MAS Holdings is the largest clothing manufacturer in Sri Lanka. It has annual turnover of over $1 billion and employs more than 55,000 people. The MAS Intimates Thurulie factory, a 10,000 square meter facility with roughly 1,300 employees, is its top plant. To build the factory, though, MAS Holdings paid 25 percent more than the conventional cost of factories in Sri Lanka—a curious move for any leading industry player (apparel or otherwise).

The factory shows what is possible in terms of sustainability, efficiency, low environmental impact, and profitability. It has increased the efficiency of production, heat loads, energy usage, and water consumption in significant and surprising ways. Notably, it sells back energy not used by the factory on holidays and weekends to the main power grid of Sri Lanka.

The MAS Intimates Thurulie factory serves as a stark contrast to the Rana Plaza apparel factory in Bangladesh’s capital Dhaka that collapsed in April 2013. The disaster resulted in the deaths of 1,133 people and served to expose the compromises often made in the apparel industry, thrusting poor safety conditions to the top of media headlines around the world.

The existence of the MAS Intimates Thurulie factory and Rana Plaza at the same time in the same industry barely scratches the surface of the sheer magnitude and complexity of the opportunities and challenges facing the world of apparel—factors that the industry has thus far insufficiently diagnosed and addressed with similar inadequacy. To begin sorting out a more effective way forward, Impact Economy—a global impact investment and strategy firm—has released a new report titled “Creating Sustainable Apparel Value Chains” (written by a co-author of this post, Dr. Maximilian Martin).

The report provides a detailed look at the $3 trillion (and counting) global textile and garment industry—an industry that has powered national development and been a source of economic progress since it kicked off the industrial revolution in the United Kingdom more than 250 years ago. In the past 20 years alone, the industry has advanced considerably due to:

  1. The movement from slow to fast fashion—fashion products today move quickly from the catwalk to high street stores to capitalize on current fashion trends
  2. A shift from advanced to emerging economies, with imports and exports increasingly moving away from the European Union, United States, and Japan, and toward the Association of Southeast Asian Nations (ASEAN)—absorbing unskilled labor into formal employment and propping up entire economies in the process
  3. Trends involving transparency and the enablement of it—spurred by consumer consciousness, environmental compliance requirements, and social initiatives; the work of advocacy groups; and the role model effect of the more ambitious corporate social responsibility (CSR) programs at companies such as Nike or Patagonia

Yet, for all this progress, the industry is actually less sustainable today than it has ever been. Instability—in the apparel choices of consumers and the production decisions that producers make to keep up as a result—embodies the market in the same way that Rana Plaza has now come to illustrate it.

The report subsequently discusses changing consumption and production patterns, and makes the case for supply chain transparency—which helps manage risk and secure efficiency gains—and reveals the hidden treasures of resource productivity. The MAS Intimates Thurulie factory is but one example of these two concepts in action.

Concluding the report is the identification of a series of important levers that could lead to industry transformation, including:

  • Any next gen strategy for the industry will need to consider the entire supply chain in order to foster total resource productivity and transparency.
  • Impact investing can critically drive needed upgrades to industry infrastructure.
  • Improving working conditions (with particular emphasis on the gender dimension) with a new level of ambition is a critical component for making systemic and lasting change.
  • Replicating the best practices of leading players, or otherwise getting involved in pilots or partnerships, provides a meaningful way to keep costs low while also turbo-charging efforts.

While the thrust of the report is focused on apparel, the dynamic at play is not exclusive to the textile and garment industry. Other industries currently make heavy use of energy, scarce natural resources, and low-skilled labor. But the pattern that leads to a Rana Plaza-type disaster is fortunately not inevitable.

A win-win of raising productivity and competitiveness, as well as social and environmental performance, is possible. But an ambitious, systemic approach is needed to achieve industry transformation.

This transformation will require making value chains—the series of activities that firms perform to bring products and services to the market—sustainable, and in addition to ingenuity and a systems perspective, it will require impact investments.