Vietnamese Textiles and Apparel at the Data and Circularity Crossroads: From Fulfilling Orders to Rebuilding the Supply Chain

Vietnam’s textile and apparel industry is entering a phase in which production capacity and labor costs are no longer the only factors determining its ability to secure orders. Alongside requirements for quality, delivery times and prices, international brands are increasingly concerned about the origin of materials, energy consumption, emissions, chemicals, labor conditions and the ability to substantiate this information with data.

This shift is taking place as the European Union and many developed markets promote policies on ecodesign, extended producer responsibility, sustainable products and the circular economy. For Vietnamese businesses, the impact is not limited to the export of finished products. New criteria may extend upstream to suppliers of fiber, yarn, textiles, dyeing, finishing, accessories and even waste-treatment providers.

The core issue, therefore, is not simply to use a higher proportion of recycled fibers. Businesses need to build a reliable information chain in which every batch of materials can be identified, verified and linked to the production process. This is a change in governance, technology and business models, rather than merely a new certification requirement.

Green regulations are moving from recommendations to market requirements

On June 13, 2024, the European Union issued the Ecodesign for Sustainable Products Regulation, commonly known as the ESPR. This regulation creates a legal framework for the EU to establish specific requirements for product groups, including information on durability, repairability, recyclability, resource use and environmental impacts.

The ESPR also lays the foundation for digital product passports. In essence, this is an electronic information system linked to a product or product group, allowing relevant parties to access data on materials, origin, characteristics and post-use treatment within the prescribed scope. This approach differs from a business simply providing a separate file for each customer. Data must be standardized, consistent and verifiable throughout the product life cycle.

For the fashion industry, a notable impact is that regulators and brands are tending to request more information about product composition, durability, recyclability and the handling of unsold goods. The ESPR has set a direction for limiting the destruction of unsold textiles and footwear, while empowering the EU to develop more specific requirements in subsequent implementing measures. Exporters need to monitor each regulation according to product group and application date, rather than treating all EU requirements as obligations taking effect simultaneously.

In Vietnam, the 2020 Law on Environmental Protection and Decree No. 08/2022/ND-CP have established a legal basis for extended producer responsibility. Textiles and apparel are not the only sector affected by environmental policies, but the principles concerning responsibility for post-consumer products, waste sorting and material-flow control are creating additional pressure for businesses to look beyond the boundaries of their factories.

These changes do not mean that every business must immediately build a complete system on the same scale. However, they indicate a clear trend: environmental records, material data and evidence of production processes are becoming part of supply capacity.

Data is becoming a link in the value chain

Traceability goes beyond certificates

In the textile and apparel supply chain, a garment may use materials from multiple suppliers and pass through several processes at different facilities. Yarn may be purchased from one business, while fabric is woven and dyed by another, and cutting, sewing, printing, embroidery or finishing takes place at a different location. If data is recorded in separate forms, without batch codes or consistent rules, verifying origin will take considerable time and may easily lead to discrepancies.

Third-party certification still plays an important role, but it cannot replace the entire data system. A certificate usually reflects a specific scope, standard and assessment date. Meanwhile, brands need to know information about each shipment, material proportions, suppliers, chemicals used, energy consumption and waste-treatment methods. Businesses must therefore combine certification with production records and internal controls.

This requirement is even clearer for recycled materials. Recycled yarn may come from pre-consumer waste, post-consumer products or various other sources. Without identifying the input source and the method used to calculate the recycled content, claims about a “green” product may lack a basis. Standards such as the Global Recycled Standard, managed by Textile Exchange, are used by many businesses to verify recycled content and certain requirements related to chain of custody. However, the scope of each standard is different; businesses need to interpret the requirements correctly rather than use a certification as a general claim covering every environmental aspect.

The largest gaps lie among lower-tier suppliers

Many export garment manufacturers do not directly purchase fibers, yarn or dyes. They receive materials specified by customers or purchase them through intermediary suppliers. This makes data collection at earlier stages more complicated. A garment factory may effectively control electricity and water use in its workshop, but still find it difficult to fully answer questions about the origin of fibers and yarn if that information is not passed down by suppliers.

The solution does not necessarily require every business in the chain to immediately invest in an expensive technology platform. An initial step could be to standardize minimum data fields: material code, composition, supplier, batch number, weight, relevant certifications, production location and delivery date. Once the process has stabilized, businesses can integrate the data into enterprise resource planning software, quality management systems or specialized traceability platforms.

This approach also helps reduce the risk of “greenwashing” on paper. If an environmental claim cannot be linked to invoices, warehouse receipts, testing records and production data, it will be less convincing to customers, even if the business has already implemented many resource-saving activities.

Textile recycling still faces technical limitations

Expanding the use of recycled materials is often viewed as an important direction for the circular economy. Nevertheless, textile recycling is not a simple process. Fabric may contain multiple types of fibers, dyes, coatings, accessories, sewing threads and other components. These factors affect the ability to sort and separate fibers and to produce secondary raw materials with stable quality.

Mechanical recycling is often more suitable for certain relatively uniform material streams, but processing can reduce fiber length and strength. Chemical recycling can handle certain types of fibers in different ways, but it requires appropriate technology, chemicals, energy and control systems. It cannot be assumed that every textile product can be recycled using the same method or turned into new yarn with quality equivalent to virgin materials.

Collection is also a major obstacle. Waste generated in factories is generally cleaner and easier to sort than post-consumer clothing. By contrast, used products may be mixed, dirty, damaged or lacking information about their composition. If the cost of collection, sorting and transportation exceeds the value of the recovered material, the recycling model will be difficult to sustain through market incentives alone.

Businesses should therefore distinguish at least three material streams: waste generated during production, defective or unused inventory, and post-consumer textiles. Each stream has different requirements for collection, quality control and proof of origin. Combining everything as “textile waste” may eliminate important information needed to decide whether materials should be reused or recycled.

Businesses need to change how they invest

In the short term, green pressure may increase compliance costs. Businesses must invest in measurement, audits, training, wastewater treatment, energy efficiency, waste sorting and data systems. Smaller suppliers may face greater difficulties because they lack dedicated staff and access to capital.

However, viewing this solely as a mandatory cost would cause businesses to overlook operational benefits. Accurate material data helps reduce warehouse receiving errors, limit discrepancies between standards and actual consumption, and support quality control. Sorting waste at the source can help businesses identify processes that generate significant losses. Tracking energy and water by area also provides a basis for prioritizing improvement projects with clearer results.

Another important change concerns how suppliers are selected. Previously, price, quality and delivery time were usually the main criteria. In the new context, the ability to provide data, the stability of recycled materials, chemical control and factory transparency will carry increasing weight. This may encourage longer-term cooperation between garment businesses and suppliers of yarn, fabric and dyes.

For Vietnamese businesses, a practical strategy is to start with the product groups and customers that have the clearest requirements. A business can map the supply chain for several key materials, identify data gaps and then gradually expand. A phased approach helps avoid scattered investment and allows the usefulness of the system to be tested before it is applied across the entire portfolio.

Competition will shift toward the ability to substantiate claims

The international textile and apparel market has not completely shifted to a circular model. Prices, orders, speed and quality remain important factors. Nevertheless, environmental and data requirements are gradually becoming conditions for businesses to be considered within supply chains, particularly for brands facing pressure to disclose information and reduce environmental impacts.

This creates opportunities for businesses that invest early in measurement and transparency capabilities. A factory may not immediately achieve every target for recycled materials or emissions, but with reliable data, it will be easier to identify gaps, set appropriate targets and communicate specifically with customers. Conversely, vague claims without evidence can weaken credibility and make it more difficult for a business to meet future assessments.

Going forward, issues to monitor include the EU’s specific implementing requirements for each textile and apparel product group, how digital product passports will operate, regulations related to extended producer responsibility, and the potential development of collection, sorting and recycling networks in Vietnam. These factors could directly affect product design, sales contracts, material selection and logistics costs.

The circular economy in textiles and apparel should therefore not be understood simply as replacing part of virgin fiber use with recycled fiber. It is a process of reorganizing the flow of materials, data and responsibility among multiple businesses. For Vietnam, its manufacturing advantage can be maintained only if it is accompanied by the ability to demonstrate where a product was made, through which processes, and how it can be treated after the end of its life cycle.