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Far Eastern New Century: Partner in sustainability for top global brands

Far Eastern New Century:  Partner in sustainability for top global brands

Source:Ming-Tang Huang

Nike, Adidas, Lululemon… when these major global brands call out their goals for environmental protection and net zero, they look to Far Eastern New Century. How has such a venerable textiles foundry established such a big name for itself in the Environmental, Social and Governance (ESG) realm?

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Far Eastern New Century: Partner in sustainability for top global brands

By Teng Kai-yuan
From CommonWealth Magazine (vol. 732 )

Tracing its origins to Shanghai, Far Eastern New Century (FENC) has more than 70 years of history since its establishment as Far Eastern Textile Limited (FET). But when it comes to Environmental, Social and Governance (ESG), this old soul is not the least bit old fashioned.

FENC Chairman Douglas Hsu says that the bigger the client’s brand, the more emphasis they place on ESG. “The pressure is unbelievable,” he says.

However, the more demands brands place on ESG, the more it benefits FENC.

To understand why, we must go back to the textile industry and upstream petrochemicals industry coming under fire from environmental advocacy groups for their high energy expenditure. Yet, for the past 30 years FENC has constantly developed environmentally friendly materials and new production processes, accumulating technology that set it apart from the rest of the industry and has made it the designated cooperative partner of names like Nike and Adidas, and Parley for the Oceans.

Three decades ago, beverage bottle materials had just transitioned from glass to plastic. Plastic bottles are light and strong, and quickly replaced glass to become the favorite of the major beverage companies.

Before PET bottle recycling techniques and an ecosystem were in place, disposable bottles posed major headaches for society.

With the government’s encouragement, Far Eastern Textiles (FENC’s precursor) co-invested with the Shin Kong Group to develop PET bottle recycling technology.

The technology had not been introduced before in Taiwan. With the joint venture losing money year after year, Shin Kong withdrew, while FET gritted its teeth and bought out the rest of the shares.

50% of Taiwan’s PET bottles recycled and reconstituted

According to Huang Po-hsiung, director of product development at the Taiwan Textile Research Institute, few people thought much of environmentally friendly materials at first. “Over the past 30-plus years, Far Eastern has been the one big name in PET recycling.”  

As a result of sticking to its guns, Far Eastern New Century has been able to help the petrochemical and textile industries develop the most feasible and economy-of-scale carbon-reduction solutions under the existing level of technology.

Compared to fiber made directly from conventional petroleum, recycled fiber made from raw material recycled from PET bottles reduces greenhouse gas emissions by 63 percent.

Half of Taiwan’s PET bottles are produced from materials recycled by FENC. It is also Japan’s largest bottle recycler, helping FENC hold steady as the world’s second-largest name worldwide in polyester recycling.

“The idea at the time, while developing the technology, was that plastic bottles are disposable after one use, which is quite wasteful,” says Douglas Hsu.

Five years ago, FENC exclusively helped Adidas develop the world’s first sneakers made from marine waste, helping Adidas capture the marine waste recycling spotlight.

At the time, Adidas dispatched representatives to Taiwan to present a sustainability award to FENC. “All we did was propose an idea, and didn’t know how it would play out. And Taiwan unexpectedly pulled it off,” related Kelli George, at the time the senior material manager for Adidas, in an interview with CommonWealth following the awards ceremony.

(Source: Parley for the Oceans)

Not just Adidas, but Nike also wanted to develop a groundbreaking waterless dyeing process. And they came to FENC to achieve it.

With conventional dyeing, over 100 liters of water are expended for each kilogram of cloth material for the dyes to adhere to the cloth. In contrast, a waterless dyeing process does not require water or chemical catalysts; instead, it uses carbon dioxide as a medium in place of water.

What is more, over 95 percent of carbon dioxide (CO2) that is liquified under high pressure can be circulated and re-used.

Branding raw materials, like Intel

According to Huang Po-hsiung, FENC has been able to become the designated partner of brands for new materials innovation and manufacturing process development because it offers various advantages. Foremost is the long-term trusted relationship it has maintained with brands, and due to FENC’s capacity for developing unique products, the innovative materials it has developed have won various brands notoriety and acclaim.

“Similar to the ‘Intel inside’ moniker in the electronics industry, we have steadily taken that route,” says Humphrey Cheng, corporate management president of FENC.

Establishing a stellar reputation among major global brands has become FENC’s most effective weapon for acquiring new clients. Recently, high-end sports apparel company Lululemon sought out FENC when it was working to introduce a new recycled fiber product line. Presently, it is preparing to expand the new line.

Identifying environmentally friendly products as the prevailing trend, FENC is also deploying resources in Japan, Vietnam, the Philippines, and the United States.

“After so many years of sticking it out, these products are now finally products that everybody needs,” remarks Cheng.

However, the technology development process - from nothing to profitability - is a long one. And Humphrey Cheng admits that the company has had frequent internal debates about whether it is worth taking on the risks.

The most practical issue is that the company must constantly toss money around. Over the last few years, FENC has continuously invested, while steadily increasing capitalization. Yet many projects have died on the vine over the course of developing new technologies.

Far Eastern New Century has an innovative solution that allows the capital market to support investment-heavy innovation and green transformation.

The method involves sourcing funding according to the ESG concept. European banks have been a great help to FENC, reports FENC chief financial officer David Wang. Green bonds are a financial tool that have been in practice for years in Europe, but up to six years ago no one in Taiwan had implemented them.

Accordingly, around six years ago Europe-based banks such as HSBC, BNP Paribas, and Banque de l'Indochine approached FENC, looking to issue green bonds. “We actually didn’t understand them at the time,” recalls Wang.

However, everything came together the following year when the Financial Supervisory Commission was looking to introduce green bonds in Taiwan. And so, on the heels of China Petroleum, FENC became Taiwan’s first private enterprise to issue green bonds.

This green bond was used to develop waterless dyeing, as well as the development of polyester recycling technology.

(Source: Ming-Tang Huang)

Over the past two years, FENC has continued to employ ESG to secure relatively inexpensive capital. For example, the sustainability index financing the company in cooperation with Banque de l'Indochine, and the social responsibility bonds issued jointly this past May with KGI Securities, were firsts for Taiwan.

“The cost is only about half of that of typical financing,” Wang reveals.

Nine-year-old report reveals ambitions

Humphrey Cheng notes that the company’s achievements on this difficult journey would never have been possible without the support and authorization of the big boss behind the scenes. Niven Huang, general manager of KPMG Sustainability Taiwan, relates that “Douglas Hsu has a tremendous amount of ideas, and he’s keenly interested in new things.”

Even at the ripe old age of 80, Hsu still takes personal interest in ESG, making sure to attend every internal ESG meeting at the company.

In 2015, the Taiwan Stock Exchange required all listed companies with at least NT$5 billion to compile a CSR report. But FENC was already three years ahead by then.

Looking at this report from nine years ago, the issues that have finally come into focus for Taiwanese businesses only over the last few years, such as climate change risk management and sustainable supplier management, were already on FENC’s radar at the time.

Greatest fear: That Taiwan won’t be able to keep up

Last year, FENC also became the first chemical fiber corporation in Taiwan to sign on in support of the Taskforce on Climate-related Financial Disclosures.

Embracing key green technology, and having engaged in ESG earlier than industry colleagues, FENC nonetheless continues apace. At this time, they are working on developing technology to turn recycled clothing into new clothing, creating a closed circular economy.

Right now most old clothing goes into landfills or is chopped up to be turned into filler material, making it impossible to be re-manufactured into new clothing. If old clothing can be broken down and then made into new clothes, it would transform the ecosystem and business model of the entire textiles industry.

Nevertheless, Douglas Hsu worries that Taiwan’s energy transformation is proceeding too slowly, and that the proper infrastructure is not yet in place. Consequently, industry’s energy use and carbon output remain significantly higher compared to Europe.

Far Eastern New Century has begun installing solar panels and biomass energy production within its plant facilities, and is also planning the autonomous installation of wind power generators.

“Achieving carbon neutrality by 2050 is too slow. FENC wants to achieve that goal more quickly than that, but there’s still a lot to overcome before then,” he says. And although Hsu will not easily claim that the company has achieved net zero emissions, it has taken steps to be well on its way to getting there.


Have you read?

♦ TSMC’s bold net zero pledge: Cutting a Taipei’s worth of emissions
♦ Taiwan Startups Develop Plastics-Free Products
♦ How Douglas Hsu Commands 10 Business Divisions and 200 Companies

Translated by David Toman
Edited by TC Lin
Uploaded by Penny Chiang

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