Textile Executive Teresa Yang Embraces Sustainability, Creating Value Beyond Profit
While the textile and apparel industry is infamous for its damaging environmental impact and poor working conditions, Esquel Group (Esquel), one of the world’s largest cotton-based textile and apparel manufacturing companies, is leading the effort to prioritize the reduction of its environmental impact, while investing in the growth, development and well-being of its people and surrounding communities.
The Hong Kong-based company produces cotton shirts through a vertically integrated supply chain for some of fashion’s biggest brands, including Tommy Hilfiger, Hugo Boss, Ralph Lauren, Muji and Nike. With a team of 55,000 employees spread across manufacturing and merchandising operations globally, Esquel produces more than 100 million garments annually. But for Esquel Vice Chairman and YPO member Teresa Yang, the company’s stated vision of “Making a Difference” in people’s lives has always been as important as being profitable.
Evolution of integrating sustainability in business
Yang’s father started Esquel in 1978 — the year China opened up to the world under Deng Xiaoping’s economic reforms — as a garment manufacturer with a head office in Hong Kong and overseas manufacturing, initially in Malaysia and Mauritius.
“My father was a great entrepreneur with a vision and a lot of passion for the industry. He emphasized that if we do it, we do it in the right way, meaning not only making profit but doing it in a way that is right for our own value system,” explains Yang. “So, this (sustainability) is like continuing my father’s legacy … not only part of the business, but part of our culture.”
As overseas production grew in the late 1980s, the family business expanded from garment to textile manufacturing, eventually taking control of the process, “from seed to shirt.”
Yang did not initially plan to join the family business. But in 1990 she decided to help support its rapid expansion, following in the footsteps of her older sister, Marjorie Yang, Chairman of Esquel.
“By the late 1990s, when we started looking into textile and not just garment manufacturing, we realized the amount of consumption of water and energy involved. We felt it was our responsibility not to pollute the environment where our own people live. So that was really the initial realization we needed to look beyond just manufacturing,” adds Yang.
It was at that time that a purposeful effort began to put sustainability — primarily by addressing the wealth gap and climate change issues — at the core of the business strategy, based on the belief that sustainable economic development can be achieved in harmony with the environment and society.
The past two decades saw the company making significant strides toward incorporating sustainability principles across the entire supply chain. From 2000, Esquel began to cascade its 5E-Culture — ethics, environment, exploration, excellence and education — as the foundation of its core values.
“Ethics is the people component and has become more important as we globalized,” explains Yang. “With production based in overseas countries, including Mauritius, Malaysia, Vietnam, Sri Lanka and a lot of locations in China, sustainability was no longer just about looking at the environmental aspect as we need to also take care of the growing diversity of our people and communities where we operate.”
In 2013, the Esquel Sustainability Council was established and Esquel became the first supplier in the textile and apparel sector to be accredited by the Fair Labor Association.
Transformational leadership: New industry benchmarks
Today, Esquel operates with a sustainability framework according to four strategic pillars: people, planet, product and community. Its supply chain includes research on cultivation of cotton using genetic technology and sustainable techniques, investing in wastewater treatment infrastructure, developing methods to increase material utilization, and the use of non-polluting natural dyes. Since 2005, water consumption per unit of production has been reduced by 67% and energy consumption by 49%.
“A lot of times, we are ahead of industry and regulatory standards,” says Yang. “These are our own standards, regardless of what customers and the government want.”
To keep up with the latest technologies and introduce innovation, Esquel collaborates with universities, and research and development (R&D) institutions.
“We invest a lot in the longer-term R&D projects and always look for next generation technology or different approaches to ensure we are moving ahead in terms of reducing impact on energy and water production, using recycled resources and developing new material,” says Yang. “With a lot of our suppliers, when they have new technology, they come to us to test it because we have a good platform and people are open to change.”
Prioritizing people transformation
While adopting new technology, the company is committed to advancing a “people-plus-technology approach,” offering training to workers for technical proficiency and management skill development. Providing people with opportunities to grow and maximize their potential is reflected in their vision of “Making a Difference.”
“Among all our exciting projects, I’m most proud of the transformation of our people,” says Yang. “Innovation in technology is important, but I think technology is something money can buy, whereas transformation of people you can’t buy with money.”
While putting substantial effort in transforming employees through internal and external education programs, Esquel is also transforming job tasks so they become less manual and more knowledge-based.
“In the spinning operation for example, a front-line operator used to focus on one task that demanded high hand-eye coordination and repetitive movement. But now, with more automation and integrated information systems, the current front-line operator will not do as much of that, but more of setting up and fixing machines, preventive maintenance work, and at the same time maybe doing some simple data analytics to ensure machines run smoothly. We have re-engineered the job nature,” says Yang.
Current employee development initiatives being rolled out go beyond training and include transforming the factory workspace as well as the dining experience.
“This is part of a sustainable way of living, addressing the whole development of our employees. For example, we are collaborating with nutritionists to design balanced diets for different needs while transforming the physical work environment so it’s healthier,” says Yang. “This not only ensures the well-being of our team, but also attracts qualified people.”
Investing to strengthen local communities
From the early years, Esquel understood the link between business and community. In 2003, Esquel-Y.L. Yang Education Foundation was established to create a strong relationship with the local communities in all places where they operate.
“This helps narrow the wealth gap while developing local talent to support growth,” says Yang. Some of its initiatives include programs in education, health care, disaster relief, women’s empowerment and cultural heritage. Since 2007, the Foundation has provided scholarships and sponsorships for more than 1,300 high achieving secondary school students with financial needs. And since 2012, it has provided free vision screenings to more than 10,000 school children in rural communities to facilitate better learning. Since that time, its environmental and health education programs have reached in excess of 300,000 students from more than 250 rural schools.
Despite the changing market dynamics, the company remains committed to transformational leadership through these community-building efforts.
“With additional trade policies and tariffs for exporting to certain countries from China, many industry players took the easier way out by exiting to lower labor-cost countries. We don’t agree with that approach as we believe we are responsible for the local communities that have been working with us for so many years.”
Yang adds, “Typically, when moving to different countries, apparel manufacturing companies take their senior team to the new country and only hire local for front-line operations. Our mission has been to build up local teams and strengthen the local community. So, we spend a lot of efforts recruiting, training and mentoring young local people.”
Today, in overseas countries, close to 98% of employees of Esquel are local and the other 2% are on an exchange program.
A collective, long-term commitment
For Yang, sustainability by definition has to be an inherently long-term commitment. “We are lucky as we are a private family business. We can implement a lot of decisions with a longer-term vision, knowing that some of these sustainability investments might hurt in the short term,” says Yang.
Collaboration is an intrinsic part of this longer-term vision planning, based on the belief that the industry can only move forward if companies across the value chain start working together to share solutions.
In October 2019, Esquel was among the four leading companies (with Alibaba Group, Yili Group and China Three Gorges Corporation) committed to the Initiative for Sustainable Development Actions from Businesses, which strived to deliver the long-term value of sustainable development for the brighter future of the companies, the communities, the countries and the planet. The initiative was signed by a total of 16 Chinese and overseas enterprises at the first Sustainable Development Forum in Beijing. The Forum was guided by the Chinese Ministry of Foreign Affairs and co-organized by the Development Research Center of the State Council, Beijing’s municipal government and United Nations organizations.
And this past November, for the sixth consecutive year, Esquel hosted the Integral Conversation conference on sustainability. Prominent leaders in business, government and academia gathered in Guilin, China, where Esquel has built Integral — a state-of-the-art manufacturing facility and a sustainable development garden — to exchange insights and best practices.
This year’s conference called for greater collective action to advance the United Nation’s Sustainable Development Goals, set by the U.N. General Assembly in 2015. In her opening remarks, Yang said, “SDG No.8 (Decent Work and Economic Growth) and No.12 (Responsible Consumption and Production) offer the biggest opportunities for corporations like us to make a difference. Chasing profit should not be the only objective for enterprises. We should be held accountable to a sustainable future.”
In recognition of its sustainability achievements, Esquel is the only textile and apparel manufacturer featured in the “17 Goals to Change our World” film series, a collaboration between the United Nations and Reuters. The video features Esquel Hoa Binh, the most recent garment manufacturing site established in Northern Vietnam, where in 2014, Esquel experienced first-hand the effects of global warming and social unrest. Yet the employees fought courageously against a massive flood and a riot to protect their second home at Esquel.
In the end, for Yang and the Esquel leadership team, this is another inspirational example of transformational leadership and the value of their 40-year commitment to people: “When our communities thrive, we thrive.”