The release of the Paris Agreement in 2015 set long-term goals for all nations to reduce greenhouse gas emissions to prevent the global temperature from increasing beyond 2 degrees Celsius in this century, to review their own commitments every five years, and to provide financing to developing countries to mitigate climate change. (source: UN) In 2021, the United Nations Climate Change Conference (COP26) reaffirmed the shared commitment among almost 200 participating countries in advancing the implementation of the Paris Agreement through actions towards a more sustainable and low carbon future. (source: UN)

In response to the Paris Agreement, the Hong Kong Government announced the Climate Action Plan 2030+ in 2017, and updated it to the Climate Action Plan 2050 in 2021, aiming to achieve carbon neutrality for the city by 2050. In the plan, the governance set out the vision of “Zero-carbon Emissions ‧ Liveable City ‧ Sustainable Development” and outlined roadmaps and targets for achieving carbon neutrality. According to the data in 2019, electricity generation was the largest source of carbon emissions, accounting for about two-thirds (66%) of the total emissions in Hong Kong, followed by transport (about 18%), and waste (about 7%, mainly from landfills). Therefore, Net-Zero Electricity Generation, Energy Saving and Green buildings, Green Transport, and Waste Reduction are the four pillars of the plan. (source: Gov)

Sustainability policies and initiatives relating to these four pillars and other local constraints (e.g., lack of landfill space) are bringing or will bring impact to both people’s lifestyle and businesses’ operations. For example, the Home Subsidy Scheme and the Hong Kong Roadmap on Popularisation of Electric Vehicles encourage a shift to electric vehicles and have a significant effect on the transport and logistics industry. Moreover, the Charging for Municipal Solid Waste, which is expected to take effect by the end of 2023, will apply charges on general non-recyclable waste. Businesses that are not ready for managing their waste in a systematic way will likely have to pay additional expenditure for waste disposal. Many industries such as F&B, property management, and hotel will be impacted, while the fashion and textiles industries are no exception. On the other hand, more and more incentives and support, such as grants, funding, and loans, are becoming accessible for businesses to support their sustainable development and innovations. The Government has planned to invest about $240 billion on measures relating to climate change mitigation and adaption in the next two decades.

In the commercial sector, financing for sustainability often relies on businesses’ disclosures on their sustainability commitment, performance, and innovative solutions. Listed companies in Hong Kong are required to report their Environmental, Social and Governance (ESG) performance annually with reference to the Listing Rules of Hong Kong, and these requirements have been regularly reviewed and updated in recent years. Some listed companies in the fashion and textiles industries have already set their own targets on lowering carbon emissions, reducing the use of water, and using sustainable materials to reduce the industries’ ecological footprint.

For example, a listed fashion and textiles company has adopted international environmental standards such as ISO 14001 Environmental Management Systems and ISO 50001 Energy Management Systems. The company has set targets on carbon footprint, energy consumption, water use, waste management, and reforestation. By increasing the use of recycled water and improving the wastewater treatment system, it aims to improve the efficiency of water use and minimise the impact to the environment. Another listed fashion and textiles company has scaled up its wind power and solar power generation, striving to gradually phase out fossil-fuel based energy sources for less greenhouse gas emissions. Furthermore, the company has committed to accelerating the use of more sustainable fabric materials and has set a goal of buying half of all purchased materials from certified recycled or more sustainable sources in the next few years.

What’s more, a sustainable and resilient supply chain concept is replacing the traditional supply chain concept. The COVID-19 pandemic in the past three years has “highlighted the importance of building sustainability and ESG factors into business strategy”, as stated in HKEX Insight. (source: HKEX) Companies in the fashion and textiles industries may often have a global supply chain involving many upper-stream suppliers, downstream partners, and customers. Facing such a global market, companies need to be sensitive to market changes in different regions, and get prepared with their business strategies and action plans, in order to better fulfill growing regulatory requirements and buyers’ expectations associated with sustainability.