Circular economic pressure from the EU and the future of Vietnam's garment industry
(VNF) - When the European Union (EU) announced its Sustainable and Circular Textile Strategy (2023), the message to the global industry was clear: fast fashion is coming to an end. For Vietnam – a country that exports more than 5 billion euros worth of garments to the EU each year – this is a major turning point. The EU is reshaping the rules of the game: garments must be durable, recyclable, safe and transparent throughout the entire product lifecycle.
From 2026, new regulations will require non-destruction of inventory, the introduction of a Digital Product Passport and an Extended Producer Responsibility (EPR) mechanism. This means that Vietnamese exporters must not only sell goods, but also demonstrate environmental responsibility throughout the product lifecycle.
In that context, Vietnamese businesses are forced to change if they want to maintain their position in the European market – which is increasingly strict with green standards. Adaptation efforts are therefore more vital than seeking new competitive advantages.
Textile and garment enterprises are forced to change if they want to maintain their position in the European market.
Risk of falling behind
Most Vietnamese factories, especially small and medium-sized enterprises, still focus on low-cost, fast fashion. But under the new system, short-run clothing will face difficulties: high EPR costs, the risk of rejection, and the risk of losing contracts. EU firms will eliminate suppliers that do not meet standards, and at the same time tighten audits to avoid “greenwashing”.
Compared to China, Vietnam faces significant pressure. Groups such as Hengli Petrochemical have produced recycled polyester (rPET) on an industrial scale, while REO-ECO has developed advanced recycling technology that turns old fibres into near-virgin fibres. Vietnam will find it difficult to compete on scale, but can take advantage of its flexibility and work closely with EU customers.
A bright spot is the emergence of domestic recycling infrastructure. At the end of 2024, Recover™ - a global recycled fiber group announced the opening of a factory in Dong Nai, with a capacity of 10.000 tons/year of recycled cotton blends, with a quality testing laboratory. This is a foundation to help Vietnamese businesses reduce raw material import costs, reduce carbon footprint and meet EU recycling requirements.
Several large garment companies have also tested product lines using recycled polyester, coordinated with European customers to prepare electronic product passports and tested take-back and reuse programs. Although still on a small scale, these steps show the determination to "stick" to the EU market.
Opportunities from EVFTA
Not only are Vietnamese businesses under pressure, they also benefit from the Vietnam-EU Free Trade Agreement (EVFTA). Many textile and garment products will have their import tax reduced to 0% according to the roadmap. If they meet the new sustainability standards, Vietnamese goods will not only maintain their presence but also have a competitive advantage in price compared to competitors that do not have an FTA with the EU. This is a “double window of opportunity”: taking advantage of tax incentives and demonstrating green capacity to retain customers.
To survive and develop in the EU, businesses need to: Evaluate product life cycles in terms of raw materials, recyclability, and durability; Participate in piloting product passports and EPR with customers; Invest in R&D for recycled fibers, durable designs, and easy repairability; Be transparent about social, environmental, and governance standards to comply with European ESG requirements.
Enterprises will need support from associations such as the Vietnam Textile and Apparel Association (VITAS), the Vietnam Energy Association (EPV) to quickly train and share experiences on ecological design, as well as ministries and branches that can support testing laboratories, issue policies to encourage green investment, and preferential loans for industrial clusters and production cooperation groups according to circular principles in the textile and garment industry.
The EU is not only changing the rules but is also leading new consumer trends. European buyers increasingly prioritize sustainable and transparent products. For Vietnam, this is not only a challenge but also an opportunity to upgrade the garment industry. Businesses that pioneer circularity and take advantage of the EVFTA will maintain long-term contracts, improve profits and maintain their position in the European market. Conversely, those that are slow will easily be excluded from the green fashion economy in the future.
Wei Thi Khanh