The textile industry is the largestmanufacturing industry and the second largest employment generating sector inPakistan. In this paper, we seek to understand why firms in the garment andtextile sector choose to comply with or ignore Pakistan’s environmental regulationsand effluent standards. Based on survey of 60 firms, we find that there arenine different environmental management practices adopted in the textilesector. While only 12% of our sample adopted all nine practices, 50% embracedmore than five practices and some 87% of firms adopted at least twoenvironmental management practices. The most common environmental practiceadopted is evaluation of any chemical hazards.

We find that institutionaldeficiencies in implementation such as inadequate monitoring and fines hinderenforcement and compliance. However, non-regulatory pressures frominternational customers and competitors act as a major un-official source ofinfluence. Local factors such as community and local media stressors seem tohave limited impacts. As expected, larger firms are more likely to adoptenvironmental management practices relative to medium sized firms. We proposethree strategies to improve environmental compliance – installation of effluenttreatment technology matched with improved monitoring, creating a rating systemto trigger competition among firms and offering firms training and informationservices at the district-level.Introduction:Pakistan has a dynamic, vigorous and exportoriented textile industry with a large economic footprint. The textile industryis the largest manufacturing industry and the second largest employmentgenerating sector in Pakistan. Notably, Pakistan is the 8th largest exporter oftextile products in Asia, the 4th largest producer of cotton with the thirdlargest spinning capacity in Asia and contributes 5% to the global spinningcapacity .

While the textile sector in Pakistan is large, in this paper, ourfocus is on understanding environmental compliance in the textile wetprocessing sector. There are 600-800 textile wet processing units in thecountry, which turn grey fabric into finished fabric. These are majorindustries, which contribute to almost 50% of total exports, 38% of themanufacturing labor force about 9.5% of GDP. While engines of economic activity,wet processing units, are also highly polluting factories. This is becausetheir dyeing, printing and finishing activities result in large discharges ofwaste water, often without clean-up, into drains and rivers. Understanding the effectiveness ofenvironmental regulations in developing economies is a challenge because of thecomplex array for factors that affect compliance and the limited data availableto tease these factors apart.

The main purpose of our study is to examine thereasons underlying environmental compliance in the textile sector in Pakistan.Thus, we seek to first understand whether and how well existing environmentalrules and regulations apply to the textile sector. We assess the challengesfaced by the government in implementing existing laws and the textile sector infully complying with these laws. The study also examines the role of voluntaryand non-regulatory pressures that lead firms to comply.

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Our analyses is basedon 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 mediumtextile processing.Thetextile sector in Pakistan:The textile sector in Pakistan can be dividedinto eight types of units. These include spinning, composite, independentweaving, finishing, garment, terry towels and knitwear units (see Table 1).While many of these activities are undertaken separately, some compositefactories combine these different tasks.1 The most water pollution appears tobe generated from wet processing within composite firms.2 Though it isdifficult to assess exact the level of effluents in different sub-processes,”bleaching and dyeing” are known to contribute significantly to waste waterpollution. Thus, our research focuses on composite firms with wet processingactivities (bleaching, dyeing, printing and washing).Textile-processing units are mainly locatedin and around the major cities of Karachi (350), Lahore (200), and Faisalabad(250).

Our study focuses on the industrial estates of Faisalabad and itssuburban area of Khurrianwala in Punjab province. Of the 475 registered membersof the Pakistan Textile Processing Mills Association (APTMA),3 135 members arein Faisalabad. In fact, production from Faisalabad constitutes more that 65% ofoverall value of textiles exported from Pakistan (APTPMA, 2012; FCCI, 2012a,2012b). Faisalabad is a hub for all types of textile production. But, factoriesassociated with ginning, spinning and weaving are found in large numbersbecause of easy access to raw cotton. Faisalabad’s contribution to pollutionthrough wastewater discharge.Studydesign:In order to understand environmentalcompliance in the textile industry in Pakistan we first undertook a review ofenvironmental regulations, followed by expert interviews. We also undertook asurvey of sixty firms to obtain quantitative data on compliance and reasons fornon-compliance and ten detailed case studies.

Reviewof Environmental Regulations The Government of Pakistanhas six major environmental legislations (see Appendix-1) and detailed NationalEnvironmental Quality Standards (see Appendix-2) that apply to textileindustries. The federal environmental protection agency (EPA) classifiesindustries into three categories A, B and C on the basis of the level ofpollution released. The textile processing sector lies in category A for liquideffluents.NEQS (2001) establish standards for liquideffluents, gaseous emissions and ambient air quality and the legislations.Thepollution 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. Wereviewed most of the regulatory documents relevant to the textile sector’senvironmental compliance.KeyInformant Interviews: We undertook key informant interviews withthe Chairman, Faisalabad Region, APTPMA, Secretary General and DirectorR-Faisalabad Chamber of Commerce and Industry (FCCI), District EnvironmentOfficer (DEO)- Environment Protection Agency (EPA) in Faisalabad (districtoffice). This information is organized in the form of 10 Key InformantInterviews.

We also obtained secondary information fromAnnual Reports, Quarterly/Monthly Bulletins and/or Research Reports, documentson textile policy etc. from some of the firms and concerned departments ofMinistry of Textile, EPA, FCCI and APTPMA. We also collected inspection andmonitoring reports from the EPA in Faisalabad. Besides, interview sessions donewith district environment officers and environmental inspectors providedinformation on compliance and regulatory processes.

Surveyof Firms Wesurveyed 60 large and medium textile-processing firms from a list provided byFaisalabad Chamber of Commerce and Industry (FCCI). We selected these firmsusing stratified random sampling to ensure that firms were evenly distributedin each size class. We identified large and medium firms with the help of FCCIand APTPMA, based the number of employees working in the firm/factory as wellas the number of processing production units.4 We excluded small firms as fewadopted any EMP(s). We selected medium and large wet processing firms, whichundertake bleaching, dyeing, printing and finishing as sub-processes. We contacted firms with the help of FCCI andAPTPMA. A detailed survey questionnaire comprising of qualitative andquantitative questions was used to collect primary data.

Apart from the basicinformation- such as number of employees, amount, type and value of productgenerated, different types of textile sub-processes undertaken by the firm andpresence of environmental officers, information on inputs, i.e., technology,water, materials etc. were incorporated. We also asked indirect questionsrelevant to environmental management.  Case Studies We obtained information from 10 textilefirms, which were randomly selected from a list provided by Faisalabad Chamberof Commerce (FCCI). These firms are members of FCCI and registered withSecurity and Exchange Commission of Pakistan (SECP), which is the premieregovernment body for registering and regulating the corporates, privatecompanies and firms. In our ten case studies, six are large firms,three medium and one small.

We distinguished between large, medium and smallfirms/factories on the basis of the number of employees working in thefirm/factory as well as the number of processing production units.5 These firmsproduce outputs such as home garments, bed sheets, terry towels and processedfabric. To identify cases, we contacted Chief Executive Officers (CEOs),Technical Directors and General Mangers (GMs) – Processing formally bytelephone and then emailed our research concept note and some details onSustainable Development Policy Institute (SDPI’s) Research Ethics. Personnelwere contacted again and formally asked for the appointments for interviews.EnvironmentalRegulatory Framework The Pakistan Environmental Protection Act(PEPA) (1997) establishes a comprehensive regulatory framework for theprotection, conservation, rehabilitation and improvement of the environment,prevention and control of pollution, and promotion of sustainable development. Industrial environmental activities areregulated in multiple ways. First, PEPA’s (2000) environmental examination(IEE) and environmental impact assessment (EIA) regulations specify therequirements for a plant-level preliminary environmental review of impacts. TheEIA, undertaken by a firm, is expected to be given to the EPA, relevantindustry associations, local chambers and the library.

The EIA report includesaspects such as prediction of impacts, alternatives, evaluation and monitoringarrangements.Firms are expected to follow NEQS,self-monitor and report measurement of effluents voluntarily to the EPA on amonthly basis (Appendix 3, NEQS, 2001). Effluent samples have to be examinedand verified by an EPA certified laboratory. The federal EPA is also authorizedto establish laboratories to conduct research, measure effluents and reportpollutants to the EPA/environmental tribunalIn order to ensure compliance, PEPA (2001)allows federal authorities to levy a pollution charge on non-compliant firmsand calculate charges by dividing the established discharge rate by the unitsof production (see Appendix 3). The Environmental Tribunal Rules (1999), further,give the federal government the mandate to establish environmental tribunals. Monitoringand Enforcement Challenges The Environmental Protection Agency (EPA) isthe ‘Regulator’ assigned with the task of monitoring and implementingenvironmental laws. The EPA performs two independent roles: field monitoring(through district offices) and regular monitoring (through laboratories).

Monitoring is done through differentprocesses. First, before firms are established, the EPA issues a notice inlocal newspapers to assess if the public has reservations against constructionof plants. Next a public hearing is held to explain the purpose of the firm andusefulness of treatment plants, if are effluents being released. All wet-processing textile firms need to obtain an environmental license when theystart up. A No Objection Certificate (NOC) is issued to firms after EIAcompletion. Effluent treatment plants (ETPs) are expected to be setup withinfour months of establishing wet processing units.Firm-levelEvidence on Environmental Management Practices :In this section, we first examine firm leveldata environmental practices to understand what environmental managementpractices are adopted and whether there are differences between large andmedium firms. We then discuss a conceptual model that allows us to explain whyfirms may adopt certain environmental management practices (EMPs).

We followthis with an empirical estimation of a statistical model to understand whatfactors may be more or less important in influencing firm-level adoption ofenvironment practices. Environmental Management Practices amongLarge and Medium Firms The average firm in our sample is nearly 20years old, has 2393 employees, produces 27 mm meters of fabric and generates14,244 cubic meter amount of waste water per day. Large firms are older with anaverage age of operation at around 24 year, while medium firms are around 10years old. Large firms provide greater employment by undertaking all subprocesses – they have, on average, 4 production units. Medium firms undertake62% of all the processes. Our data includes information on nineEnvironmental Management Practices (EMPs) adopted by firms. Table 5 shows thefrequency of adoption of different practices. Thirty two percent of firms havean environmental policy in place, 72% adopt Total Quality Control (TQC) andTotal Quality Management (TQM) in production and 62% of the firms considerenvironment as subject of TQM Principles.

Some 55% of the firms doenvironmental risk evaluation of suppliers and 92% of the firms evaluatechemical hazards. Further, some 70% of the firms provide environmental trainingto their employees in some form and 85% undertake environmental audits. Some20% of the firms had Effluent Treatment Plant, while only in 15% of the firmsis the ETP operational. Figure 1 shows that 87% of firms adopt up to 2 of the 9environmental practices identified, 50% adopt 3 to6 practices, and 12% adoptmore than 6 EMPS.

EconometricAnalyses In this section, we discuss results ofregressions to investigate the factors that influence the adoption ofenvironmental management practices (EMPs) by the firms. We estimate fourregression models: three Probit models and one count data model. For Probitmodels, we use three different measures of EMPs, namely TQEM, SRISK andETRAINING, as a dependent variable. In the count data model we consider Negativebinomial and Poisson models. The Poisson model assumes that mean of the countdependent variable equals its variance, but the negative binomial relaxes thisassumption and becomes a less restricted model (Greene, 2012). When we comparethe mean of the count dependent variable (5.16) with its variance (5.80) in ourcase, 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, weestimate the count data model using negative binomial regression model.CaseStudy Findings on Compliance Aspreviously noted, we also undertook case studies of six large firms, threemedium 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 inKhurrianwala-Faisalabad. Large firms employ 4250 workers on average, have 3 to4 production units and exported, on average, 72 million USD worth of textilesduring 2012.

They undertook all five types of processing (i.e. bleaching,washing, dyeing, printing, finishing).The medium forms we studied are based inKhurrianwala (2) and Faisalabad city (1). They employ an average of 2000workers and usually have two production units, undertaking the ‘printing’sub-process only.8 Average annual exports were at 15 million USD.

Our finalcase study was of one small firm located in Khurrianwala, with 250 workers, oneproduction unit and undertaking the “printing” sub-process. The firm sold itsoutput in the local market.  Environment and Water Management In terms of environmental management, firmsfollow different environmental management practices in different degrees .Three of the large firms don’t have any specific code of conduct but follow acorporate policy, while one has its own environmental management system as itscode of conduct and has SA 80009 in place. Only one large firm has a compliancedepartment focusing on the firm’s code of conduct.10 All the six large firms and three mediumfirms have senior management and front line managers who are well educated andaware of environmental regulations. The large firms conduct workshops/campaignsto inform the labor force about health/hygiene/safety/waste management issuesin collaboration with APTPMA and EPA.

Five of the six large firms undertakeregulatory and/or non-regulatory liquid waste assessments as a result of theirinternational customer requirements. These assessments involve identificationof disposal of total waste water discharged by firms. Five of the six largefirms also undertook compliance appraisals on a regular basis. Such appraisalsprovide evaluation of the firms’ actions taken on protecting environment whichis done by internal auditors/firms’ managers.

The remaining five firms did notconduct such assessments.Compliancewith International Standards There are several ways in which firms seem tocomply with international norms and standards. Five of the six large firms haveacquired 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 onlychemicals and dyes that are imported and certified internationally. Two of themedium firms perceive pressure from international customers; therefore theyhave to take preventive measures to avoid high levels of effluents.

They complyby either importing certified chemicals and/or by testing their final fabricproducts at certified international laboratories. Finally, the small firmreleases high levels of effluents as it uses locally manufacturedchemicals/dyes/paints and waste water is discharged directly into the sewersystem without any treatment.  Discussion There are several criteria for judgingwhether 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 bestindicator, we have information on the presence of ETPs, existence of differentenvironmental management practices, international certification, and the typeof chemicals used in the manufacturing process. Some medium firms do seem to respond tointernational pressure. For example, this pressure is felt by medium firms thatare working for exporters or those who are directly exporting to Middle East,China, India, Russia and Central Asia. Medium/small firms are also subject tosome local stakeholder pressure.

However, this is limited because communitiesand their livelihood is also dependent on these firms.Medium and small firms are much more subjectto inspections and monitoring from regulators. They have also been fined by theEnvironmental Tribunal. However, firm managers, the APTPMA chairperson and EPAofficials all suggest that these firms do not comply with the laws. The mainreason for this is because fines are low and it is possible to bribe EPAofficials to withdraw charges.Conclusionsand Recommendations Sixmajor environmental regulations in Pakistan have oversight over environmentalpractices in the textile sector. Pakistan also has National EnvironmentalQuality Standards that would apply to many of the effluents released by thetextile sector.

However, a number of institutional deficiencies hinder properenforcement and implementation of these regulations. While the EPA does inspectand take actions against non-compliant industries through legal proceedings inthe local high court and environmental tribunals, the fines charged appear tobe too low to change firm behavior. On the implementation side, the EPA has adearth of human resources, which makes monitoring difficult. These budgetaryand human resource challenges have been aggravated since the Federal Governmentdecentralized its environmental monitoring functions to state EPAs in 2010.There are generally nine differentenvironmental management practices that are adopted in the textile industry.

These range from environmental policies to environmental training for employeesto international certification. Our survey of firms suggests that 87% of firmsin our surveyed sample adopted more than two environmental managementpractices, 50% adopted more than five practices, and 12% adopted all nineidentified EMPS.Within the textile industry, large firmsfollow different environmental practices relative to medium firms.

Large firmsare likely to have an overall environmental policy and are more likely to takeon more environment related management practices. They are also likely to feelmore pressure from international buyers relative to medium firms. Acknowledgements We acknowledge thefinancial support in conducting this study.

The team benefited from technicalcontributions of our advisor. She really put a lot of effort to this study andmade it possible to bring it into the final shape. We are also thankful to forhelping in proposal development and her encouragement at every stage of thestudy.