November 25, 2024
Sustainability as the Path Forward for Ukraine’s Textile and Apparel Sector
Although Ukraine’stextile, clothing, leather, and footwear (TCLF) industries, as most businesses in the country, have experienced significant upheaval since the beginning of the full-scale invasion in February 2022, the light industry in Ukraine today is standing firm.
Albeit it underwent strong war-driven changes, and it requires even more changes to become compatible with the EU market. This means it is time for a green and sustainable sector transition.
However, countries of the region lack the knowledge of how to be competitive within the EU market despite, as in Ukraine’s case, being part of the Central European Free Trade Agreement (CEFTA), and having EU candidate status.
Opportunities and needs
With the sharp drop in its major source of income, i.e. export of Ukrainian textile products to the EU in the second year of the full-scale war, the TLCF market was stabilized by the domestic customer — the Armed Forces of Ukraine.
As of the end of 2023, a significant part of the production is made up of manufacturers of military, medical, tactical, and firefighting clothing according to the recent study of ‘Textiles, clothing, leather and footwear under conditions of full-scale war’ conducted by the Fama Research Agency and the Ukrlegprom Association.
Production in the TCLF sector suffers from constant shelling, economic instability, and labor shortage as a lot of workers evacuated from Ukraine abroad or relocated to other regions.
Additionally, the industry is import-dependent, has problems with resources, and the lack of government support also affects its state, the study finds.
On top of that newly signed Agreement on free trade between Ukraine and Türkiye, which the latter has already ratified in August this year and Ukraine is about to ratify itself, puts Ukraine’s textile and clothing producers into a more precarious state. Because of the liberalization of the market between the two countries, Turkish manufacturers might gradually displace the Ukrainian ones which would lead to a significant drop in sales for the latter.
“It is important to emphasize the unequal competitive conditions between Ukrainian and Turkish manufacturers. Over the past 30 years, Türkiye has identified the textile industry as a priority sector, supporting it with strong protectionist policies. As a result, Türkiye is now one of the leading global suppliers of clothing, strengthening this position further in 2022-2023. For Ukraine, Turkish imports have surged, with clothing imports rising by 41% and footwear by 69.4% in 2023 compared to the same period in 2022.
The textile industry plays a significant role in national employment, especially during wartime. If the Free Trade Agreement is ratified, it is estimated that the Ukrainian state budget will lose at least 1.5 billion UAH annually in customs duties from imported Turkish textile products.
This could lead to the shutdown of Ukrainian clothing and footwear factories, potentially putting up to 50% of workers at risk. For context, in 2023, the Ukrainian textile industry paid 2.1 billion UAH in personal income taxes. If the agreement proceeds, this amount could drop by half.
Thus, it is crucial to maintain the existing customs tariffs on imported finished textile goods from Türkiye. This is the focal point of our current advocacy efforts, as we work to bring attention to the potential risks posed by the free trade agreement.,” Tetiana Izovit, President-Chairperson of the Board of the Ukrlegprom Association, says.
In the third year of the war, with a decline in exports and dependence on state customers, the TCLF sector today has the opportunity to undergo a green transformation to boost its growth.
Ukraine’s light industry faces significant challenges: firstly, appropriate infrastructure must be built.
“European legislation introduces the requirement to recycle, not to dispose of. Ukrainian companies working on the tolling scheme, already receive from their European partners a requirement to provide documents confirming they recycle waste, which they are not able to provide as the infrastructure doesn’t exist. We are creating such an infrastructure for our clients,” says co-owner and CEO of Re:inventex LLC, Andriy Ilchenko, whose company is working on developing a textile waste recycling infrastructure.
Secondly, Ukrainian legislation is not aimed at developing, supporting, and encouraging waste generators to recycle and reuse nor does the Ukrainian state have specialized support schemes and incentives for businesses to adopt these green solutions at the moment.
In 2025, import to the EU may become impossible for Ukrainian textile companies that do not follow EU standards and requirements for handling their own production waste and do not recycle or reuse it.
That is, Ukraine, on the one hand, is striving to integrate into the EU, on the other hand, the entire textile industry risks being out of the European market simply because of its inability to meet technical parameters.
Strategy
Document titled ‘Sectorial Strategies for the Textiles Sector’ (2022) published by EU4Business: Connecting Companies shows common problems which exist nowadays in the textile sector in Ukraine, Georgia, Moldova, and Armenia. That is lack of professionals and experts on sustainable, green practices and business models, and an absence of services that can strengthen private sector companies.
In Ukraine, private sector companies do not have enough information on how to transition to green production, how to integrate a circular business model into their business operations. There is not enough training, nor do leading enterprises in this field share their practical experience.
“It is clear that education and training are very important, so that it can be transferred to enterprises and thus encourage [green and just] transition,” says Izovit.
The main objective of the industry players is to advocate and inform on circular business models and the green economy, and most importantly, to develop competitiveness in the textile market, which RECONOMY supports.
Another goal is to provide private sector companies and associations that are developing eco-consulting businesses with services of eco-certification and international standards that will strengthen their capacities to grow export potential. Associations are expected to take the lead in developing these services and to offer them to private sector companies.
The main target group of this project is mostly women, as 90% of the people who are employed in the textile sector and fashion industry are women, and also youth. Mostly internally displaced people (IDPs), domestic violence survivors, and students will be involved in project activities and skills development.
Existing efforts
One of the Ukrainian companies that is implementing green solutions in their business already today is Re:inventex, which is developing an infrastructure for the recycling of post-industrial textile waste from textile and apparel industry companies, according to established European practices and regulations.
“We try to show the full path of circularity, our project is not just aimed at collecting textile waste and turning it into some raw material, we return it directly to the same industry: we use recovered fibers to produce non-woven materials and a wide variety of ready-made products like mattresses-transformers for shelters, shoppers, packaging materials,” says Andriy Ilchenko.
What started as a long-term planned project to produce fiber for their own consumption, significantly expanded this project and the scope of investment. It was also part of the company’s development strategy. Now, Re:inventex’s goal is to receive a permit for waste management in order to fully meet this status as a company engaged in waste recycling.
“We see ourselves as a company that will also expand into the used clothing waste recycling in later stages, this requires significant financial support, legislative changes, and support at the municipal level,” Ilchenko says.
The greener and waste-responsible TCLF sector does not only mean ecological business and a boost in trade with the EU. An increased uptake of sustainability and circularity by businesses, sustainability means increased self-sufficiency, moreover, it means increased resilience of the country to external shocks and less dependence on external resources.
Authors
Kateryna Farbar
Kateryna Farbar is a Ukrainian journalist with nine years experience covering socioeconomic issues, worker's rights, migration and Russia's full-scale invasion for Ukrainian and international media.
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