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The business case with its 'tipping point' towards full water re-use (ZLD) by textile industry

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Jeroen M. Tielman
Founder and CEO at QStone Capital.

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  • The business case with its 'tipping point' towards full water re-use (ZLD) by textile industry

The implementation of water treatment systems enabling full water re-use (Zero Liquid Discharge – ZLD) has been promoted in Bangladesh by the local regulators for almost nearly a decade. Despite this, the vast majority (if not all) of the estimated 5,000 (export oriented) textile factories in Bangladesh still treat their water to meet the current discharge requirements only. In this article we sketch a business case, which would induce an industry wide migration towards ZLD, where the early adopters will benefit strongly of an imminent tipping point towards ZLD as a next level of unambiguous sustainable textile production as is expected to be demanded by end-consumers.

A ‘total value chain perspective’, the application of innovative technologies as part of the total solution enhancing effectiveness and reducing costs, as well as QStone Capital’s basic requirement that a ZLD water treatment system needs to generate attractive returns for both the textile producers as well as for the fashion brands, are the necessary ingredients for a successful migration towards ZLD. This economic base is in our opinion a powerful and necessary supplement to any regulatory requirement. It is using the “carrot” (perceived to be more appealing), rather than just applying the “stick”.

Water treatment is a cost item in a linear model where the textile processing water is being treated for discharge only. Economic law says that costs are to be minimized as much as possible within its purpose as it does not boost revenues. So, in the case of water treatment for discharge, a regulator is needed for demanding and monitoring industrial process water being treated according to minimum standards before discharge in order to protect the general interest of a clean environment. However, water treatment for re-use (ZLD) is an investment, as it appeals to end-consumers becoming more vocal in their requirement of a true sustainable production without pollution as caused by discharge.

Water treatment for re-use (Zero Liquid Discharge) is an investment, as it fits with the next level of true sustainable production

As an investment has associated returns by definition, we took several steps starting with analysing samples of process effluent water provided by a few textile producers in Bangladesh. Next we determined the innovative technologies to be applied for pre-treatment (EC) followed by further treatment steps including the process of recovering salts for re-use in addition to water re-use. Once we knew the optimal design of the different water treatment modules, we were able to calculate both the capital as well as the operational expenditures per m3 of treated water. This is the point where the economic analysis of water treatments costs normally ends in case of a linear water treatment model. This is also the point where the comparison of total costs between a linear and ZLD model is considered as a reason to stop further analysis and stick with a discharge model with the associated lower costs per m3 of treated water.

However, when building a solid business case for migrating towards ZLD, the next step is to look at the revenue potential - not only for the textile producer - but also for the Fashion Brand. The basic source of revenues for the textile producer are not coming from selling m3 of treated water to the Fashion Brand, but from the produced “Ready Made Garments” (RMG) with full water re-use (ZLD). So the subsequent step in our analysis was to convert the total ZLD water treatment costs per m3 into ZLD costs per RMG.

Our findings show that the total capital as well as operational costs incurred by a textile producer migrating from its existing ‘linear’ water treatment towards full ZLD would require the fashion Brand to pay only about 2-3% as a separate ZLD surcharge on top of what they are used to pay per RMG item. For example, this would mean a ZLD surcharge of about USD 0.05 per knitted T-shirt, USD 0.20 for a hoodie or USD 0.35 for a pair of jeans. At the same time ZLD will enable the Fashion Brand to offer their retail customers a “next level of unambiguous sustainability”. When they would apply (at least) their usual “cost to end-consumer price multiplier” to the “ZLD surcharge” paid to the textile producer, Fashion Brands can realise an additional revenue of for example USD 0.25 per knitted T-shirt or USD 3-5 per pair of jeans.     

This being said, there is an additional strategic-economic value for both textile producers as well as Fashion Brands to embrace ZLD as soon as they can. This is based on the hypothesis that retail clients of the Fashion Brands would migrate to demanding ZLD as a tangible next level of sustainability quicker than the ability of all textile producers in Bangladesh to implement it. It is our estimate that – even if today all of the 5,000 textile producers would decide to migrate towards ZLD – it would take close to a decade for all to have been able to implement ZLD given the current availability of parties being able to supply the ZLD equipment. This compares to our assumption that a relatively quick shift of retail clients demanding ZLD could have materialized within the coming few years only. This implies the possibility (or better stated: the probability) of a shortage of ZLD capacity. In this scenario, this could lead to textile producers demanding higher compensation for ZLD from the fashion Brands at a later stage.

Our conclusion is that with a separate “ZLD surcharge” of only 2-3% paid by the Fashion Brands per item to the textile producers of RMG’s in Bangladesh, both parties prepare themselves adequately for the next level of “accountable sustainability” when demanded by retail clients. Once retail clients become aware that a separate and tangible ZLD surcharge could only translate into a total price tag increase of 1% to 1.5% (in case of application by the Fashion Brand of a “cost to retail price” multiplier of only 2) it will quickly be embraced by them as a ‘no brainer’. Both Fashion Brands as well as (their associated) RMG textile producers in Bangladesh would be better off aligning themselves to be prepared for that moment to come.  

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