Catalyzing the Green Transition of India’s Textile & Apparel Value Chain

The Challenge

The Textiles & Apparel (T&A) sector is one of the largest and oldest industries in India. It contributes 2.3% of India’s GDP, 13% of industrial output, and 12% of export earnings. India is home to 18% of global Tier 1 and Tier 2 T&A facilities. Employing over 45 million people, 60% of whom are women, the T&A sector is the second-largest employer in the country.

India accounts for around 10% of global textile production, with manufacturing primarily driven by Micro, Small, and Medium Enterprises (MSMEs). These enterprises represent 40% of textile mills, 90% of processing units such as dyeing, printing, washing, and finishing, and nearly all of the approximately 75,000 apparel manufacturing units. The T&A sector in India also significantly contributes to global Scope 3 emissions.

Major environmental challenges include reliance on fossil fuel-based energy, water pollution from untreated wastewater, and the use of hazardous chemicals and dyes, which lead to harmful emissions and industrial sludge. To implement and scale decarbonisation solutions, both existing and innovative, an estimated $93.9 billion in investment is required.

MSMEs face several obstacles in transitioning to sustainable practices. These include limited technical skills and capabilities related to decarbonisation, circular economy, and ESG principles; low awareness of and access to circular or low-carbon solutions; and limited access to climate finance. Addressing these challenges is essential to support the decarbonisation of India’s T&A sector and unlock its potential for sustainable growth.

The project aims to support MSMEs in driving the green transition of the textiles and apparel (T&A) value chain to reduce its emissions footprint. To enable this shift, the programme seeks to align existing and emerging green and climate finance instruments with the specific needs of MSMEs in the region. It also focuses on building collaborative partnerships and alliances with key industry and cluster associations to leverage their networks, expertise, and resources in supporting MSME decarbonisation.

The Objectives

The objective of the project is to provide outcomes-oriented technical assistance and capacity-building support to MSMEs, helping them understand circular economy principles, measure their carbon footprint, and report on their decarbonisation goals, including ESG-relevant indicators. It also aims to raise awareness and enable access to circular and low-carbon solutions through structured showcases and by establishing linkages for cluster- or MSME-level demonstrations. Additionally, the project seeks to facilitate access to inclusive and affordable capital through green financing instruments offered by affiliate partners, with a strong focus on promoting gender-intentional financial tools to accelerate the growth of women-led MSMEs.

The Way Forward

Through this project:

• 250 to 400 MSMEs will receive capacity-building support and linkages to access finance for adopting low-carbon solutions.
• 50 to 75 MSMEs will be provided with technical assistance to implement decarbonisation initiatives.
• 16 to 18 low-carbon solutions will be promoted through structured showcases and market linkages.

Relation to European Green Deal, Circular Economy and Climate Change

The project aligns with EU Green Deal policies by enhancing compliance among export-oriented MSMEs within EU supply chains. It can play a key role in addressing Scope 3 emissions in the textiles and apparel supply chain, as required under the Corporate Sustainability Reporting Directive (CSRD). The project also complements other initiatives supported by the EU and other donors, including EU member states, with gender equity integrated as a core design principle and a cross-cutting theme throughout all project activities.