$65 billion in apparel export earnings at risk due to extreme heat and flooding
NEWS RELEASE - 13 september 2023
- Analysis by Cornell University’s Global Labor Institute and Schroders finds extreme heat and flooding are threatening key apparel production hubs
- Four countries vital for apparel production risk foregoing $65 billion in export earnings – equivalent to a 22% decline - and nearly 1 million new jobs due to slower growth
- Researchers analysed the climate-vulnerability of 32 apparel production hubs, findings show that exposure to heat and flooding risk is widespread
- Schroders states that 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
- Researchers mapped the supply chain footprint of six global apparel brands across the four production centres – findings show workers and manufacturers for all six face productivity impacts from extreme heat and flooding
- Analysis calls for social protection mechanisms and climate adaptation finance that redistributes costs and risks away from apparel workers
Extreme heat and flooding are threatening key apparel hubs and will put over $65 billion worth of export earnings at risk across four key production centres by 2030.
That’s according to new research by Cornell University’s Global Labor Institute (GLI) and global asset management firm Schroders about the economic impact of climate breakdown – specifically, extreme heat and flooding - on apparel manufacturers and workers.
Researchers looked at the climate vulnerable apparel industries in Bangladesh, Cambodia, Pakistan and Vietnam, which collectively represent 18% of global apparel exports, house approximately 10,000 apparel and footwear factories and employ 10.6 million workers.
Using projections, researchers analysed future heat and flooding levels for Bangladesh, Pakistan, Cambodia and Vietnam. This data was then used to estimate industry-level outcomes for 2030 and 2050 by comparing a ‘climate adaptive’ scenario with a ‘high heat and flooding’ scenario.
The results show that extreme heat and flooding will result in significant earnings and jobs foregone across all four countries, due to slower industry growth as a result of lower productivity. Compared with a ‘climate adaptive scenario’, the ‘high heat and flooding’ scenario shows a $65bn shortfall in projected earnings between 2025 and 2030, representing a 22% decline in export earnings. Similarly, the high heat and flooding scenario analysed shows that over 950,000 fewer new jobs would be created, representing a 7% decline. These projections rise significantly for 2050, representing a 68.6% in foregone export earnings and 8.64 million fewer jobs under the ‘high heat and flooding’ scenario.
Extreme flooding and heatwaves are already affecting these regions. In 2022, a third of Pakistan was underwater due to unprecedented flooding while earlier this year, Dhaka experienced an eleven day heatwave with temperatures reaching 40.2 degrees °C/ 104.3°F.
Jason Judd, Executive Director of Cornell GLI commented:
“Flooding and extreme heat pose significant risk to every constituency in global apparel production — workers, manufacturers, regulators, investor and brands themselves.
“But no one is factoring the on-the-ground costs of climate breakdown into their planning. The apparel industry and regulators have mostly framed their climate responses around mitigation issues—emissions, water usage, and recycled fabrics. They are ignoring the climate issues that are dramatically and directly affecting suppliers and their workers now. The Global North’s climate nightmares are already in evidence in Bangladesh, Pakistan, Cambodia and elsewhere. Life, let alone work, will become very difficult in these and many other hotspots that apparel brands and retailers depend on for production.”
Angus Bauer, Head of Sustainable Investment Research at Schroders commented:
“Rising heat stress and intense flooding represent $65 billion in would be export earnings and nearly one million forgone jobs for key apparel producing regions for 2030, increasing significantly for 2050. These issues pose material risks for brands, retailers and investors as they manifest either through productivity losses, stranded assets or both. This research 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 policy makers 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.”
Beyond the four production centres
The analysis also notes that flooding and heat risks are a widespread issue for apparel production and are not limited to these four regions. Researchers analysed the climate-vulnerability of 32 apparel producing hubs, in terms of their exposure to extreme heat and humidity and riverine and coastal flooding. 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.
Putting analysis to the test for six global apparel brands
Furthermore, the analysis also explores how these issues manifest for brands and retailers. Researchers mapped the supply chain footprint of six global apparel brands representing a wide variety of business models, across the four production centres.
Looking specifically at how the disruption translates to production, researchers looked at the productivity costs for heat and flooding impacts for one sample brand as an example. The analysis suggests that the estimated productivity headwind of heat stress and flood impacts in Ho Chi Minh and Phnom Penh alone could equate to five percent of group operating profits per year. The findings reiterate the need for brands to support adaptation measures.
The analysis notes that investment and transition finance strategies for the apparel industry must write new costs into their plans.
Jason Judd commented:
“Climate ‘loss and damage’ for manufacturers and workers are treated by brands as externalities — someone else’s problem. New Due Diligence rules in Europe shift some liability to brands and retailers can lead to bigger investments in adaptation – cooler workplaces, flood prevention and basic social protection systems. However, heat and flooding measures do not appear in initial drafts, due to the industry’s focus on mitigation. Key will be introducing set standards and protocols for working hours, effort levels, rest and hydration to be collected and reported daily, as well as enforcing meaningful sanctions for violations of standards.
“Workers need these investments now because extreme heat standards and flood protections are non-existent, or the systems are easy to game. And, in order to deal with the day-to-day costs of climate breakdown, workers need social protection systems in place and living wages. And ultimately, regulators and brands need to treat heat and flood events as health hazards.”
Higher Ground is available to download here.
*See full table in Part 1: Mapping apparel’s climate vulnerability
ENDS
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Note to Editors
‘Climate adaptive’ and ‘high heat stress’ scenarios – see R1
- The ‘climate-adaptive’ scenario represents the growth trajectory of apparel industries that move quickly to reduce heat stress for workers.
- The business-as-usual or ‘high heat stress’ scenario adjusts future growth in export earnings and jobs using new wet-bulb globe temperature projections in our four focus countries. We combine these with observed changes in productivity due to heat stress: apparel workers’ output declines by approximately 1.5 percent for each 1 C increase in the wet-bulb globe temperature. (Hsiang et al, 2010; Somanathan et al, 2021).[1]
*Climate vulnerability measures – see R1, Part One for full details of methodology
- Heat and humidity are measured using a wet bulb globe temperature (WBGT) to predict the effect of heat stress for workers. At a wet bulb reading of 30.5 C, workers require as must rest as work in an hour according to the ILO. Changes in heat levels are represented using the number of days per year – or exceedance days – for which wet-bulb readings climb above the productivity threshold of 30.5 C WBGT.
- Flooding projections include both coastal and a combination of fluvial and pluvial flooding. Flood vulnerability is measured by calculating the percentage of each centre’s projected population that will be inundated – most between 0.25 and 1 metre – in a 10-year flood, referred to as a ‘return period’ (RP10).
Export earnings and jobs data for Bangladesh, Cambodia, Pakistan and Vietnam – see R1, Part 2 for full details of methodology
- To compare the impacts for the four countries, analyses were run for 2030 and 2050 under two different scenarios – a Climate Adaptive scenario and a Business-as-Usual scenario
- Country-specific heat damage estimates for earnings and jobs are based on ILO projections of annualized changes in indoor worker productivity. Flood damage figures are based on ‘interruption day’ estimates under different return periods, then converted to earnings and jobs losses below.
Brand analysis – see R2, Parts 1 and Parts 2.1 for methodology
- Using the same methodology as above,researchers mapped the supply chain footprint of six global apparel brands (Value Fast Fashion, Value retailer, Fast fashion and mid-multi retailer, Mid-market sportswear, Mid-market multi retailer and Online only) with footprints in the four production centres covered in the above analysis to calculate each brand’s exposure to flooding risk and heat impacts. For the Mid-Market sportswear brand, the lost production days due to flooding and heat were translated into a productivity figure.
About the Research
Details about the full methodology, including assumptions made, limitations of the research and external reviewers are detailed in the report.
About Cornell University Global Labor Institute
The Global Labor Institute (GLI) is dedicated to independent quantitative research and action on a new generation of strategies that the evidence says measurably improves labor conditions for large numbers of workers in global production.
The Institute is part of the Cornell University ILR School. Its faculty includes specialists on Asia, Europe, Latin America, North America, the Middle East and North Africa, and Sub-Saharan Africa who study work, labor and employment, and analyze the dynamics of globalization.