Greening the supply chain: The path forward for Bangladesh's industrial sector

Bangladesh's industrial sector, led by its globally competitive ready-made garment (RMG) industry and a growing manufacturing base, stands today at a defining crossroads. As global focus intensifies on environmental responsibility, local industries face mounting pressure from international buyers, investors, and regulators to adopt greener practices across their supply chains.

The transition towards "greening the supply chain" is no longer a distant aspiration; it has become a strategic imperative that must be urgently addressed if Bangladesh is to sustain and strengthen its position in global markets.

A supply chain encompasses everything from sourcing raw materials to delivering finished goods. Historically, supply chains were optimised for cost efficiency and speed to market. Today, environmental impact — measured through carbon emissions, resource consumption, waste generation, and responsible sourcing — has become equally critical.

Several structural challenges continue to obstruct progress. Chief among these is cost sensitivity. Most suppliers, especially SMEs, operate on razor-thin margins, making investments in cleaner technologies, energy-efficient machinery, or third-party certifications financially daunting without assured returns. The technical knowledge gap further compounds the problem, as many enterprises remain unfamiliar with best practices in environmental management or standards like ISO 14064.

Global brands, driven by evolving consumer expectations and tightening regulations, are now prioritising suppliers who can demonstrate tangible progress on environmental and social metrics. Frameworks such as the European Union's Corporate Sustainability Reporting Directive (CSRD) and the Science-Based Targets Initiative (SBTi) are fundamentally reshaping the rules of global trade.

For Bangladesh's export-oriented industries, particularly garments and manufacturing, failure to align with these expectations risks reputational damage, diminished market access, and economic stagnation.

A mixed record of progress

Bangladesh has made commendable strides toward sustainability in selected sectors. The country now boasts more than 200 LEED-certified green garment factories, and several companies are adopting renewable energy, wastewater recycling, and low-impact dyes. Yet these developments remain largely concentrated among a few large exporters. Across the broader industrial base, supply chain transparency remains limited. 

Few companies systematically track greenhouse gas emissions, material use, or waste beyond their direct operations. The challenge becomes even greater when considering upstream sourcing and downstream logistics, areas that often account for most of a product's footprint.

Tier 2 and Tier 3 suppliers — including small and informal manufacturers and service providers — often lack the technical knowledge, financial resources, and strategic incentives necessary to embrace sustainability. Much of Bangladesh's industrial activity still operates outside formal environmental governance frameworks. While polished examples capture international attention, systemic change across the supply chain remains elusive.

Several structural challenges continue to obstruct progress. Chief among these is cost sensitivity. Most suppliers, especially SMEs, operate on razor-thin margins, making investments in cleaner technologies, energy-efficient machinery, or third-party certifications financially daunting without assured returns. The technical knowledge gap further compounds the problem, as many enterprises remain unfamiliar with best practices in environmental management or standards like ISO 14064.

The global procurement structure itself often discourages long-term thinking. Buyers typically issue short-term contracts, prioritising cost and delivery speed over sustainability commitments. Such practices disincentivise suppliers from making capital investments that would require years to realise returns. 

Access to green finance remains another critical bottleneck. Although Bangladesh Bank has introduced green banking guidelines and the Sustainable Finance Policy, in practice, few SMEs possess the awareness, collateral, or capacity to access funding geared toward environmental upgrades.

Opportunities for leadership

Despite these hurdles, the opportunities for Bangladesh's industrial sector to lead in sustainable supply chain transformation are substantial. A critical starting point is deeper engagement with suppliers through sustained capacity building. Large manufacturers and brands must treat suppliers as strategic partners, not transactional vendors. 

Organising targeted training workshops on energy efficiency, water stewardship, and carbon management can equip suppliers with the tools needed for meaningful change. Case studies from countries like Australia, Germany, and the United Kingdom show that when suppliers receive knowledge and support, they are far more likely to embrace sustainable innovation.

Measurement and transparency form the foundation of any credible sustainability strategy. Yet, comprehensive greenhouse gas (GHG) emissions measurements across Scope 1 (direct emissions), Scope 2 (indirect emissions from purchased energy), and Scope 3 (value chain emissions) have not been systematically undertaken across Bangladesh's industries. This lack of robust data hinders credible target-setting and alignment with global expectations.

Given that Scope 3 often constitutes over 70% of a company's carbon footprint, ignoring it leaves a critical blind spot. Partnerships with local and international sustainability consultancies can address this challenge, streamlining emissions inventory processes and ensuring compliance with frameworks such as the GHG Protocol and ISO 14000 standards. Through such collaborations, SMEs and large organisations can produce credible, transparent emissions reports suited to global market demands.

Greening the supply chain also requires a rethinking of procurement practices. Buyers must formally integrate environmental performance into supplier evaluation, treating it as non-negotiable alongside price and quality. 

Preferential sourcing from environmentally certified suppliers, offering longer-term contracts to those investing in sustainability, and recognising environmental leadership through awards can all create strong market incentives. Major brands like H&M, Unilever, and Nike have demonstrated that sustainable sourcing can enhance rather than diminish profitability.

Financial solutions must accompany ambition. Bangladesh's banking sector has an important role in designing loan products for environmental upgrades such as solar systems, water treatment plants, and energy-efficient machinery. Green bonds, backed by government guarantees where needed, could mobilise vital capital for SMEs. Microfinance institutions and venture capital funds can also explore innovative models to finance sustainable manufacturing projects across the value chain.

Embedding life cycle thinking

Life cycle thinking represents another critical paradigm shift. Companies can no longer focus only on operational efficiencies within their factories; they must rethink products, processes, and material flows from cradle to grave. 

Assessing environmental impacts across every stage — from raw material extraction, manufacturing, and use phase to end-of-life disposal — helps uncover hidden risks and opportunities for improvement.

Life Cycle Assessment (LCA) offers a scientific, internationally recognised approach to quantifying these impacts. Conducting LCAs under ISO 14040 and ISO 14044 standards enables businesses to make evidence-based decisions on material selection, energy use, production processes, and end-of-life strategies.

Complementing life cycle thinking, circular economy principles offer a practical roadmap for industrial innovation. Reducing waste, designing products for disassembly and recycling, prioritising low-impact materials, and extending product life spans can drive both environmental and commercial benefits. In a world where resource efficiency increasingly defines competitiveness, adopting circularity is becoming essential.

Certification and transparent reporting also play critical roles. Independent verification through globally respected frameworks such as the Global Reporting Initiative (GRI), Carbon Disclosure Project (CDP), Science Based Targets initiative (SBTi), and ISO 14064 standards can greatly enhance credibility. Even simple, early-stage sustainability reports signal commitment, track progress, and build essential trust among buyers, investors, and regulators.

A national opportunity

The government's role in enabling this transformation cannot be overstated. Beyond setting targets, government agencies must provide regulatory clarity, financial incentives, and infrastructure to drive green industrialisation. 

Clear standards, tax breaks for green investments, and support for renewable energy, logistics, and waste management are essential. Public-private partnerships to develop eco-industrial parks — where waste from one industry becomes input for another — can showcase practical closed-loop manufacturing models.

Education and public awareness must also be central to the strategy. Embedding sustainability principles into technical education, management courses, and vocational institutes will foster a generation of technicians, engineers, and business leaders for whom sustainable thinking is instinctive.

Greening the supply chain lies at the heart of Bangladesh's economic future. As the global economy shifts toward decarbonisation and transparency, nations that act swiftly will secure strategic advantages, while those that delay risk falling behind.

The path forward demands leadership — not just from policymakers or global brands but from local industry champions ready to innovate, invest, and inspire. Bangladesh has demonstrated its resilience time and again. The renewed ambition sparked by the August 5 (36th July) Monsoon Revolution of 2024 has reignited a spirit of transformation among the nation's youth and broader society. This energy holds immense potential to drive Bangladesh to new heights — not only socially or politically but also through sustainable industrial growth.

Now is the time to channel this spirit into building a green, resilient, and inclusive economy. Greening the supply chain is not merely an environmental responsibility; it is a national economic opportunity. In a changing world, the future will belong to those who act boldly, decisively, and together.

Dr Mabrur Rashedi is Principal Carbon and Sustainability Consultant at Carbon Neutral, Director of Aqualis Carbon Advisory, a Board Director of the Australian Life Cycle Assessment Society, and a Senior Research Fellow (Adjunct) at Charles Darwin University in Australia.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.