EU Green Regulations Reopen the Supply Chain Challenge for Vietnam’s Textile and Garment Industry

Vietnam’s textile and garment industry is entering a period in which production capacity and labor costs are no longer the only factors determining competitiveness in the European market. As the European Union shifts its focus from voluntary encouragement toward specific requirements on sustainable design, product information and responsibility throughout the entire life cycle of goods, exporting businesses must prepare for a new approach: proving how a product was made, what materials were used, how it can be repaired or recycled, and to what extent that data has been verified.

This is not a single regulation designed specifically for apparel. Directly relevant to the industry are the EU Strategy for Sustainable and Circular Textiles, published by the European Commission in 2022, and the Ecodesign for Sustainable Products Regulation, which took effect in 2024. This policy framework provides the basis for the EU to issue requirements for specific product groups in subsequent phases. Therefore, the impact on Vietnamese businesses will not appear simultaneously across all products, but the overall direction is already quite clear: products exported to Europe will need to be associated with more information and assessed beyond the point of sale.

From the Final Product to the Entire Life Cycle

In the traditional trade model, buyers generally focus on criteria such as design, quality, delivery time, price and the ability to fulfill orders. Environmental requirements still exist, but they are largely expressed through individual brand rulebooks or voluntary certifications. The EU’s new approach tends to expand the scope of assessment, from the source of raw materials and the production process to durability, repairability and the handling of products after consumers no longer use them.

The EU textile strategy aims to ensure that textiles circulating in the European market are more durable, easier to repair and recycle, and produced with lower resource use and environmental impact. The strategy also addresses limiting fast-fashion products, promoting circular business models and strengthening producer responsibility. This is a policy direction, while specific obligations need to be implemented through documents, standards and requirements applicable to particular product groups.

The Ecodesign for Sustainable Products Regulation, commonly known as the ESPR, establishes a legal framework for the EU to set sustainability requirements for many types of products. These requirements may relate to durability, reusability, upgradability, repairability, maintenance, recyclability, recycled content, resource efficiency and product information. For textiles, the important point is that businesses should not understand this merely as a requirement to use a type of environmentally friendly fabric. It may affect product design, product structure, the choice of accessories, supplier data and the way businesses substantiate their claims.

The Digital Product Passport Will Make Data Part of the Goods

One of the notable changes in the ESPR framework is the direction toward establishing a digital product passport. Essentially, this is an electronic information system linked to a product or product group, enabling relevant parties to access data on sustainability characteristics, origin or the ability of the product to circulate throughout its life cycle. The structure and scope of the information will depend on the EU’s specific implementing regulations.

For apparel businesses, this raises major questions about their ability to collect and link data. A shirt may use fabric from one supplier, thread from another supplier, dyes supplied by a third party, and various accessories such as zippers, buttons, labels and packaging. If data is stored only by separate departments, in different formats or without verification procedures, it will be difficult for a business to create a unified product record.

The challenge is even greater for businesses that undertake contract manufacturing for short-term orders. They may not directly decide on the design or materials, but they still have to coordinate with brands and suppliers to ensure that information is accurate. If buyers require more detailed data, the ability to manage records and traceability will become a condition for retaining orders, rather than merely a supporting activity for audits.

Vietnamese Businesses Face Impacts on Multiple Levels

The first impact lies in product design and development. Choices that may appear to belong to the creative department, such as combining multiple types of fibers, using complex accessories or creating structures that are difficult to disassemble, can affect repairability and recyclability. When life-cycle criteria are incorporated into the product approval process, design teams will have to work more closely with engineering, procurement and production departments.

This does not mean that every product must use only one type of material or that blended fibers must be eliminated entirely. Blended materials may sometimes be necessary to meet requirements for durability, feel or technical performance. However, businesses need to understand the consequences of each choice and be able to provide appropriate information. A product cannot be considered sustainable merely because it contains some recycled material if its other characteristics have not been substantiated or if its environmental claims lack a basis.

The second layer of impact relates to supplier management. Garment factories generally have better control over processes taking place within their own facilities, but that control may decline when tracing materials back to yarn, fibers, chemicals, dyes and input materials. To meet the new requirements, businesses need to classify which data must be obtained from suppliers, which data requires third-party certification and which data must be verified through production records.

This is a significant issue for small and medium-sized businesses. They may not have sufficient resources to immediately build a complex data system, but waiting until customers issue mandatory requirements also creates risks. A more practical step is to map the supply chain for each product group, identify materials with significant environmental impacts and standardize record-storage practices. When data is collected consistently from an early stage, the cost of transition will be easier to control.

Environmental Transparency Must Be Accompanied by Verifiability

In recent years, many brands have required suppliers to report water use, energy consumption, emissions or the proportion of recycled materials used. However, providing a figure and proving that the figure was calculated using an appropriate method are two different things. Textile and garment businesses need to distinguish between directly measured data, data declared by suppliers, data calculated using coefficients and claims confirmed by independent organizations.

This distinction is especially important as the market becomes increasingly cautious about green claims. If a business promotes a product as environmentally friendly without explaining the scope of the assessment, the basis of the data or the conditions for comparison, the information may be misleading. For exported goods, the risk is not limited to reputational damage; it may also lead to trade disputes, requests for additional documentation or a loss of customer trust.

Therefore, the safest approach is to make only claims that the business can substantiate. Instead of using general terms such as green, clean or sustainable, product records should specifically describe the type of material, the verified proportion, the scope of the certification and the limitations of the information. This requires coordination among legal, quality, product development and sales departments, rather than being the sole responsibility of the environmental department.

Transition Costs Go Beyond Machinery

When discussing green production, businesses often first think of changing equipment, installing water-treatment systems or using renewable energy. These are important investments, but as product requirements become more detailed, transition costs also lie in software, personnel, training and data-control procedures.

A factory may possess a modern production line but still face difficulties if it does not know where material data is stored, who is responsible for validating it or how to link that data to a product code. Conversely, a business that is not yet able to make major investments in automation can still improve its readiness by standardizing its material catalog, coding suppliers, storing records by batch and clearly defining the approval process for environmental claims.

For contract manufacturers, the commercial dimension also needs to be considered. If new requirements extend the time needed to collect and verify data, businesses should discuss each party’s responsibilities with customers at an early stage. Contract terms may need to clarify who provides the data, who bears testing costs, who is responsible when information is inaccurate and how long the data must be retained.

In the long term, these investments may help businesses reduce their dependence on orders that compete only on price. With reliable data systems and production processes, businesses will have a basis for participating in orders that require higher technical capabilities, products with longer life cycles or strict traceability requirements. However, business benefits do not automatically emerge simply because a company invests in green technology. The ability to convert investment into commercial value also depends on the market, customers and management capabilities.

Opportunities for the Domestic Supply Chain

Pressure from green regulations may also create momentum for the development of the domestic raw-material supply chain. When customers need to shorten traceability times, control data and reduce transportation risks, suppliers of yarn, fabric, accessories and finishing services that can provide clear and reliable information are likely to become more important.

To take advantage of this opportunity, material suppliers need to do more than introduce a product with a recycled content percentage or a water-saving process. They need to provide a consistent documentation package that clearly states the source of the materials, the production process, the scope of verification and the applicable standards. The ability to exchange data with garment factories and brands will also become part of their competitiveness.

For textile recycling, development prospects remain accompanied by numerous technical limitations. Fabrics made from multiple fiber types, products with coatings, accessories that are difficult to remove or contaminated products can make sorting and recycling more complex. Therefore, recycling should not be viewed as a solution capable of handling every type of textile waste. Design, source separation, collection, processing and markets for recycled materials all need to be improved at the same time.

This is an area that may require cooperation among manufacturers, brands, collection companies, recyclers and regulatory authorities. An individual factory will struggle to create a stable stream of recycled materials without an appropriate collection system and sorting standards. Conversely, recycling activities will also be difficult to expand if product design does not consider disassembly and sorting from the outset.

Businesses Should Not Wait Until Requirements Become Mandatory to Act

Because the EU’s specific requirements are being implemented by product group and phase, businesses may not have to change their entire operations immediately. However, delaying preparations could leave businesses unprepared when buyers introduce their own standards or when a product falls within the scope of a new regulation.

Three tasks that can be undertaken early are reviewing the list of products exported to the EU, mapping the data associated with key materials and assessing areas where unsupported environmental claims may arise. Businesses can then select several product lines to pilot a complete traceability process rather than implementing it across the board. The pilot results will show which data is missing, which suppliers need support and which stages require investment.

Businesses also need to monitor the EU’s implementing documents and technical guidance, because the general legal framework cannot replace the specific requirements applicable to each product group. Reading information from customers is necessary, but businesses should not depend entirely on a single brand. Policy changes may affect multiple buyers at the same time, and businesses with their own systems will be more proactive in negotiations.

The Measures of Competitiveness Will Change

For many years, the advantages of Vietnam’s textile and garment industry have been built on production capabilities, relatively stable quality and the ability to fulfill orders. These advantages remain important, but environmental and data requirements are adding a new layer of capability. Businesses that want to maintain their position in the international supply chain need to prove not only that they can produce goods, but also that they understand and control their products’ impacts.

This is also changing the role of data in export operations. Previously, data was generally used to manage orders, inventory and quality. Now it is also the basis for assessing compliance with environmental policies, explaining the origin of materials and supporting product-design decisions. Businesses that view data as part of their production infrastructure are more likely to adapt than those that regard it merely as documentation for inspections.

The EU’s green policy framework is therefore both a barrier and a market signal. The barrier lies in preparation costs, technical requirements and the risk of being excluded from the supply chain if requirements are not met. The market signal lies in the fact that businesses investing early in sustainable design, traceability and data management may be able to differentiate themselves in their relationships with customers.

For Vietnam’s textile and garment industry, the necessary transition is not about following every green slogan, but about building the ability to provide proof. From a material code and a fabric batch to a finished product, every important piece of information needs an accountable person, a verification method and appropriate records. As market requirements shift from commitments to evidence, this will provide a foundation for businesses to protect their export operations while also improving the quality of the domestic supply chain.