HO CHI MINH CITY -- Fashion brands including H&M and Nike are pressing Vietnam to move ahead with a renewable energy purchase program as companies come under increasing pressure to meet their sustainability goals, Nikkei Asia has learned.
A consortium of 29 brands sent a letter to Vietnamese Prime Minister Nguyen Xuan Phuc this month urging the country to introduce direct power purchase agreements (DPPA) between private buyers and sellers of renewable energy. Currently, energy users can only buy electricity through the national utility or through small-scale projects such as rooftop solar panels.
International clothing brands, which rely heavily on Asian garment factories, are under pressure from shareholders and consumers to reduce emissions in their supply chains. Renewable energy in Vietnam -- the world's third-largest textile exporter -- is key to those companies hitting their emission targets.
"Without the DPPA we believe renewable energy development will plateau and fall short of meeting the growing energy needs of Vietnam's industries," the consortium warned in the Dec. 15 letter, seen by Nikkei.
The consortium -- which includes the second-biggest U.S. mega-retailer, Target, U.K. handbag maker Mulberry and Swiss sports brand Mammut -- said it had hoped Vietnam would launch a planned DPPA pilot in 2020, but that has not happened. The national utility, Electricity Vietnam (EVN), has a monopoly on the country's power grid, but DPPAs would allow private producers to sell wind and solar power through the grid.
PVH Corp., parent of Calvin Klein, Tommy Hilfiger and others, also signed the letter and told Nikkei it aims "to drive the fashion industry toward net-zero emissions in line with the goals of the Paris Agreement."
Another signatory, Sweden's H&M, told Nikkei that shoppers and brands expect factories and stores to be environmentally sustainable.
"The success of the DPPA pilot in Vietnam will also send important signals across the region as to the possible national actions available to meet the renewable energy requirements," the fast-fashion retailer said.
The consortium's request follows a similar move in Cambodia this summer when a group of international companies sent a letter to the government warning that the kingdom's embrace of coal would make it "less attractive" as a production base for foreign brands.
Vietnam relies on renewable energy for about 10% of its power supply, a number it hopes to double by 2030. The communist country already has the most solar capacity in Southeast Asia, according to energy consultancy Wood Mackenzie, and says it is building the region's biggest solar farm.
The government is drafting regulations for a roughly two-year pilot program to trial direct purchases. Lawyer Vaibhav Saxena expects the program will kick off in 2021. Private lawyers say preparations have dragged on because of the technical and legal complexities of bringing corporate energy producers onto a grid that has long been run by EVN.
One important purpose of the pilot program is to help Vietnam find a balance between how much electricity can be supplied by the state-owned utility and by the private sector.
"It is a win-win position, I would say, for Vietnam," Saxena, a foreign counsel at the law firm Vilaf in Hanoi, told Nikkei.
He added that Vietnam needs the direct-purchase contracts because supply is not keeping pace with demand. The country had planned to have 60 gigawatts of total power capacity by 2020, but the World Bank said in January it had reached just 47 GW.
In its letter, the fashion consortium also argued that adding more energy options will give Vietnam an edge over its neighbors.
"Implementing the DPPA will allow industry in Vietnam to reach 100% renewable energy targets years ahead of other countries in the region, helping Vietnam build a strong comparative advantage as companies make decisions about where to source products," the group said. The consortium also includes New Balance, French athletics brand Salomon, Ralph Lauren, Ireland's Primark and VF Corp., a major supplier for buyers from JanSport to Timberland.
Vietnam continues to rely on coal as its biggest power source, though Hanoi, as a party to the Paris accord on climate change, has pledged to cut emissions of greenhouse gases up to 25% by 2030.
A campaign linked to the Paris Agreement, called the Fashion Industry Charter for Climate Action, urges members to achieve net zero emissions by 2050. The companies that signed the letter to Vietnam's prime minister are members of the charter, as well.
Domestic players say the country is already making headway on green energy. Andy Nguyen, founder of the renewable energy company VES, said he is building what will be Southeast Asia's biggest solar rooftop project, for an international beverage company that he declined to name.
"There are people who are willing to invest, and there's a benefit," Nguyen said in an interview. "It's real -- it's not just a discussion or negotiation anymore."
Contributing writer Shaun Turton contributed to this article.