The textile industry is the largest
manufacturing industry and the second largest employment generating sector in
Pakistan. In this paper, we seek to understand why firms in the garment and
textile sector choose to comply with or ignore Pakistan’s environmental regulations
and effluent standards. Based on survey of 60 firms, we find that there are
nine different environmental management practices adopted in the textile
sector. While only 12% of our sample adopted all nine practices, 50% embraced
more than five practices and some 87% of firms adopted at least two
environmental management practices. The most common environmental practice
adopted is evaluation of any chemical hazards. We find that institutional
deficiencies in implementation such as inadequate monitoring and fines hinder
enforcement and compliance. However, non-regulatory pressures from
international customers and competitors act as a major un-official source of
influence. Local factors such as community and local media stressors seem to
have limited impacts. As expected, larger firms are more likely to adopt
environmental management practices relative to medium sized firms. We propose
three strategies to improve environmental compliance – installation of effluent
treatment technology matched with improved monitoring, creating a rating system
to trigger competition among firms and offering firms training and information
services at the district-level.
Pakistan has a dynamic, vigorous and export
oriented textile industry with a large economic footprint. The textile industry
is the largest manufacturing industry and the second largest employment
generating sector in Pakistan. Notably, Pakistan is the 8th largest exporter of
textile products in Asia, the 4th largest producer of cotton with the third
largest spinning capacity in Asia and contributes 5% to the global spinning
capacity . While the textile sector in Pakistan is large, in this paper, our
focus is on understanding environmental compliance in the textile wet
processing sector. There are 600-800 textile wet processing units in the
country, which turn grey fabric into finished fabric. These are major
industries, which contribute to almost 50% of total exports, 38% of the
manufacturing labor force about 9.5% of GDP. While engines of economic activity,
wet processing units, are also highly polluting factories. This is because
their dyeing, printing and finishing activities result in large discharges of
waste water, often without clean-up, into drains and rivers.
Understanding the effectiveness of
environmental regulations in developing economies is a challenge because of the
complex array for factors that affect compliance and the limited data available
to tease these factors apart. The main purpose of our study is to examine the
reasons underlying environmental compliance in the textile sector in Pakistan.
Thus, we seek to first understand whether and how well existing environmental
rules and regulations apply to the textile sector. We assess the challenges
faced by the government in implementing existing laws and the textile sector in
fully complying with these laws. The study also examines the role of voluntary
and non-regulatory pressures that lead firms to comply. Our analyses is based
on a review of the laws, interviews with industry and government officials,
case studies of 10 textile processing units and a survey of 60 large and medium
textile sector in Pakistan:
The textile sector in Pakistan can be divided
into eight types of units. These include spinning, composite, independent
weaving, finishing, garment, terry towels and knitwear units (see Table 1).
While many of these activities are undertaken separately, some composite
factories combine these different tasks.1 The most water pollution appears to
be generated from wet processing within composite firms.2 Though it is
difficult to assess exact the level of effluents in different sub-processes,
“bleaching and dyeing” are known to contribute significantly to waste water
pollution. Thus, our research focuses on composite firms with wet processing
activities (bleaching, dyeing, printing and washing).
Textile-processing units are mainly located
in and around the major cities of Karachi (350), Lahore (200), and Faisalabad
(250). Our study focuses on the industrial estates of Faisalabad and its
suburban area of Khurrianwala in Punjab province. Of the 475 registered members
of the Pakistan Textile Processing Mills Association (APTMA),3 135 members are
in Faisalabad. In fact, production from Faisalabad constitutes more that 65% of
overall value of textiles exported from Pakistan (APTPMA, 2012; FCCI, 2012a,
2012b). Faisalabad is a hub for all types of textile production. But, factories
associated with ginning, spinning and weaving are found in large numbers
because of easy access to raw cotton. Faisalabad’s contribution to pollution
through wastewater discharge.
In order to understand environmental
compliance in the textile industry in Pakistan we first undertook a review of
environmental regulations, followed by expert interviews. We also undertook a
survey of sixty firms to obtain quantitative data on compliance and reasons for
non-compliance and ten detailed case studies.
of Environmental Regulations The Government of Pakistan
has six major environmental legislations (see Appendix-1) and detailed National
Environmental Quality Standards (see Appendix-2) that apply to textile
industries. The federal environmental protection agency (EPA) classifies
industries into three categories A, B and C on the basis of the level of
pollution released. The textile processing sector lies in category A for liquid
NEQS (2001) establish standards for liquid
effluents, gaseous emissions and ambient air quality and the legislations.
pollution parameters that are a priority include effluent flow, temperature,
pH, COD, Total suspended solids (TSS), Total dissolved solids (TDS), BODS,
Copper, Chromium, Chlorides, traces of Arsenic, Cadmium, and Nickel. We
reviewed most of the regulatory documents relevant to the textile sector’s
We undertook key informant interviews with
the Chairman, Faisalabad Region, APTPMA, Secretary General and Director
R-Faisalabad Chamber of Commerce and Industry (FCCI), District Environment
Officer (DEO)- Environment Protection Agency (EPA) in Faisalabad (district
office). This information is organized in the form of 10 Key Informant
We also obtained secondary information from
Annual Reports, Quarterly/Monthly Bulletins and/or Research Reports, documents
on textile policy etc. from some of the firms and concerned departments of
Ministry of Textile, EPA, FCCI and APTPMA. We also collected inspection and
monitoring reports from the EPA in Faisalabad. Besides, interview sessions done
with district environment officers and environmental inspectors provided
information on compliance and regulatory processes.
surveyed 60 large and medium textile-processing firms from a list provided by
Faisalabad Chamber of Commerce and Industry (FCCI). We selected these firms
using stratified random sampling to ensure that firms were evenly distributed
in each size class. We identified large and medium firms with the help of FCCI
and APTPMA, based the number of employees working in the firm/factory as well
as the number of processing production units.4 We excluded small firms as few
adopted any EMP(s). We selected medium and large wet processing firms, which
undertake bleaching, dyeing, printing and finishing as sub-processes.
We contacted firms with the help of FCCI and
APTPMA. A detailed survey questionnaire comprising of qualitative and
quantitative questions was used to collect primary data. Apart from the basic
information- such as number of employees, amount, type and value of product
generated, different types of textile sub-processes undertaken by the firm and
presence of environmental officers, information on inputs, i.e., technology,
water, materials etc. were incorporated. We also asked indirect questions
relevant to environmental management.
We obtained information from 10 textile
firms, which were randomly selected from a list provided by Faisalabad Chamber
of Commerce (FCCI). These firms are members of FCCI and registered with
Security and Exchange Commission of Pakistan (SECP), which is the premiere
government body for registering and regulating the corporates, private
companies and firms.
In our ten case studies, six are large firms,
three medium and one small. We distinguished between large, medium and small
firms/factories on the basis of the number of employees working in the
firm/factory as well as the number of processing production units.5 These firms
produce outputs such as home garments, bed sheets, terry towels and processed
fabric. To identify cases, we contacted Chief Executive Officers (CEOs),
Technical Directors and General Mangers (GMs) – Processing formally by
telephone and then emailed our research concept note and some details on
Sustainable Development Policy Institute (SDPI’s) Research Ethics. Personnel
were contacted again and formally asked for the appointments for interviews.
The Pakistan Environmental Protection Act
(PEPA) (1997) establishes a comprehensive regulatory framework for the
protection, conservation, rehabilitation and improvement of the environment,
prevention and control of pollution, and promotion of sustainable development.
Industrial environmental activities are
regulated in multiple ways. First, PEPA’s (2000) environmental examination
(IEE) and environmental impact assessment (EIA) regulations specify the
requirements for a plant-level preliminary environmental review of impacts. The
EIA, undertaken by a firm, is expected to be given to the EPA, relevant
industry associations, local chambers and the library. The EIA report includes
aspects such as prediction of impacts, alternatives, evaluation and monitoring
Firms are expected to follow NEQS,
self-monitor and report measurement of effluents voluntarily to the EPA on a
monthly basis (Appendix 3, NEQS, 2001). Effluent samples have to be examined
and verified by an EPA certified laboratory. The federal EPA is also authorized
to establish laboratories to conduct research, measure effluents and report
pollutants to the EPA/environmental tribunal
In order to ensure compliance, PEPA (2001)
allows federal authorities to levy a pollution charge on non-compliant firms
and calculate charges by dividing the established discharge rate by the units
of production (see Appendix 3). The Environmental Tribunal Rules (1999), further,
give the federal government the mandate to establish environmental tribunals.
and Enforcement Challenges
The Environmental Protection Agency (EPA) is
the ‘Regulator’ assigned with the task of monitoring and implementing
environmental laws. The EPA performs two independent roles: field monitoring
(through district offices) and regular monitoring (through laboratories).
Monitoring is done through different
processes. First, before firms are established, the EPA issues a notice in
local newspapers to assess if the public has reservations against construction
of plants. Next a public hearing is held to explain the purpose of the firm and
usefulness of treatment plants, if are effluents being released. All wet-
processing textile firms need to obtain an environmental license when they
start up. A No Objection Certificate (NOC) is issued to firms after EIA
completion. Effluent treatment plants (ETPs) are expected to be setup within
four months of establishing wet processing units.
Evidence on Environmental Management Practices :
In this section, we first examine firm level
data environmental practices to understand what environmental management
practices are adopted and whether there are differences between large and
medium firms. We then discuss a conceptual model that allows us to explain why
firms may adopt certain environmental management practices (EMPs). We follow
this with an empirical estimation of a statistical model to understand what
factors may be more or less important in influencing firm-level adoption of
Environmental Management Practices among
Large and Medium Firms
The average firm in our sample is nearly 20
years old, has 2393 employees, produces 27 mm meters of fabric and generates
14,244 cubic meter amount of waste water per day. Large firms are older with an
average age of operation at around 24 year, while medium firms are around 10
years old. Large firms provide greater employment by undertaking all sub
processes – they have, on average, 4 production units. Medium firms undertake
62% of all the processes.
Our data includes information on nine
Environmental Management Practices (EMPs) adopted by firms. Table 5 shows the
frequency of adoption of different practices. Thirty two percent of firms have
an environmental policy in place, 72% adopt Total Quality Control (TQC) and
Total Quality Management (TQM) in production and 62% of the firms consider
environment as subject of TQM Principles. Some 55% of the firms do
environmental risk evaluation of suppliers and 92% of the firms evaluate
chemical hazards. Further, some 70% of the firms provide environmental training
to their employees in some form and 85% undertake environmental audits. Some
20% of the firms had Effluent Treatment Plant, while only in 15% of the firms
is the ETP operational. Figure 1 shows that 87% of firms adopt up to 2 of the 9
environmental practices identified, 50% adopt 3 to6 practices, and 12% adopt
more than 6 EMPS.
In this section, we discuss results of
regressions to investigate the factors that influence the adoption of
environmental management practices (EMPs) by the firms. We estimate four
regression models: three Probit models and one count data model. For Probit
models, we use three different measures of EMPs, namely TQEM, SRISK and
ETRAINING, as a dependent variable.
In the count data model we consider Negative
binomial and Poisson models. The Poisson model assumes that mean of the count
dependent variable equals its variance, but the negative binomial relaxes this
assumption and becomes a less restricted model (Greene, 2012). When we compare
the mean of the count dependent variable (5.16) with its variance (5.80) in our
case, we find that the variance is greater than the mean, referred to as over-dispersion,
which does not satisfy the basic assumption of the Poisson model. Thus, we
estimate the count data model using negative binomial regression model.
Study Findings on Compliance
previously noted, we also undertook case studies of six large firms, three
medium firms and one small firm to get a deeper understanding of firm behavior.
As Table 8 shows, a majority of the large firms (4 out of 6) are located in
Khurrianwala-Faisalabad. Large firms employ 4250 workers on average, have 3 to
4 production units and exported, on average, 72 million USD worth of textiles
during 2012. They undertook all five types of processing (i.e. bleaching,
washing, dyeing, printing, finishing).
The medium forms we studied are based in
Khurrianwala (2) and Faisalabad city (1). They employ an average of 2000
workers and usually have two production units, undertaking the ‘printing’
sub-process only.8 Average annual exports were at 15 million USD. Our final
case study was of one small firm located in Khurrianwala, with 250 workers, one
production unit and undertaking the “printing” sub-process. The firm sold its
output in the local market.
Environment and Water Management
In terms of environmental management, firms
follow different environmental management practices in different degrees .
Three of the large firms don’t have any specific code of conduct but follow a
corporate policy, while one has its own environmental management system as its
code of conduct and has SA 80009 in place. Only one large firm has a compliance
department focusing on the firm’s code of conduct.10
All the six large firms and three medium
firms have senior management and front line managers who are well educated and
aware of environmental regulations. The large firms conduct workshops/campaigns
to inform the labor force about health/hygiene/safety/waste management issues
in collaboration with APTPMA and EPA.
Five of the six large firms undertake
regulatory and/or non-regulatory liquid waste assessments as a result of their
international customer requirements. These assessments involve identification
of disposal of total waste water discharged by firms. Five of the six large
firms also undertook compliance appraisals on a regular basis. Such appraisals
provide evaluation of the firms’ actions taken on protecting environment which
is done by internal auditors/firms’ managers. The remaining five firms did not
conduct such assessments.
with International Standards
There are several ways in which firms seem to
comply with international norms and standards. Five of the six large firms have
acquired international certifications i.e. such as ISO 14001 and Eco-Labeling.
Of these, the most important from an environmental perspective is ISO 14001.
Five of the six large firms use only
chemicals and dyes that are imported and certified internationally. Two of the
medium firms perceive pressure from international customers; therefore they
have to take preventive measures to avoid high levels of effluents. They comply
by either importing certified chemicals and/or by testing their final fabric
products at certified international laboratories. Finally, the small firm
releases high levels of effluents as it uses locally manufactured
chemicals/dyes/paints and waste water is discharged directly into the sewer
system without any treatment.
There are several criteria for judging
whether the case study firms are complying with Pakistan’s environmental laws.
While we do not have direct data on effluent discharge, which would be the best
indicator, we have information on the presence of ETPs, existence of different
environmental management practices, international certification, and the type
of chemicals used in the manufacturing process.
Some medium firms do seem to respond to
international pressure. For example, this pressure is felt by medium firms that
are working for exporters or those who are directly exporting to Middle East,
China, India, Russia and Central Asia. Medium/small firms are also subject to
some local stakeholder pressure. However, this is limited because communities
and their livelihood is also dependent on these firms.
Medium and small firms are much more subject
to inspections and monitoring from regulators. They have also been fined by the
Environmental Tribunal. However, firm managers, the APTPMA chairperson and EPA
officials all suggest that these firms do not comply with the laws. The main
reason for this is because fines are low and it is possible to bribe EPA
officials to withdraw charges.
major environmental regulations in Pakistan have oversight over environmental
practices in the textile sector. Pakistan also has National Environmental
Quality Standards that would apply to many of the effluents released by the
textile sector. However, a number of institutional deficiencies hinder proper
enforcement and implementation of these regulations. While the EPA does inspect
and take actions against non-compliant industries through legal proceedings in
the local high court and environmental tribunals, the fines charged appear to
be too low to change firm behavior. On the implementation side, the EPA has a
dearth of human resources, which makes monitoring difficult. These budgetary
and human resource challenges have been aggravated since the Federal Government
decentralized its environmental monitoring functions to state EPAs in 2010.
There are generally nine different
environmental management practices that are adopted in the textile industry.
These range from environmental policies to environmental training for employees
to international certification. Our survey of firms suggests that 87% of firms
in our surveyed sample adopted more than two environmental management
practices, 50% adopted more than five practices, and 12% adopted all nine
Within the textile industry, large firms
follow different environmental practices relative to medium firms. Large firms
are likely to have an overall environmental policy and are more likely to take
on more environment related management practices. They are also likely to feel
more pressure from international buyers relative to medium firms.
We acknowledge the
financial support in conducting this study. The team benefited from technical
contributions of our advisor. She really put a lot of effort to this study and
made it possible to bring it into the final shape. We are also thankful to for
helping in proposal development and her encouragement at every stage of the