Vietnam’s Textile and Garment Industry Faces the Shift to Circular Models and Deeper Traceability

Vietnam’s textile and garment industry is facing an important change in the way it approaches the market. Whereas competitiveness was previously assessed mainly through price, quality, delivery time and the ability to fulfill large orders, factors such as the origin of raw materials, energy consumption, repairability, reusability and the treatment of products after consumption are increasingly being included in the supplier selection process.

This change does not arise solely from consumer demands. Many major import markets are developing or finalizing policies to reduce the environmental impact of products, increase producer responsibility and enable the circular economy. For Vietnamese businesses, this is directly related to product design, raw material procurement, production organization, data management and relationships with international customers.

The new momentum does not mean that the entire industry must transform within a short period. However, the longer businesses delay standardizing information and processes, the more limited their ability to meet new requirements will become. As international brands increasingly seek more detailed data from suppliers, green transformation is becoming part of commercial capability rather than merely a corporate social responsibility activity.

From green production to requirements covering the entire product life cycle

One notable change is that product assessment no longer stops at the garment-making stage. A product is considered more sustainable not only because it is produced in a factory that uses little electricity or has a wastewater treatment system. Supply-chain stakeholders are increasingly concerned with the type of fiber used, the blend ratio, durability, disassembly, the use of chemicals, packaging, transportation and options for handling the product after it is discarded.

The European Union’s regulation on ecodesign requirements for sustainable products, issued under the name Ecodesign for Sustainable Products Regulation, expands this approach to multiple product groups. The regulation provides a basis for establishing requirements for specific product groups, with textiles and footwear among the sectors receiving attention in the EU’s policy to promote sustainable products. Specific requirements may relate to durability, repairability, recycled content, resource use and product information.

It is important to note that a framework regulation does not mean that all requirements apply in the same way to every product. Businesses must monitor implementing documents, technical standards and the requirements of each market and customer. This requires legal, export, technical and product development departments to coordinate rather than work in isolation.

Digital product passports increase the role of data

The concept of a digital product passport, commonly called a Digital Product Passport, is one of the policy directions receiving attention. In essence, it is an information system linked to a product or group of products that enables relevant parties to access data on materials, origin, characteristics and certain environmental information.

For textile and garment businesses, preparing for data requirements may be more complex than preparing an annual report. Information must be collected from multiple links in the chain: fiber and yarn suppliers, dyeing companies, finishing facilities, garment factories, packaging providers and logistics services. If data is recorded only at the final stage, it will be difficult for businesses to prove the origin or consistency of their products.

Questions that appear simple can become technical requirements: Where were the materials produced? What is the fiber composition? By what method was the blend ratio determined? What records exist for the dyes and chemicals? How can the product be recycled? Or what information may be provided to customers and consumers? As a result, data management capability will increasingly be tied to production capability.

Three major bottlenecks for textile and garment businesses

The first challenge is the fragmentation of the supply chain. The textile and garment industry commonly uses a network of suppliers with different sizes, technological capabilities and management systems. A garment business may have strong control over cutting, sewing and finishing, while still depending on data from fabric, yarn, accessories or finishing-service suppliers.

When customers require proof of origin or the proportion of recycled materials, the answer cannot be based solely on a supplier’s commitment. Businesses need transaction records, appropriate certifications, inspection methods and record-retention procedures. This is particularly important for environmental claims, as incomplete information can create commercial and reputational risks.

The second challenge is the cost of transformation. Investment in energy-efficient equipment, measurement systems, data-management software, water treatment, chemical controls or material testing all requires capital. For small and medium-sized businesses, these costs can create significant pressure, especially when customers may not necessarily pay extra for the entire investment.

However, costs do not lie only in equipment. Businesses must also allocate resources to train employees, standardize forms, assign responsibilities and maintain regular inspections. A transformation program based solely on purchasing machinery, but lacking operational data and designated personnel, will struggle to produce sustainable results.

The third challenge is the lack of consistency among assessment methods. The same product may be assessed against different criteria, such as greenhouse gas emissions, water consumption, the proportion of recycled materials, durability or recyclability. If each customer uses a separate set of forms and terminology, businesses must repeat reporting work even though the core data may not change.

Impacts on materials and product design

Circularity requirements will first affect decisions on material selection. Using recycled fibers may help businesses meet certain environmental objectives, but simply increasing the recycled content does not solve every problem. Supply, fiber quality, color stability, durability, compliance with safety standards and verification methods all need to be considered.

For fabrics made from multiple types of fibers, recycling is generally more difficult than for materials with a single composition. Accessories such as zippers, buttons, sewing thread, labels and coatings also affect the ability to sort or process products after use. Therefore, design for circularity must be carried out from the product development stage and cannot be left solely to recyclers at the end of the life cycle.

Sustainable design also does not simply mean replacing one type of material with another. A product with a long useful life, requiring fewer replacements and capable of being repaired, may reduce resource use even if it does not meet every recycling criterion. Businesses need to assess the entire life cycle and intended use rather than pursue a single indicator.

Balancing environmental requirements and commercial characteristics

In practice, buyers still need to ensure that products have suitable colors, styles, drape, durability and prices. A material promoted as environmentally friendly but unable to meet quality requirements or remain stable in production will be difficult to use widely.

This is why businesses need to conduct testing for each product group rather than apply one general formula. Basic product lines, sportswear, outdoor goods and premium products may have very different requirements. Test results should be recorded to build an internal database, helping shorten the development time for future collections.

Early communication with customers is also important. When a factory receives a request for change only after an order has been finalized, its ability to select materials and adjust processes will be limited. Conversely, if it participates from the design stage, the business can propose a product structure more suited to its production capabilities and traceability capacity.

What do businesses need to prepare?

The first step is to map the supply chain for each product group. This map should identify the sources of materials, processing stages, service providers and where data is being stored. The aim is not to create a complex documentation system immediately, but to identify gaps that could create risks when customers or regulators request verification.

Next, data should be classified according to its level of importance. Information on material composition, origin, volume, dyeing processes, energy and water consumption, chemicals, waste and quality inspections should be standardized first. Businesses also need to specify who enters the data, who checks it and how long records are retained.

For suppliers, sales contracts can add requirements concerning material records, inspection rights, notification of changes in supply sources and responsibility when information is inaccurate. This approach helps move part of the traceability requirements from the final stage back to the earlier processes where the data is generated.

Businesses should also distinguish between certification, testing and environmental claims. A certification is valid only within the scope, period and criteria specified. The test result for one product sample does not necessarily represent all batches if the production process changes. Meanwhile, claims such as “green,” “sustainable” or “environmentally friendly” need clear supporting grounds and careful wording.

In terms of technology, not every business needs to immediately deploy a large system. It can begin by linking data from purchasing, warehousing, production and quality departments, then add batch codes, material codes and supplier records. The important point is that the new system must reflect actual processes and avoid creating another layer of manual data entry without improving control.

Green transformation can become a competitive advantage

In the short term, environmental requirements may increase costs and the time needed to prepare orders. In the long term, however, businesses with strong data systems will have an advantage when customers need to assess multiple suppliers. The ability to provide records quickly, consistently and verifiably helps reduce due diligence time, support negotiations and limit the risk of being rejected because of missing information.

The ability to control resources can also improve operational efficiency. Measuring electricity, water, chemical and material consumption helps businesses identify wasteful processes, error rates or abnormal losses. This is an inherent benefit of the transformation process and does not depend entirely on whether customers pay more for the products.

However, green transformation should not be viewed as an isolated commitment by the sustainability department. If the purchasing department continues to select suppliers solely on the basis of the lowest price, the design department does not consider recyclability, and the production department fails to maintain complete data, circularity goals will be difficult to achieve. The transformation must be linked to specific operational targets and investment decisions.

Trade agreements, environmental regulations in import markets and individual brand requirements will continue to put pressure on supply chains. The level of impact may vary by product and market, but the general trend is that more detailed information about goods will be required. Businesses do not necessarily need to complete every item immediately; what is essential is to have a roadmap, set priorities and measure progress.

For Vietnam’s textile and garment industry, the opportunity lies in moving from a manufacturing position based on production capacity to becoming a partner capable of developing products together with customers. To do so, factories need to understand not only how to produce a quality product, but also how to demonstrate what raw materials it was made from, how many resources it consumed and how it can continue to be used after leaving the production line.

Circularity is therefore not a new marketing label, but a requirement to reorganize information, design and operations. Businesses that begin by controlling data and improving the processes with the greatest impact will have a more practical foundation for meeting emerging regulations while also strengthening their competitiveness in the international textile and garment supply chain.