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FICCI TAG 2011

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Sustainabilityby

Knowledge Paper on

Choice

FICCI TAG- 2011

Copyright In preparing this report, Technopak Advisors Pvt. Ltd. (Technopak) has collated and analyzed information attributable to a variety of sources. Wherever possible, efforts have been made to correctly identify the sources of the information referred in this report. All content included in this report, such as text, graphics, logos, images, data compilation etc are the property of Technopak. This report or any part thereof should not be copied, reproduced, duplicated, sold, resold or exploited for any commercial purposes. Furthermore, the report in its entirety or any part cannot be stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Technopak. Disclaimer The report is provided by Technopak on an as is and as available basis. Technopak has provided information that is provided by secondary research of publicly available information. Technopak takes no responsibility for any incorrect information supplied to them by market participants. No claims or representations are made for the completeness, accuracy or suitability of the information to any specific situation. Technopak makes no representations or warranties of any kind, express or implied, as to the information, content, materials etc, included in this report. The user of the report shall do so at the users sole risk. In the event the user intends to take any steps that could have an adverse effect on the users business, Technopak expressly states that the user should consult its legal, tax or other advisors, in order to protect the interests of user, which may be specific from case to case. It is emphasized that merely because of FICCIs association in relation to this report the views expressed in the report should not be construed as necessarily being reflective of the views or position of FICCI. To the full extent permissible by applicable law, Technopak and FICCI disclaim all warranties, express or implied, including, but not limited to, implied warranties of merchantability and fitness for a particular purpose. Technopak and FICCI will not be liable for any damages of any kind arising from the use of this report, including, but not limited to direct, indirect, incidental, punitive, and consequential damages.

Table of ContentsIntroduction Global Textile and Apparel Overview Emerging Trends Sustainability and its Pillars Sustainability at the Core of Business01

02

05

11

13

Representative Initiatives: Sustainable Business Practices20

Co-existence of Sustainability and Profitability30

Way forward33 Citations36

Sustainability by Choice / October 2011

Chapter 1

Introduction1With increasing globalization and evolving consumerism, firms worldwide have been developing strategies to leverage and encash this wave. They have been adopting and executing strategies with good amount of success as well with leapfrogging revenues and profits. But the question that needs to be answered is will there be enough for everybody, will there be an equitable share of the increasing pie or will some companies dominate this surge in consumerism on a sustainable basis leaving others far behind? Or will the firms try and look at the bigger picture for the mankind and adopt strategies and devise steps towards a more sustainable development and growth? In fact in todays world it has become the need of the hour to look at success and growth from the point of view of sustainability. Whether the pillars of sustainability environmental, social and economic; are strengthened further in the process? Firms focusing on sustainability would in the process realize the core essence of their business growth in their top lines and bottom lines. Needless to say that the resources that the earth has in store, are limited and would exhaust sooner than later, if we do not take precautionary steps now. The changing global environment (global warming, melting of glaciers, global floods, earthquakes etc. are all signs of the disturbances that have been created owing to the increased globalization and consumerism). This knowledge document for TAG 2011 focuses on this key driver of success sustainability in the Textile, Apparel and Garment Industry. It makes an attempt to delve upon the issues pertaining to sustainability and its three pillars. Some startling facts about our surroundings Over 100 pesticide ingredients are suspected to cause birth defects, cancer, and gene mutations. Every day 40,000 children die from preventable diseases Every day 50 to 100 species of plants and animals become extinct as their habitat and human influences destroy them Average temperatures have climbed 1.4 degrees Fahrenheit (0.8 degree Celsius) around the world since 1880, much of this in recent decades, according to NASAs Goddard Institute for Space Studies Cars amount to three-quarters of all transportation emissions. At the current rate, the world will be driven on by more than a billion cars in 2030 and a billion more by 2050 The oceans circulation system, known as the ocean conveyor belt, could be permanently altered, causing a mini-ice age in Western Europe and other rapid changes. Rampant deforestation currently causes 20% of the worlds global warming pollution by prohibiting the re-absorption of CO2 2000-2009 was the hottest decade: The World Meteorological Organization reported that 2000-2009 was the hottest decade on record, with 8 of the hottest 10 years having occurred since 2000. Arctic ice cover already perilously thin is vulnerable to further melting: The National Snow and Ice Data Center reported that while a bit more summer Arctic sea ice appeared in 2009 than the record breaking lows of the last two years, it was still well below normal levels. Slight changes in the climate may trigger abrupt threats to ecosystems: According to a report by the U.S. Geological Survey, slight changes in the climate may trigger abrupt threats to ecosystems that are not easily reversible or adaptable, such as insect outbreaks, wildfire, and forest dieback.

Sustainability by Choice / October 2011

Chapter 2

Global Textile and Apparel OverviewThe global textile and apparel industry has been evolving driven primarily by the emergence of organized retail in developing countries like China, India, Brazil, Russia, UAE etc. with continued sustenance of the developed and established US/European markets. The developing economies have been witnessing a high GDP growth which is fuelling the demand and consumption textile and apparels being one of the beneficiaries. Major retailers and brands across the world have been witnessing increased revenues over the past few years and there has been growing focus towards improved sourcing from key manufacturing countries with improved and efficient practices. There has also been an increase in the sales revenues through the e-commerce route for the major brands and retailers in US and EU. Share of e-commerce sales range from 2% to 12% of the total revenues and have been witnessing a growth rate of 15% to as high as 55%.Exhibit 1

2

Textile and Apparel Retail Consumption (US$ Bn)2005 70 30 252 2010 160 52 260 2015(P) 260 90 275 % CAGR (2005-15) 14% 11% 1% Absolute Increase (10 year period) 190 60 23

Key Markets China India US

Exhibit 2

Annual Real GDP Growth (%)

14.0 10.5 9.0 9.7

9.5 8.1 4.2 2.6 2.6 2011 2012 2013 1.7 2014 2.6 2015

4.0

4.8 2.8

1.0 -

2005

2006

2007

2008

2009

1.7 2010

6.0 Source: IMF

China

Japan

India

United States

World

United Kingdom

Sustainability by Choice / October 2011

The textile and apparel trade has also grown significantly over the years and is expected to grow further. The following chart illustrates the various phases of this trade and the way ahead.Exhibit 3

Global Textile and Apparel Trade ($ Bn)Quota Phase Out Regime Post Quota Global Slowdown & Recovery The Way Ahead. CAGR : 6% 1000 800 570 340 500 205 2005Textile

3CAGR : 8.6% CAGR : 5.6%

CAGR : 8% -14% Growth

350

618 In US$ Billion 311 212 108 104 1990 158 152 1995 355 198 157 2000 278 253 2008Apparel

483 365

527 316 211 2009Total

300

650

230 2010 (E) 2015(P) 2020(P)

E: Figures of 2010 have been estimated based on US & EU imports for 2010 P: Projections Source: WTO, OTEXA, Eurostat, Technopak Analysis

As far as the Indian textile and apparel industry is concerned, it has been witnessing a robust growth driven by strong fundamentals. Growing urbanization and higher income levels have given way to much larger consuming population in India which in turn is leading to the growth in the sector. Indias total textile and apparel industry size is estimated to be Rs 3,68,000 crores (US$ 78 bn) in 2010 and is estimated to grow @ 11% CAGR to reach Rs 10,32,000 crores (US$ 220 bn) by 2020

Exhibit 4a.

Indian Textile and Apparel Industry Size1032 CAGR 11% 631 327 108 219 2009Domestic

376 212 656 419 2015(E)Total (INR'000 Cr)

211 72 139 2005Source: Technopak Analysis

368 122 246 2010Exports

2020(E)

Sustainability by Choice / October 2011

Exhibit 4b

Increasing Urban Population (Mn)1175 1325

Exhibit 4C

Rising Consuming Population (Mn)1175 462 1253 452 334 350 117 2015 E 20-35 yrs 35-59 yrs > 60 yrs

1010 730 810 860

305 465 2020 EUrban Total

280 2000Rural

365 2010

312 96 2010 < 19 yrs

4

Exhibit 4d

Per Capita Income ($)

606 2004-05

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