Vietnam’s Textile Industry Faces Traceability and Circular Economy Requirements

For many years, the advantages of Vietnamese textile and garment enterprises have mainly been assessed through their processing capabilities, product quality, delivery times, and ability to fulfill large orders. However, these criteria are now being supplemented by another set of requirements: what materials products are made from, how many resources the production process consumes, whether products can be repaired or recycled, and whether businesses can substantiate this information with reliable data.

This shift does not come solely from the individual requirements of each brand. The European Union has issued the Ecodesign for Sustainable Products Regulation, commonly known as the ESPR, establishing a legal framework for requirements related to durability, repairability, resource efficiency, and product information. The EU Strategy for Sustainable and Circular Textiles also aims to ensure that textile products circulating in the European market have longer lifespans, are easier to repair and recycle, and are produced under conditions that respect the environment and society.

For Vietnam, the immediate impact is not necessarily a new import ban. The greater pressure lies in the fact that buyers will require more detailed data when selecting suppliers. Businesses that cannot control the sources of materials, chemicals, energy, water, waste, and labor conditions will face difficulties when they have to demonstrate their compliance capabilities.

From Order-Based Production to Management of the Product’s Entire Life Cycle

The circular economy in textiles does not simply mean using recycled fibers. This approach encompasses the entire product life cycle, from design, fiber selection, spinning, weaving or knitting, dyeing, finishing, and sewing to distribution, use, and post-consumer recovery.

At the design stage, a product can be assessed according to multiple criteria: fabric durability, the ability to disassemble components, ease of repair, the types of dyes and accessories used, and the possibility of sorting the product after it is discarded. A shirt with multiple material layers, difficult-to-remove accessories, or a blend of fibers that is hard to separate may create commercial value in the short term but increase processing costs at the end of its life cycle.

As a result, design is gradually becoming an issue directly connected to production and recycling. Garment manufacturers cannot simply receive patterns, materials, accessories, and technical specifications from customers and then focus on assembly. They need to participate earlier in the product development process to assess opportunities to save fabric, reduce waste, replace accessories, and extend product use.

At the factory level, circularity is also connected to reducing cutting and sewing losses, controlling defects, reusing water, recovering heat, and sorting waste. These measures can reduce operating costs, but the benefits do not appear automatically. Businesses need sufficiently detailed data to determine which stage generates waste, whether the cause is design or operations, which materials can be reused internally, and which need to be transferred to specialized processing companies.

Traceability Is Becoming a Competitive Capability

In the textile supply chain, traceability often begins with questions about fiber composition. However, market requirements are increasingly expanding to include the origins of materials, production locations, processing procedures, chemicals used, energy and water consumption, and relevant certifications.

For an export garment company, data collection is not limited to its own factory. Information may need to be connected with fabric suppliers, dyeing companies, yarn manufacturers, fiber suppliers, and final-processing facilities. If one link lacks data or uses a recording method different from that of the other links, the entire product file may become inconsistent.

This is why data management systems are becoming part of production capability. Material batch codes, testing records, electricity and water consumption data, chemical information, delivery documents, and audit records need to be connected rather than stored separately across multiple departments. Businesses do not necessarily have to start with a complex technology system. The first priority is to determine what data needs to be collected, who is responsible, how often it should be updated, and how its accuracy will be checked.

In the future, requirements related to digital product passports may result in product information being provided to more stakeholders, from regulators and retailers to consumers. The specific implementation will depend on regulations and industry standards. Nevertheless, the general direction is clear: product data will no longer be merely an internal document shared between suppliers and buyers.

The Greatest Challenge Lies in Supplier Data

Large businesses generally have greater advantages when investing in software, laboratories, compliance teams, and audit systems. Meanwhile, small and medium-sized enterprises may depend on numerous small suppliers, lack dedicated personnel, and not yet have standardized procedures for recording environmental data.

This gap is particularly notable in the materials segment. A garment factory may effectively control its own electricity, water, and waste, yet still find it difficult to verify the composition or environmental impact of fabric if information from the weaving and dyeing companies is incomplete. If a business merely asks suppliers to submit additional certificates without checking their scope, validity period, and suitability for each shipment, it may still face risks when customers conduct more in-depth assessments.

Therefore, traceability should be viewed as a collaborative program across the supply chain. Lead companies can establish a minimum data set, provide measurement guidelines, organize training, and conduct risk-based assessments. Small suppliers also need support to move from providing documents on request to managing data on a regular basis.

Recycled Materials Are Not the Only Solution

Using recycled fibers can help reduce demand for virgin materials in some product lines. However, the proportion of recycled fibers cannot be the sole indicator used to assess the sustainability of a textile product.

Quality, durability, future recyclability, the degree of blending between different fiber types, and the origins of the materials all need to be considered. A product made with recycled fibers that wears out quickly, is difficult to repair, or cannot be sorted after disposal may not deliver long-term circular benefits. Conversely, a product with a long lifespan that is easy to maintain and can be repaired multiple times may reduce the need for new purchases, even if it is not promoted through a prominent recycled-content percentage.

Businesses also need to distinguish between pre-consumer waste and post-consumer textiles. Waste generated during cutting or production usually has a relatively clear composition and is easier to sort. Post-consumer products may be mixed, dirty, damaged, or fitted with multiple types of accessories, making collection and recycling more complicated. These two material streams require different recovery models, processing technologies, and quality-control methods.

For Vietnam’s textile industry, a feasible initial direction is to strengthen source separation, reduce production waste, and develop stable relationships with capable recycling companies. As data on material flows improves, businesses will have a stronger basis for accurately assessing the effectiveness of each circular model.

Impacts on Vietnamese Businesses and Supply Chains

Green requirements may create additional costs in the short term. Businesses must invest in measuring equipment, software, training, supplier assessments, wastewater treatment, energy efficiency, and product testing. Some materials that meet environmental standards may also be more expensive or require orders in minimum quantities.

However, compliance costs are not the only factor to consider. Factories with good data systems can respond more quickly when customers request changes in materials, proof of origin, or emissions assessments. The ability to provide reliable data can also reduce the time spent exchanging documents, limit discrepancies between departments, and help businesses negotiate with customers based on actual capabilities rather than relying solely on processing prices.

Across the supply chain, the new pressures may encourage a shift from short-term buying and selling relationships toward long-term cooperation. To invest in water-saving dyeing technology, renewable energy, or waste-treatment systems, suppliers need a certain level of order stability. If businesses switch suppliers solely according to the lowest price, it is difficult to create incentives for green investments with long payback periods.

This also creates requirements for industry associations, regulators, and financial institutions. Businesses need consistent guidance on measurement methods, technical support for small and medium-sized enterprises, and suitable funding sources for energy-saving and environmental-treatment projects. If each brand uses a different set of criteria, compliance costs may rise and create a significant burden for suppliers serving multiple markets at the same time.

Where Should Businesses Start?

Rather than waiting for customers or regulators to issue specific requirements, businesses can develop a step-by-step roadmap. The first step is to map the supply chain for key product groups. This map should identify the sources of fibers, yarns, fabrics, and accessories; the dyeing and finishing stages; and the points where waste and compliance risks arise.

The next step is to standardize a basic data set. For each material batch, businesses should determine what information must be retained, how it should be linked to orders, and how long records should be kept. At the factory, indicators for electricity, water, fuel, chemicals, wastewater, waste, and output need to be recorded in a way that allows cross-checking. Data that is not verified will quickly lose its value, so an internal verification process should be designed at the same time.

Businesses should also prioritize changes that can create dual benefits. Improving cutting layouts can reduce waste and save material costs. Maintaining dyeing equipment can reduce energy consumption, limit color defects, and reduce the need for reprocessing. Redesigning packaging can reduce the amount of material used and simplify sorting at a later stage.

Finally, environmental targets need to be linked to the responsibilities of each department. If data belongs only to the sustainability department while procurement continues to select suppliers based on price and delivery time, the circularity program will struggle to create substantive change. Materials management, design, production, quality, finance, and sales all need to participate in a shared system of objectives.

For Vietnam’s textile industry, the transition to a circular economy will not occur evenly across businesses, nor can it be completed through a single investment. It represents a change in how products are designed, production is organized, data is shared, and suppliers are engaged. Businesses that start early have an opportunity to turn compliance requirements into a competitive capability; those that prepare slowly may face higher costs as market standards are applied more broadly.

In this context, green production should not be viewed as an external communications activity carried out beyond the factory. It is increasingly becoming part of supply capability, from proving the origin of materials to ensuring quality and maintaining relationships with international customers. As markets require products to be not only attractive, durable, and delivered on time but also supported by reliable documentation, data and the ability to control the life cycle will become the new foundation of the textile industry.