Extreme Heat and Floods Could See Fashion Supply Hubs Lose US$65 Billion by 2030

Research by Cornell University’s Global Labor Institute (GLI) and Schroders, has found that apparel manufacturers in some climate-vulnerable countries could face a 22% shortfall in export earnings, or miss out on US$65 billion, by 2030.

As a result of extreme heat and flooding key apparel production hubs vital for fashion production – Bangladesh, Cambodia, Pakistan, and Vietnam – risk missing out on $65 billion in export earnings and almost 1 million new jobs.

In addition, several other production centres stood out for their vulnerability to both, most notably Colombo (Sri Lanka), Managua (Nicaragua), Chittagong (Bangladesh), Port Louis (Mauritius), Yangon (Myanmar), Delhi, Bangkok, and the Dongguan-Guangdong-Shenzhen regions of China.

Key Findings

According to the report, collectively the four focus countries analysed – Bangladesh, Cambodia, Pakistan, and Vietnam – are home to around 10,000 apparel and footwear factories and employ over 10.6 million workers in the industry.

The four countries were selected for their prominence in apparel and footwear production and, in the case of Pakistan, textile production. Together, these four represent 18% of global apparel exports.

These countries’ major production centres – Dhaka, Phnom Penh, Karachi, and Lahore, Ho Chi Minh, and Hanoi – are already confronting extreme heat and humidity. And all of these cities are also likely to experience significant flooding. 

These centres were also selected because they are at different stages of evolution as apparel and footwear producers. They include local and foreign-owned manufacturers, and they sell to a mix of fashion brands and retailers.

In GLI and Schroders’ first report, using projections to analyse coastal and riverine flooding and wet-bulb globe temperature readings, researchers analysed future heat and flooding. This data was then used to predict industry-level shortfalls for 2030 and 2050 by comparing a ‘”climate-adaptive” scenario with a “high heat and flooding” scenario.

The results suggested a loss of 1 new million jobs and US$65 billion in missed export earnings.

These projections rise significantly for 2050, amounting to a potential 65-70% shortfall in export earnings and 8-9 million fewer new jobs under the “high heat and flooding” scenario.

Both scenarios interrupt factory production, reduce workers’ productivity and jeopardise their health, and may represent risks to the fashion industry.

The Fashion Business and Climate Adaptation

In their second report, GLI and Schroders looked at impacts for a cross-section of six global brands in four focus countries.

The research examined company-level climate risk, costs, and financing for adaptation and “just resilience”, i.e. the principle that less developed communities will require support to adapt to climate pressures.

The report found that workers and manufacturers for all six brands could face significant productivity impacts from extreme heat. Ho Chi Minh in Vietnam was found to have the largest proportion of brands’ supplier locations affected by riverine flooding. But brands with significant production in Dhaka, Bangladesh, were also found to be vulnerable to physical flood impacts.

Looking specifically at how the disruption translates to production, the report estimated the productivity losses for heat and flooding impacts for one sample brand as an example. The analysis suggests that the potential productivity headwind of heat stress and flood impacts in Ho Chi Minh and Cambodia’s Phnom Penh alone could equate to five percent of group operating profits.

Too Focused on Mitigation

With this research, GLI and Schroders aimed to measure and understand fashion’s exposure to extreme heat and flooding. They found investment and transition finance strategies for the apparel industry must write new costs into their plans.

This sets the foundations for industry actors to formulate, negotiate, and enact adaptation strategies that are large-scale and fit for purpose.

These issues pose material risks for brands, retailers, and investors as they manifest either through productivity losses, stranded assets, or both. This research also highlights the urgent need for action.

Investors must begin to engage with apparel companies and their stakeholders to ensure they start to measure and address the significant challenges of physical climate impacts on workers and business models.

Furthermore, apparel companies must look to partner with suppliers, and work with peers, worker organisations, and policymakers to design suitable adaptation strategies that consider the impact on workers. Adaptation planning could have positive returns on investment for the industry and is a critical addition to mitigation efforts.

Multiple stakeholders – government, suppliers and their workers, brands and their investors – will benefit from an increased focus on adaptation.

Building a greater understanding of company exposures to the effects of acute heat and flooding sets the stage for enhanced analysis of company productivity and value, as well as creating engagement opportunities across the value chain.  

Investors need to engage with apparel companies and their stakeholders as adaptation measures aren’t prioritised enough in risk plans because the industry is focused on mitigation.