Bangladesh's textile and apparel sector risks losing a multi-billion-dollar opportunity as weak policy support and limited technological capacity hinder the transition to a circular economy.
Industry insiders estimate the economic opportunity of waste recycling to be worth $8.0-billion annually.
They warned that without urgent reforms, the country's position as the world's second-largest apparel exporter could come under pressure, particularly as key export markets move towards stricter environmental and traceability standards.
Legislative changes in Western markets, especially in the European Union, will make it mandatory to ensure traceability and adopt environmentally friendly supply chains, they said.
The observations were made on the sidelines of a seminar titled "Accelerating Circular Transition in Bangladesh's Textile Industry: Insights from SWITCH2CE Pilots," jointly organised by the Ministry of Commerce and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) at a city hotel on Wednesday.
Speaking to The Financial Express, Sheikh H M Mustafiz, managing director of Cute Dress Industry Ltd and a BGMEA director, said global legislative changes are reshaping the future of the apparel industry, pushing it towards circularity and sustainability-driven compliance.
He said initiatives such as the EU's Green Deal and the Digital Product Passport (DPP) will require greater transparency, product traceability and overall supply chain circularity.
This will compel manufacturers to adopt circular practices, increase the use of recycled materials, reduce reliance on virgin resources and lower the sector's overall carbon footprint.
The volume of textile waste in Bangladesh has risen sharply and now stands at nearly 0.6 million tonnes annually, he said.
A large share of this waste is reused or processed through the informal economy, but it has yet to be brought under a formal framework.
Bringing the sector into the formal economy would deliver two key benefits, he noted: reducing health and safety risks, such as fire hazards, caused by the lack of oversight, and building a more organised and safer industrial base.
Discarded fibre and textile waste offer strong potential for reuse as raw materials. While 100 per cent cotton waste can be recycled mechanically, Bangladesh's capacity for chemical recycling remains limited.
Currently, recycling is largely cotton-based, with significant gaps in handling blended fabrics and man-made fibres (MMF). However, these materials could be transformed into higher-value products through proper processing.
He warned that by 2030, rising global demand for resources and constrained raw material supply will require a shift away from dependence on cotton and other natural fibres towards recyclable alternatives.
Efforts to develop a circular economy began in 2022-23, with gradual moves towards formalisation. However, the absence of comprehensive policies and legal frameworks continues to hinder progress.
Although some policy guidelines have been introduced, a clear national policy and implementation framework for waste utilisation is still lacking, he added.
Pilot projects are underway to assess waste collection, sorting and recycling, but only a small proportion of Bangladesh's textile waste is currently recycled through the formal channels.
Echoing these concerns, Vidiya Ammrit Khan, Vice President of BGMEA, said recycling the entire volume of RMG waste could generate a circular economy worth nearly $8.0 billion.
At present, Bangladesh can recycle up to 30 per cent of cotton-based RMG cutting waste, with a value running into several million dollars, she added.
However, a significant portion of this waste is exported to India and Pakistan and later reimported as recycled yarn.
She also noted that around 17 factories in Bangladesh are currently operating under pilot projects, with an estimated value of a few hundred million dollars.
Addressing the seminar, Michael Miller, Ambassador of the European Union to Bangladesh, said the country is approaching a critical milestone with its LDC graduation and needs to build a more balanced, "eye-to-eye" commercial relationship with its largest trading partner.
"We are carefully assessing the request to negotiate a free trade agreement with Bangladesh," he said, adding that regardless of the graduation timeline, the country must strengthen competitiveness, circularity and eco-efficiency.
He urged Bangladesh to use the remaining time before graduation to create an investment-friendly environment, remove trade irritants - including discriminatory practices - and ensure predictable market access to the EU.
Highlighting the circular economy, he said it is central to the EU's growth strategy aimed at decoupling economic growth from resource use and achieving carbon neutrality by 2050.
He referred to European Commission President Ursula von der Leyen's call to move away from the "take-make-waste" model towards reuse and sustainability.
He noted that circular practices such as recycling, material substitution and efficient resource use can reduce costs and drive innovation.
Turning to the textile and garment sector, he said it remains a priority due to its scale and waste intensity. The EU generates over 5 million tonnes of textile waste annually, while Bangladesh produces around 600,000 tonnes.
"These realities, along with concerns over social conditions and fast fashion, have driven the EU to act," he said.
He said the EU's 2022 strategy for sustainable and circular textiles includes eco-design requirements, extended producer responsibility, digital product passports and stricter rules on greenwashing, alongside broader directives embedding circularity into corporate accountability.
"These policies matter for Bangladesh, as Europe is your largest export market, dominated by RMG products," he said, noting that the sector contributes about 11 per cent to GDP and employs around 4 million workers.
He said the EU is supporting Bangladesh's transition through initiatives such as the SWITCH to Circular Economy (SWITCH2CE) project, with brands like H&M and Bestseller leading pilot projects on recycling and waste traceability, alongside policy support from United Nations Industrial Development Organization (UNIDO) and Chatham House.
The European Investment Bank has also signed a €60 million loan deal with BRAC Bank to support circular investments for SMEs.
He emphasised the need for forward planning to ensure a smooth LDC graduation and continued access to EU markets.
Khandaker Abdul Muktadir, Commerce Minister, and Mahmud Hasan Khan also spoke at the event, which was chaired by Commerce Ministry Secretary (routine charge) Md Abdur Rahim Khan.
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