It’s business as usual in one of Vietnam’s leading textile factories, where 27-year-old Phan Chi Cao works in the laser unit. He uses laser machines to “dry process” denim apparel—a technique used to achieve the cool, faded look some consumers crave. With the lasers, Cao can dry around 300 jeans a day, a huge jump in productivity from the labor-intensive manual process, which allows for only 20 to 30 daily—and exposes workers to harmful chemicals.
Cao’s company, Phong Phu International (PPJ), brought these laser machines to the factory as part of a long-term effort to support Vietnam’s emergence as a major textile sourcing center in Asia. In 2016, PPJ’s efforts were boosted further by the Vietnam Improvement Program, an IFC initiative to improve resource efficiency in the local apparel, textile, and footwear sector. IFC now works with 70 factories that supply large retailers and clothing companies including VF Corp., Target Corp., Puma, New Balance, and Adidas.
Initially, IFC assessed PPJ’s potential to achieve optimal energy and water efficiency. After this research, IFC helped the company adopt emerging technologies and good practices that would bring it closer to its goal. With 20 factories and 14,000 workers supplying denim, knit, and woven apparel to global brands, the company first implemented several resource-efficient solutions at its Thanh Chau wash factory in 2016 and 2017.
Apart from landing more orders, the measures helped PPJ slash its energy consumption by almost 7 million kilowatt hours per year, and use 200,000 cubic meters less water annually. This allows it to save as much as $700,000 a year, while also paying workers a salary that encourages them to remain with the company.
A Laundry List of Efficient Practices
PPJ’s participation in the Vietnam Improvement Program helped the company reach these significant results. First, PPJ replaced its low-efficiency boiler with a high-efficiency one. It also achieved significant water efficiency by recycling 80 percent of wastewater. For higher resource efficiency and better productivity, PPJ replaced the manual process with laser machines, and switched from traditional washing machines to modern ozone machines.
“Improved efficiency and increased output have helped us attract new buyers who are in search of suppliers with global standards,” says PPJ’s Vice General Director Nguyen Thi Lien. She also believes that increased profit leads to better salary for employees. This in turn is helping the company to retain good workers like Cao, who plans to stay at the company for the long-term because of the benefits it offers.
“A salary of $400 allows me to save, send money home for my sister’s education, and pay for my parents’ medical treatment,” Cao says.
The company has rolled out similar upgrades in all its factories throughout 2018. As productivity grows by at least 30 percent, PPJ is expecting a turnover of $300 million in 2018—a 30 percent increase compared to 2017. Operating costs have decreased by 20 percent. PPJ now plans to set up a sophisticated automatic garment factory in Asia by next year.
Investing in a Clean Future
Vietnam is one of the 10 largest exporters of textiles and garments globally. With more than $30 billion in these exports annually, the sector contributes significantly to the country’s economy. However, chemical discharge makes the sector the second-biggest water polluting source in the country. Vietnam’s textile and garment factories are also among the world’s most energy-intensive ones, using up one tenth of the total energy consumed by all industries in the country. IFC’s Vietnam Improvement Program provides an opportunity to help Vietnam promote more sustainable private sector growth.
There are signs this is already happening. Since 2016, the program has enabled 70 factories to invest $26 million in resource efficiency measures, helping them save $24 million in water, energy, and chemical operating costs. When the program’s recommendations are fully implemented over the next three years, the $40-million capital investment—required for retrofits and more efficient equipment—could collectively save 4 million cubic meters of water and curb 788,500 tons of greenhouse gas emissions annually. This is equivalent to removing 1.1 million new cars from the road. Energy consumption in this sector alone could decrease nationwide by 30 percent with technology upgrades and improved efficiency.
Benefits like these encourage other companies to consider more efficient methods—and IFC’s network of client banks can support this effort, too. For example, on IFC’s recommendation, Samil Vina Co., Ltd, another strategic supplier for Target, sought a bank loan to install more advanced dyeing machines, which use significantly less water, energy, and chemical to dye textile. With IFC’s advice and the introductions that followed, Samil Vina borrowed $4 million from Vietnam Industrial and Commercial Joint-Stock Bank (VietinBank), an IFC client that finances energy-efficiency projects at affordable terms.
Improvements followed as soon as the upgrades were installed. The new low-MLR dyeing machines are reducing by 45 percent Samil Vina’s water, chemical, and energy consumption. The new system also reduces production time by 17 percent.
The new approach saves Samil Vina $2 million per year in operating costs. This allows it to offer a 60 percent higher salary to its employees within just a year of the new dyeing machine installation. The company plans to construct a new $60 million textile plant and hire 2,000 more workers when it starts operating in 2020.
“IFC’s support helped us realize that instead of building a new factory to expand production, we can double our productivity with some basic but effective upgrades,” said I.B. Park, General Director, Samil Vina Co., Ltd. “Now Samil Vina is one of the most productive textile companies in Vietnam. And resource saving is our secret.”
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Published in January 2019