Chinese textile business booms after betting on sustainability
Back in 2012 with the global economy still mired in crisis, the proud new owners of a bankrupt Chinese textile mill took an extraordinary decision. Instead of trying to rebuild the business by cutting costs even further, brothers Song Lingyong and Song Lingyan gambled on a new approach: investing in sustainability and water stewardship to survive in the ruthlessly competitive textile world.
And their bet is certainly paying off.
“We are doing very well this year and expect to pay back our investments in around two years,” said Lingyong, who has seen their company grow from 15 employees when they snapped it up to 160 now.
It is an impressive achievement since running a profitable textile factory in China is by no means easy. Many owners are struggling to cope with the unfavorable global economic climate and rising salaries, which are pushing international companies into the arms of cheaper competitors in South East Asia and South America.
In addition, tighter domestic environmental regulations have begun to bite. Factories that do not meet the criteria can now be shut down overnight or forced to move to new location. But while many textile companies view this as a major risk, Lingyong and Lingyan saw it as an opportunity and have begun to reap the dividends of their strong commitment to environmental sustainability.
In particular the brothers have adopted a water stewardship approach over the past three years at their booming Weile Printing and Dyeing factory in the Taihu Basin, the traditional hub of China’s vast textile industry. By improving their water management, they have been able to demonstrate that focusing on environmental performance is not just a compliance issue but can also be a critical driver of success.
Geek’s interest in water technology behind company’s recovery
Wander around the mill with Lingyong and it quickly becomes clear that he is a technology geek. He is continually pointing out what he did to each part of the production process to save water or treat wastewater in a more effective way. His tricks include not only common approaches such as upgrading old machines and buying more advanced equipment, but also bold initiatives such as building a rainwater collection pool in his factory’s backyard — a sizeable investment that is usually restricted to companies many times bigger than his.
Indeed, Lingyong’s enthusiasm for technology verges on the extreme. In the last two years, he has invested about 12 million Renmimbi (US$1.8 million) into tools and equipment to improve the factory’s environmental performance, while the entire mill ceased production four months last year to allow upgrading work to be done. This is unthinkable for most of small business owners but the numbers prove that Lingyong was right to be adventurous, with significant savings coming from using less water and energy and reusing much of the water and heat during the production process.
“Environment-related technology upgrading has brought direct business benefits,” said Lingyong. “Compared to when I bought this bankrupt factory, the cost of processing a tonne of cloth has fallen by 25 percent! With these lower costs, we can confidently bid for big orders.”
Linyong is continuing to plough one-third of the company’s upgrading funds into improving environmental performance, including dust and wastewater treatment, even though the new devices do not directly generate profits. While many small and medium sized factories are struggling to meet official environmental requirements, some of the internal environmental standards in the brothers’ factory are more stringent than the government’s.
“The government regulations are getting tighter and we want to be ahead them to avoid problems when stricter requirements are implemented,” said Lingyong. “We believe the best way to stay competitive is to produce high quality products with high standards, including water and environmental standards.”
Collective action is the key
The brothers’ factory has been utterly transformed in the past five years and can now match its previous annual sales after just eight days of production.
But neither Lingyong nor Lingyan were satisfied with solely improving their own environmental performance. They realized that collective action is the only way to really mitigate water-related risks to their business so they teamed up with the Industrial Park Committee and WWF to take the next critical steps on the path to water stewardship — engaging with other water users in the same industrial park and river basin to take collective action.
The Songs’ factory shares an industrial park with 22 textile and garment companies, which swiftly became interested in the source of the brothers’ success — and unusually, the brothers had no wish to keep it secret from their neighbors.
Indeed, Lingyong happily shared the design of a machine he invented that reuses 60 per cent of the water in one printing process.
“Our understanding about how to protect water resources has increased substantially since we joined WWF’s Water Stewardship programme,” said Lingyong. “As Water Stewardship pioneers, we are happy to share our experiences with others.”
“The market is quite big so we do not see our neighbours as competitors, instead we sincerely hope to see the environmental improvement of the whole industrial park,” added Lingyan, the younger brother, who oversees sales and marketing.
Collective action and collaboration is critical to better water management and governance, and the only way to secure sustainable clean water supplies for businesses, people and nature. Many small business owners can only think about their next orders and how to maximize their razor thin profits, and therefore feel that ‘collective action’ is not relevant to them. However, the Song brothers totally disagree: they believe working with others is a necessity.
“If one company violates environmental regulations and it is reported on news, it can give the entire town a bad reputation,” said Lingyong, highlighting how businesses cannot mitigate all regulatory, reputational and operational water risks on their own.
Together with another entrepreneur, the brothers initiated a group of textile companies in the industrial park that can inspect each other for environmental compliance, resource utilization and wastewater treatment. Through this process, they share best practices and exchange news and innovative ideas. Formed in March with eight companies, the group has now expanded to sixteen.
“At first, most companies did not want to join because they were afraid of being inspected by others,” said Lingyong. “But the purpose of our inspections is to improve performance not enforce regulations so we give suggestions when we find a problem. Even factories at a comparatively higher level, such as my own, can gain a lot from the group because everyone can have blind spots by working in their own factory all the time.”
The extent of the brother’s ambition is evident in their decision to apply for certification of their factory under the Alliance for Water Stewardship (AWS) global standards. Most small business owners do not understand the AWS standards or do not see their relevance since certification will not immediately lead to extra orders.
But the brother’s are committed to the process and to collectively securing freshwater resources.
Water for fabric and families — and the future
Originally from southern China, the brothers and their families have now settled permanently in Jiangsu Province — in the very heart of the Yangtze delta.
“My wife and my two kids live here with me so I do care about the local environment,” said Lingyan.
But many other businesses need to follow the Songs’ lead. The region’s wealth is dependent on the quality, quantity and timing of the water flowing through the Yangtze basin, especially as many of its major industries are very water-intense, including chemicals, concrete, paper and, of course, textiles.
In 2013, WWF began engaging larger textile and clothing companies operating in China and now has get a few global giants on-board, including the fashion brands H&M and Tommy Hilfger, and the American retail group Target.
“We are seeing an increasing awareness among companies — both big brands and small enterprises — about the need to take water risks seriously as well as a growing willingness to make significant efforts to transform the way they work and turn risks into opportunities,” said Wenwei Ren, Head of Water Practice of WWF-China.
And the Song brothers will continue to lead the way in the textile industry and promote wider water stewardship.
“We are fully aware of the importance of minimizing our environmental impact both for the sake of business and our own life, but we are also aware of the limits of what any individual company can do,” said Lingyan. “Therefore we sincerely hope the whole manufacturing industry in China will learn about what needs to be done and collectively act for change.”
Panqiu Lin is the Senior Programme Officer specialising in the textile sector of Water Stewardship Programme at WWF-China.