Moving fashion forward in a sustainable way

Taiwanese garment manufacturer Makalot Industrial Co. Ltd keeps the shelves stocked at many of the world’s biggest clothing retailers, including GAP, H&M, Kohl’s, Target, Fast Retailing, and Walmart. The company’s production spans 17 factories across Southeast Asia and China, with the largest facilities located in Indonesia and Vietnam. It is striving to improve energy efficiency at those factories and do its part to reduce the carbon footprint of the global fast-fashion supply chain.

The fashion industry produces around 8% of greenhouse gas emissions and uses over 200 trillion litres of water each year¹. By curtailing its individual energy consumption, a major manufacturer such as Makalot can make a meaningful dent in climate change. And by raising the bar for other suppliers, its impact can extend even further.

As it works towards the ultimate goal of carbon neutrality, Makalot has set defined targets for improvements in energy efficiency across the group, with a goal of using less power for every unit of sales it makes. These targets underpinned a US$30 million sustainability-linked trade finance facility arranged by HSBC Taiwan in February 2022 – Makalot’s first ESG-themed financing.

The trade facility follows an emerging pattern of sustainability-linked financing deals to support global businesses in the sector, as they look to fasten their transition goals. Earlier this year, HSBC arranged a similar sustainability-linked trade facility for Epic Group, a Hong Kong-based multinational garment manufacturing group². More recently, it extended sustainable supply chain financing to PVH, owner of US clothing brands Calvin Klein, Tommy Hilfiger, Kenneth Cole and Michael Kors, among others³.

More than just climate impact

Makalot recognises that there is more to sustainability than carbon neutrality. The interests of all stakeholders need to be considered, including the environment, communities, workers and shareholders.

In an effort to improve its workers’ livelihoods, Makalot is also striving to provide them with more opportunities to enrich and develop their careers. To that end, its sustainability-linked trade facility also incentivises it to increase the number of hours allotted to each employee for skills training by 15%.

Makalot understands that offering opportunities for continuous learning and growth will not only make the workers happier but will also encourage staff to think innovatively about how to make its operations more efficient and sustainable.

“Makalot also attaches importance to skills such as communication, coordination, integration, planning, management and innovation. These help create a team whose members can work well together to achieve our future goals,” the company said.

Collaboration was also key to structuring this sustainability-linked trade facility, with HSBC working closely with Makalot to identify the two key performance targets.

“When setting targets for a sustainability-linked facility, our aim is to be ambitious while also ensuring the targets are relevant to our clients’ businesses. In the case of Makalot, energy use and employee development are highly relevant to current and future operations,” said Stanley Hsiao, Head of Commercial Banking at HSBC Taiwan.

“We are pleased to support Makalot’s efforts to make progress towards their sustainability goals, which are in line with something consumers everywhere are calling for: improving the environmental and social impact of the fashion supply chain.”