By the end of this year, extreme heat and floods will cut $65 billion from the garment exports of four Asian countries. Because the extreme heat will reduce the productivity of the workers in this sector and many factories will be closed due to climate reasons. This is said in a recent study.
This information was reported by the international news agency Reuters on the research of Schroders and Cornell University published on Wednesday (September 13).
This study considers the supply systems of 6 international brands doing business in Bangladesh, Cambodia, Pakistan and Vietnam. According to the study, all those 6 international brands will suffer materially.
The researchers even mentioned in the article a brand whose business losses could amount to 5 percent of their annual operating profit.
Financial costs for the ready-made garment sector are rising significantly, researchers told Reuters. Even investors in this sector do not get enough information about the companies. Therefore, both the sector and its investors should take the results of this study as a warning.
Jason Judd, executive director of the Cornell Global Labor Institute, said,
But to deal with floods and heatwaves, the industries concerned have little or no initiative in most cases, he said.
Global warming is causing severe climate change, Reuters reported. It is therefore important for companies to understand the risk of climate-related material loss. But this process is still in its early stages. Because most companies in the apparel industry do not disclose enough information. At the same time, very few investors in the sector do proper analysis of climate risk.
Angus Bauer, head of sustainable investment research at Schroders, said that there is a lack of sufficient data on this issue.
Schroders manages more than $874 billion in assets. Bauer said his company will increase communication with companies in the apparel industry. It will also encourage them to provide the necessary information.
At this time, he urged global brands to formulate adaptation strategies with suppliers and policy makers. He also urged to consider the adverse effects of climate on workers in formulating strategies.
The researchers created and analyzed a predictive model of what would happen if adaptations to a hostile climate were to occur in the near future. Along with that, they have also studied the model of adverse conditions like high heat and flood. This forecast is based on these two models.
In the second scenario, workers will be affected the most. They will suffer more heat exhaustion and weakness. Their productivity will also decrease.
Meanwhile, many factories in those 4 Asian countries will be closed due to floods. Where these 4 countries supply 18 percent of the global total apparel exports. 10.6 million workers work in garment and shoe factories located in the country.
The study found that countries would earn $65 billion less than expected export earnings between 2025 and 2030 due to an overall decline in worker productivity. Which equates to a 22 percent drop in their export earnings. Along with that 9 lakh 50 thousand employment will decrease.
Meanwhile, by 2050, the loss of export earnings will reach 68.6 percent. This will reduce the creation of new employment by 8.64 million.