Global production and trade of raw materials, finished textiles and used clothing have a profound impact on local and global water resources at each stage of the textile life cycle – raw materials production, washing-dyeing-finishing, consumer use, and recycling or waste disposal. With rising textile demand, the associated impacts of virtual water trade ripple outwards: depleted and polluted rivers, lakes, aquifers and coastal waters lead to degraded ecosystems as well as loss of livelihoods and access to clean drinking water. Meanwhile, poor labour conditions and unreliable access to water and sanitation compound pressures on workers and local communities. These impacts often occur in countries distant from consumers, yet they reverberate through the value chain, limiting sectoral growth in water-stressed regions, increasing operational costs and, in turn, affecting prices. Given the global nature of the textile value chain, water scarcity and declining water quality at one or more points along the chain can disrupt onward supplies.
Much of the projected growth in textile production in the coming decades will be concentrated in countries in the Global South – both long-established producers and emerging hubs – whose economies rely, or increasingly rely, on the sector. Mounting ecological pressures, including on water availability and quality, bring a range of socio-economic, environmental and geopolitical challenges for countries that are central to the textile value chain. Understanding how textile trade flows embed virtual water that moves between countries, and what implications they carry, is therefore critical for governments, investors, companies, producers and consumers.
Addressing the substantial water footprint of textiles demands a global commitment to water-efficient and non-polluting practices across the value chain, supported by robust water governance and trade policies, supply-chain transparency and investment in innovation, along with sustained efforts to build consumer awareness of the impacts of water-intensive goods. By taking a whole-value-chain approach, collective actions have the potential to transform the textile sector from a driver of water insecurity and pollution to a catalyst for resilience and equity. The challenge is immense, but so too is the opportunity: to build and uphold a textile value chain where water is not wasted, polluted or hidden, but instead respected, safeguarded and shared equitably.
Strengthening governance frameworks
Strengthening governance of virtual water flows is becoming increasingly urgent as global value chains intensify the movement of water-intensive goods across borders. It is not just established producing and importing countries that need to take action. So do the countries and regions that are in the process of expanding their textile-related economic activity, and are therefore facing new challenges in water and waste management that need to be addressed through strengthened regulatory and enforcement frameworks.
Concern for the social and environmental impacts of textiles has been an impetus for an array of mandatory regulations and voluntary schemes. However, many of these remain siloed – focusing, for instance, on a particular stage of the value chain, or on one or just a few of the associated critical environmental and social issues. Across the industry, uneven adoption of such measures, and the specificity of many, leave gaps and loopholes that impede progress towards sustainable, equitable and secure value chains. Standardization and greater compliance across key regulations and supply-chain disclosure mechanisms are therefore needed.
Some countries are pursuing regulatory reforms to accelerate the shift towards textile production methods that use far less water, lower the emissions footprint of textiles and strengthen the circularity of textile waste. The EU has positioned itself at the forefront of such initiatives: its Ecodesign for Sustainable Products Regulation (2024), for instance, introduces durability, repairability and recyclability mandates, along with Digital Product Passports for almost all products sold in the EU. Amendments to the Waste Framework Directive (2025) mandate the separate collection of textiles from 2025 and introduce EPR schemes. Regarding textiles in particular, such policies are positioned to reduce water use through the use of fibres that are sustainably sourced, and to channel brands’ and retailers’ resources into water-sensitive collection, sorting and recycling systems. While these measures represent a significant step forward in addressing the environmental impacts of the textile sector – including its water footprint – their success hinges on buy-in at all stages of the value chain. This means that proactive engagement of the private sector to identify and mitigate specific barriers to implementation will be essential to ensuring these measures are operationally viable.
A concerted move towards more sustainable and circular production is needed. Bringing innovative practices to scale will require investment. Fibre cultivation through regenerative methods has shown improvements in soil health, improving water efficiency and supporting biodiversity, and builds ecosystem resilience over time. One obstacle to scalability is context-dependent ecology and supply chains based on traditional, monoculture farming. Expanding the application of regenerative methods requires better peer-to-peer sharing of knowledge on best practices, increased research into localized applications, and a systemic move away from monocultural supplies. But, without deliberate risk-sharing mechanisms, such a shift would deepen inequalities, while producers in exporting countries have limited capacity to absorb the short-term costs of transition. Embedding de-risking measures is therefore essential to ensure that supply chain transitions are both effective and fair.
Using trade levers to bolster water security
With water-related risks expected to intensify across major textile-producing regions, building basin-level resilience and using trade relationships to improve water governance and achieve fair water footprints will be critical to mitigating water scarcity and quality degradation. Given the transboundary complexity of the textile value chain, trade policy is among the few instruments with the reach to address cross-border trade-offs. This means that trade mechanisms can play a vital role in tackling water insecurity. Product classifications are not well suited to monitoring water- or emissions-intensive production directly. While classification systems alone cannot capture these differences, they could support supplementary environmental designations that encourage more sustainable production practices. If added, such designations could be a lever to incentivize producers to act in responsible ways.
In 2024, the Global Commission on the Economics of Water emphasized that the true value of water must be reflected in domestic and trade policies if virtual water flows are to be prevented from exacerbating water scarcity in exporting countries. Trade that fails to factor in the real economic cost of water will otherwise create distorted economic incentives that prevent accurate pricing of traded goods. Trade agreements that value water correctly can foster more balanced trade in virtual water and help achieve sustainable, efficient and equitable water use across value chains. To do so fairly, tiered charges – with higher rates for large-scale industrial withdrawals, especially in water-intensive sectors such as textiles – can be applied by governments, while essential domestic needs remain free or low-cost. This can build incentives for the industry to improve water use efficiency, while avoiding regressive impacts on households and smallholder farmers.
When environmental standards tighten in textile-producing or consuming regions, there is a real risk that the most water-intensive and polluting activities are simply relocated to regions with weaker regulation, lower enforcement capacity or more economic vulnerability. This burden-shifting means a trade-off between progress in one region, and worse social and environmental impacts elsewhere. Trade agreements should incorporate differentiated responsibilities and support mechanisms for textile-exporting countries, such as phased implementation, financial assistance and technology transfer to help regions facing structural constraints maintain equitable access to export markets. To ensure these measures go beyond purely reducing the volume of water used in production, requirements should be guided by principles of fair water footprints, which also emphasize equity, sustainability, accountability and context-specificity.
Accelerating uptake of best-practice innovations
Ensuring that textile value chains remain stable and sustainable in a water-constrained world demands rapid acceleration of the development and implementation of innovative practices and technologies. Examples of more sustainable production practices at all stages of the textile value chain are being tested, driven both by consumer demand and recognition on the part of companies and investors of the potential severity of water risk for their supply chains and financial viability. Scaling and advancing innovations need to be supported by governance that encourages innovation, industry platforms that facilitate knowledge transfer, research investments and market-driven incentives.
Regenerative agriculture programmes are notably expanding in cotton cultivation. Under one such scheme, farmers in Gujarat, India, who participated in CottonConnect’s REEL Regenerative Programme achieved 14 per cent savings in water use after just two years. Adopting regenerative practices in other cotton-producing countries – including among emerging large exporters such as Tajikistan – combined with strengthened water governance, will be essential for improving the sustainability of future water use across the sector. Although regenerative methods can improve ecosystem resilience over time, scalability is constrained unless there is support, in parallel, for a systemic shift away from monocultural production.
In Bangladesh, factory-level investments in water reuse and efficiency are also proving effective. Some examples of progress under the Partnership for Cleaner Textile (PaCT) initiative have demonstrated that counter-current flow in continuous washing technologies and recovery of cooling water have cut water use by 14 per cent. Another such example identified that installing a caustic recovery plant enables 90 per cent sodium hydroxide reuse, significantly reducing effluent pollution loads. Demonstration projects are also moving towards near-zero liquid discharge. For instance, Bangladesh’s first membrane bioreactor effluent treatment plant that recycles treated wastewater for use in textile production processes enables high recovery rates in line with ZDHC standards.
Globally, less than 1 per cent of textiles are recycled to produce new textiles, underlining the need for further deep investments in infrastructure, governance and enforcement. There are also opportunities for value-added industry in countries now burdened by waste. Ghana, for example, has the potential to develop repair and upcycling industries that could re-export higher-value products to Europe, provided EU regulations are designed in such a way that clarifies how such goods can re-enter the market as compliant products rather than being misclassified as waste. Similar opportunities exist in South Asia, where fibre-to-fibre recycling could move beyond low-value downcycling if supported by technology transfer and investment. Designing such initiatives to integrate women and other marginalized groups, including informal workers, in formal EPR schemes, with safe working conditions and fair pay, also brings opportunities to promote circularity that is socially as well as environmentally sound.
