and has started to build its own international brands and clothing chains, such as LC Waikiki, the country’s leading apparel retailer with over 400 stores. But there is a tragic twist. One year ago, on April 24, 2013 the Rana Plaza factory in Bangladesh collapsed, killing 1,133 garment workers. As we remember the victims during the sad anniversary this week, a lingering question is returning to global attention: how can apparel supply chains not only turn out products ever cheaper and faster, but do so under decent working and environmental conditions?
Rana Plaza has triggered a wide-ranging reassessment of the industry’s sustainability (or lack thereof). Leading players are now assessing how they can render their supply chains compliant and transparent while remaining efficient. This has implications for everyone in the supply chain. At my firm, Impact Economy, we wanted to know last year if taking the industry to a much higher level of social and environmental performance, while also keeping it competitive, is even possible.
We thus conducted an industry survey that reached out to over 730 stakeholders over an eight-month period, screened more than 200 reports, conducted many expert interviews, and looked at several sourcing countries and consumer markets in depth. The resulting report Creating Sustainable Apparel Value Chains, released in English, Bengali, Burmese, and Japanese argued that greater total resource productivity and transparency, upgrading industry infrastructure by (impact) investing, improving working conditions with a new level of ambition, and replicating best practices of leading players can together unlock a next level of viability and sustainability.
First, tackling working conditions in emerging market sourcing locations is a precondition to breaking out of the prevailing unproductive cycle of suboptimal factory productivity, absenteeism and staff turnover. The key is redefining labor as an asset, rather than just a cost. This is also a topic at many of the 35,000 textile and clothing companies in Turkey, especially in light of frequently harsh working conditions and an increasing flexibilization of the labor force.
Second, lean manufacturing is a crucial ingredient to unlock productivity. This matters especially for those who cannot merely compete on cost. Achieving greater total resource productivity and transparency across the supply chain via front-of-pipe process design, lean manufacturing and energy efficient infrastructure can lower the use of chemicals by up to 20 percent, energy by up to 40 percent, and water by up to 50 percent. Continuous improvement of manufacturing and development of lead suppliers are now starting to be applied along the supply chain, over time raising the competitive bar for newcomers.
Third, in many sourcing locations, building sustainable supply chains will require upgrades in the factory infrastructure on a broad front. Turkey does not suffer the same deficits as Bangladesh, where more than 90 percent of all buildings are not compliant with the building code. Notwithstanding, there is efficiency potential. Unlike many of the other emerging market sourcing locations with the exception of China, Turkey has a strong financial services industry that allows for financing upgrading where it is needed.
Fourth, over time, sustainable sourcing will become a necessity to compete, as it already has in other industries. Turkish clothing manufacturers now start offshore to lower-cost locations, such as Ethiopia. As their international brands gain greater market share, they will eventually face many of the same demands made upon today’s leaders, such as H&M, Zara, or Uniqlo. Replicating and scaling the best practices of frontrunner producers on the bundle of manufacturing issues is the easiest way forward. These include skill and capacity building for workers and managers, optimizing audit codes and support, raising awareness about gender and workers’ rights.
After Rana Plaza, Turkey is part of an industry at the crossroads. To further leverage its geographic hub position between the European Union and the Middle East and its strong industrial base, next to investing in R&D for product innovation, the ability to operate sustainable supply chains will be one of the drivers of value within the time horizon of its $100 billion growth plan.