Moving the Needle in Ethiopia

Building a "best-in-class" apparel
manufacturing industry.

We are at the start of an exciting journey to help build a best-in-class apparel manufacturing industry in Ethiopia. We helped convene a private-public collaboration with key suppliers, the Ethiopian and local governments, and donor groups to establish an industrial park in Hawassa, a small city in southern Ethiopia. Our collective vision is that Hawassa Industrial Park (“HIP”) will be a win-win development opportunity, both for sub-Saharan Africa and for the apparel industry. To make this happen, we are working with partners that share our values and drawing on lessons learned in other sourcing regions. At every step, we are sensitive to the challenges and conscious of the responsibilities inherent in industrializing a predominantly agricultural region.

So why Ethiopia? It is Africa’s second most populous country, with an average GDP growth rate of 11% for the past 11 years and a stable government with an ambitious 2025 vision to become Africa’s leader in light manufacturing. To support this, Ethiopia is investing in its infrastructure, including by expanding clean energy generation and worker development. The country’s power is among the cheapest in the world, is 86% renewable, and is on track to be 100% renewable over time. For the apparel industry, there is an opportunity to grow cotton and implement other stages of production within Ethiopia, so that the value generated from all stages of the production process can be maintained in-country.

We are taking a thoughtful and measured approach to sourcing in East Africa, partnering with suppliers to thoroughly investigate trade prospects across the region and engaging with the national and local governments. Our Chief Supply Chain Officer, Bill McRaith, provided testimony to the U.S. government supporting the renewal and 10-year extension of the Africa Growth and Opportunity Act – legislation introduced in 2000 to help sub-Saharan Africa build trade partnerships with the U.S. This effort paved the way for investors to help make HIP and other industrialization projects a reality. Our efforts in Ethiopia reflect our key focus areas of people, environment and communities.

Empowering people

HIP is projected to create more jobs in the region than generated in the past 50 years. The park's tenants hopes to hire 40,000-60,000 workers over the next three years and a significant number of related jobs are expected to be created in Hawassa and surrounding communities.

From the outset, we have approached this new venture by drawing on the lessons learned from decades of promoting human rights in our supply chain and our experience in helping to lead efforts such as the Accord. We have opted to collaborate with like-minded business partners, all of whom understand the importance both of promoting workers’ rights and creating a high quality product. Through the HIP Investors Association, we are agreeing on fundamental ways of working that reflect our values, including the adoption of a code of conduct for park tenants.

Beyond compliance, we are working with our partners to make the park a great place to work. For example, we are promoting the establishment of workers’ committees and exploring innovative transport and housing solutions, including for workers migrating to the area. We want to help enable these workers to become part of the Hawassa community and feel invested in the park’s success.

Preserving the environment

Our long-term vision is to develop a truly integrated vertical supply chain comprising all stages of apparel production, from growing cotton to dyeing fabrics to sewing the final garments. In order to minimize impacts on the environment, it is vital that we use sustainable energy and ensure sufficient water supplies for both our operations and local communities.

Green electricity is plentiful in Ethiopia; by 2017, the country will be able to draw on the largest hydroelectric power supply in Africa. This is one of the key motivating factors in deciding to produce there and we plan to power HIP with a mix of hydroelectric and geothermal energy.

We are committed to safeguarding the water resources in the regions where we operate – for our business and the communities. Conscious of the water scarcity risks in other parts of Ethiopia, we engaged a respected independent geohydrologist to assess HIP’s potential water impacts. Initial findings revealed that running fabric production operations on site would impact groundwater around the park and that measures should be taken to prevent contamination of water supplies with chemicals, which would otherwise reach groundwater level.

As a result, we partnered with the Ethiopian government and the other tenants in the park to build a zero liquid discharge effluent treatment facility that recycles wastewater produced in the park, thereby preserving and protecting the community’s water supply. Beyond this, we are proactively taking steps to address local water issues by looking into sponsorship of a collective action water stewardship project in Hawassa.

Supporting communities

Resettling local communities can be a controversial issue when industry enters a new location. With our partners, we decided to tackle this challenge head on and address it in the right way. Through our initial risk and impact assessment, we identified that resettlement could be a challenge. We partnered with the Ethiopian government to ensure that any resettlement was informed by national laws and international regulations, with an aim to exceed those guidelines when possible. With support from independent experts, our supply chain team worked with local community leaders and officials to help resettled people with access to adequate housing, compensation and information.

With our partners, we are taking a unique approach to investment in the local communities around HIP by addressing potential challenges from the start, rather than retrofitting solutions. With the support of Development Finance International, an independent consultant, we brought public and private donors to the table, matching them with sustainable development projects near the park. In this way, donors are able to play an active role in ensuring that local impacts are managed responsibly and that the infrastructure is in place for HIP’s operations to run smoothly. We believe this collaborative model could be a blueprint for future development in sub-Saharan Africa and beyond.

Some of the projects already in motion include vocational and life skills training, transport infrastructure and waste management systems. These initiatives build on our experience supporting sustainable supply chain projects around the world. Ultimately, by helping local communities to develop valuable skills, we aim to contribute toward a sustainable economy in Ethiopia.

"Our ambition to create a vertical, scalable and sustainable venture in Ethiopia has guided every action. We set out to learn from social and environmental challenges in other production countries and to establish an operation of which we can be proud."

- Mark Green
Executive Vice President, Global Supply Chain, PVH