Vietnam’s Textile and Garment Industry Faces New Traceability and Circular Economy Requirements

Vietnam’s textile and garment industry is facing an important shift in how it approaches export markets. In addition to price, quality, delivery times and production capacity, requirements related to product durability, material sources, recyclability, emissions and supply chain data are being examined more closely.

This shift is particularly evident in the European Union (EU), where policies on sustainable products and the circular economy are being developed to cover the entire product life cycle. For Vietnamese businesses, this is not simply a matter of complying with a single regulation. It requires them to reorganize data, raw material purchasing processes, product design, inventory management and relationships with suppliers.

The EU remains one of Vietnam’s important textile and garment export markets. Therefore, policy changes in this region may affect more than businesses that sell directly to European customers. Fabric and yarn suppliers, accessory manufacturers, dyeing companies and subcontractors within the same chain may also have to provide more detailed information about products and production processes.

From Reasonably Priced Products to Products with Verifiable Origins

Under the traditional model, the documentation for a garment product usually focuses on fabric composition, color, technical specifications, safety standards and test results. This data remains necessary, but new policy trends require a broader range of information.

For each product, businesses may have to demonstrate what materials were used, where they came from, how they were processed and to what extent they can be reused or recycled. For products that use multiple types of fibers, zippers, buttons, coatings or other accessories, the question is not only whether the product can be sold, but also how consumers and post-consumer treatment facilities can sort it.

This forms the basis of the concept of the “digital product passport,” established within the EU’s legal framework for ecodesign requirements for sustainable products. The regulation is not specific to the garment industry, but textiles have been identified as a product group of high relevance in EU policies on resource use and waste reduction.

A digital product passport does not mean that every product must immediately carry the same type of label. Its content and method of application will depend on the specific regulations for each product group. However, the overall direction is clear: product data will become part of competitiveness rather than merely an internal business record.

A Framework Regulation Is Not Yet a Uniformly Applicable Requirement

The EU’s regulation on ecodesign requirements for sustainable products, issued in 2024, establishes a framework for the EU to develop requirements for specific product groups. This means businesses should not assume that all technical obligations have taken effect simultaneously across the entire textile and garment industry.

Specific requirements will also depend on implementing documents, product groups and application dates. The appropriate approach for businesses is to monitor each regulation relevant to the products they export, rather than applying requirements mechanically or waiting until customers issue their final demands.

In the garment sector, one notable aspect of the framework regulation is the restriction on destroying unsold clothing and footwear for businesses within its scope. The regulation also requires the disclosure of certain information related to discarded goods. Deadlines and exemptions are set out separately in the legal text, so businesses need to understand the scope accurately rather than interpreting it as a general ban on all types of goods.

Three Layers of Data Businesses Need to Prepare

To respond to new trends, textile and garment businesses need to view data in three layers. The first layer is material data. Businesses must know the proportion and types of fibers in a product, the sources of supply, any certifications, and the processing stages that may affect the material’s recyclability or safety.

The second layer is production data. This may include information about production facilities, dyeing and finishing processes, water, energy and chemical use, waste and control measures. Not every customer will require the same data set, but the general trend is for information to remain consistent across commercial records, social responsibility reports and operational data.

The third layer is data after the product leaves the factory. This is the most difficult part because businesses generally do not directly control consumer behavior or collection systems in import markets. Nevertheless, product design can support sorting, repair, reuse and recycling. Reducing the number of unnecessary materials, limiting structures that are difficult to disassemble and selecting suitable accessories can help businesses better meet customer requirements.

The issue is not about collecting as much data as possible. Valuable data must be accurate, verifiable, updated through a clear process and linked to each shipment or product code. If information is inconsistent among the purchasing department, technical department, factory and customer, verification costs can increase significantly.

Raw Material Supply Chains Will Be Affected First

For garment businesses, the shift to a circular model cannot begin only in the sewing factory. Much of a product’s environmental impact and traceability are determined during the selection of yarn, weaving, dyeing, finishing and accessory purchasing stages.

A business may invest in a strong data management system but still face difficulties if suppliers cannot provide reliable information. Therefore, relationships with suppliers will gradually shift from a model based on price and delivery time to one involving a comprehensive assessment of quality, supply stability, data transparency and the ability to meet environmental standards.

This may give an advantage to businesses that have already built relatively stable supply networks. Conversely, businesses that depend on many small sources, change materials for each order or lack a system for storing records will need to invest more to control information.

With recycled materials, the challenge also lies in distinguishing between commercial claims and evidence. A product promoted as using recycled fibers needs appropriate records to demonstrate the proportion, input sources and control process. Businesses must also be cautious with claims such as “green,” “sustainable” or “environmentally friendly” if they do not have measurement methods and supporting documentation.

Not All Recycled Materials Solve Every Problem

Increasing the proportion of recycled materials is an important path forward, but it does not automatically turn a product into a circular product. Effectiveness also depends on the source of the material, fiber quality, product lifespan, repairability, post-use collection methods and end-of-life processing technology.

In practice, many garments are made from blended fibers or contain components that are difficult to separate. This may improve functional performance but make mechanical or chemical recycling more difficult. Therefore, the design department needs to work with the production department and suppliers at an early stage, rather than checking recyclability only after the product has been completed.

Businesses also need to distinguish between reuse, recycling and energy recovery. These three concepts are not equivalent in terms of resource value and environmental impact. Extending a product’s useful life through durable, repairable design and good color retention can provide different benefits from processing the product into new material.

Impact on Vietnamese Businesses

The first impact may be compliance costs. At the operational level, businesses need to invest in data management software, staff training, material testing, supplier assessments and standardized record-keeping processes. For small and medium-sized businesses, this is considerable pressure because the costs cannot always be immediately passed on through selling prices.

However, these costs can also create operational benefits. When material and production data are better managed, businesses can reduce documentation errors, shorten customer response times, control material changes and identify waste-generating processes. Traceability is therefore not only an export requirement but also a management tool.

The second impact concerns competitiveness among suppliers. Businesses that only provide cutting and sewing capacity may face greater pressure if customers want to work with suppliers capable of participating in product development, material selection and the preparation of sustainability documentation.

The third impact is an opportunity to move up the value chain. Vietnamese businesses can differentiate themselves by providing comprehensive services that include design, material development, production, data control and support for customers in meeting environmental requirements. As price competition becomes increasingly difficult, transparency and regulatory compliance may become factors that help retain customers.

Nevertheless, the green transition should not be viewed as a short-term communications campaign. If a business only changes its packaging or uses a small proportion of recycled materials while failing to improve processes that consume large amounts of energy, water and chemicals, it will struggle to achieve sustainable results and may face challenges regarding its environmental claims.

Where Should Businesses Start?

The first step is to map data for each group of exported products. Businesses need to identify what information is already available, what information is held by suppliers, what data requires external verification and what cannot yet be collected. This approach helps distinguish data gaps from technology gaps.

The next step is to select several product lines for testing. Instead of implementing the process across the entire product portfolio at once, businesses can choose product groups with demanding customers or relatively stable supply chains. The results of the pilot will help determine the costs, time and responsibilities of each department.

In purchasing relationships, businesses should also include data and environmental criteria in the supplier assessment process. A low-cost supplier that cannot provide consistent records may increase costs at later stages. Conversely, a supplier with a strong management system may help businesses reduce inspection time and limit risks when customers request traceability.

In design, priority should be given to measurable changes: extending product lifespan, reducing the number of blended materials when unnecessary, improving repairability, reducing cutting waste or reducing packaging. These objectives should be linked to specific indicators and checked periodically rather than expressed only through slogans.

Finally, businesses need to monitor legal documents by market and product group. EU regulations may be implemented according to a roadmap, with specific requirements concerning scope, effective dates and the responsibilities of each party. Consulting regulatory authorities, industry associations, customers and specialized advisory organizations is safer than relying on unverified summaries.

The Biggest Change Lies in Management Practices

The circular economy in textiles is often discussed through solutions such as recycled fibers, used clothing, water-saving dyeing technologies or renewable energy. These solutions play an important role, but their ultimate effectiveness depends on how businesses connect them throughout the entire value chain.

A more sustainable product needs to begin with a design decision, be supported by suitable materials, be produced through a controlled process, come with reliable data and have a plan for post-use treatment. This is a task involving multiple departments and cannot be assigned solely to the environmental or export department.

For Vietnam’s textile and garment industry, new requirements from international markets create both pressure and opportunities for upgrading. Businesses that prepare early will have more time to test solutions, negotiate with suppliers and allocate costs. Businesses that wait until regulations become mandatory conditions for individual orders may have to act within a short period and at higher cost.

In the new competitive environment, production capacity remains the foundation, but it is no longer enough. The ability to prove where a product was made, how resources were used and how the product can continue to be used will increasingly influence purchasing decisions. This is why traceability and the circular economy are shifting from environmental topics to becoming part of the business strategy of the textile and garment industry.