The global textile industry has helped transform economies from Bangladesh to Uzbekistan, creating millions of jobs and driving export growth, but the water-intensive foundations of the trade are exposing some of the world’s biggest manufacturing hubs to rising environmental and economic risks, according to a report by Chatham House.

As outlined in the report by the London-based think-tank, the clothing industry relies on vast quantities of “virtual water” embedded in global supply chains, with water consumed in cotton fields, polyester factories, textile mills and garment production sites often far from the consumers who ultimately buy the products.

“Every textile carries a hidden ‘water footprint’ – an indicator of the amount of water embedded in its production, trade, consumption and end-of-life disposal,” Chatham House said.

The report highlights a challenge facing many emerging markets: textile manufacturing has become a crucial engine of industrialisation and employment, but climate change and growing water scarcity are making traditional production models increasingly vulnerable.

Countries including Bangladesh, Pakistan, India and Uzbekistan have sought to move up global textile value chains, expanding from raw material production into spinning, weaving, dyeing and finished garment exports. But the same water pressures that helped shape their textile industries are now threatening their future growth.

“Unsustainable water use can degrade ecosystems, disrupt supply chains and threaten local communities’ equitable access to water,” the report said.

Central Asia’s cotton legacy 

For decades, Uzbekistan was one of the world’s largest cotton producers, with irrigation from the Amu Darya and Syr Darya rivers helping transform desert areas into agricultural land during the Soviet period. But intensive water use contributed to the drying of the Aral Sea, one of the world’s most severe environmental disasters.

In recent years, Uzbekistan has attempted to reshape its cotton and textile industries, reducing reliance on raw cotton exports and encouraging domestic processing to capture more value from the supply chain. The country has invested heavily in textile factories, spinning facilities and garment production as part of efforts to diversify its economy and create jobs. Yet the expansion of domestic textile processing has also increased the importance of managing water consumption and wastewater treatment.

The Chatham House report does not single out Uzbekistan among current global textile exporters, but its analysis of cotton-producing regions highlights the challenges facing countries where textile growth is closely tied to scarce freshwater resources.

Cotton production globally accounts for around 8% of the blue water footprint of all crop production and about 10% of total unsustainable blue water use, the report said.

Between the periods 1972-76 and 2014-18, the unsustainable blue water footprint of global cotton production increased by almost 20% to 70.9bn cubic metres annually. Much of that water is effectively transferred through international trade. Between 2014 and 2018, around 71% of the unsustainable blue water used for cotton production was traded virtually through exports. The result is that countries importing textiles may be relying on water use in producing countries that face far greater water stress than their final markets.

Textile growth brings jobs and risks

The textile industry employs around 90mn people worldwide, more than half of whom are women, and has played a central role in economic development across emerging markets.

Bangladesh is one of the clearest examples. The country’s garment sector has become the backbone of its export economy, accounting for roughly 80% of export earnings. Pakistan’s textile sector is similarly important, generating around $16bn-17bn in annual export earnings and contributing about 60% of export revenues in 2023. For these countries, textiles have created industrial jobs and helped integrate developing economies into global trade networks.

However, Chatham House warned that economic success can also make countries dependent on production systems that create environmental pressures. “The industry has become emblematic of both immense opportunity and significant controversy,” the report said.

Many major textile-producing regions are already experiencing water stress. Around a quarter of the global population is exposed to extremely high water stress, with 74% of South Asia’s population affected. An analysis of apparel and textile industry clusters found that 15% of facilities assessed in 2020 were located in areas facing above-medium water scarcity risks. By 2050, that figure could rise to 23%. Water quality risks are even more significant, with almost half of sites already facing high water quality risks and nearly three-quarters projected to face high to extreme risks by 2050.

From cotton fields to dye houses

Water pressures are spread across every stage of textile production. Cotton cultivation requires significant irrigation in many growing regions, while synthetic fibres such as polyester rely on energy-intensive industrial processes. Polyester accounted for around 59% of global fibre production in 2024, with China producing about 60% of global output.

The next major pressure point comes during textile processing. Dyeing, bleaching, washing and finishing garments require large amounts of water and chemicals. Poorly treated wastewater can contaminate rivers and groundwater, affecting both ecosystems and communities living near industrial zones.

“Approximately half of the water consumed in the textile garments supply chain is in the wet processing and garment production phase,” Chatham House said.

For emerging market economies seeking to attract textile investment, improving wastewater treatment and water efficiency is becoming increasingly important. International buyers are facing growing pressure from consumers, regulators and investors to demonstrate that their supply chains meet environmental and social standards. This is creating both challenges and opportunities for countries such as Uzbekistan, where policymakers have sought to attract investment into more sophisticated textile production while improving sustainability standards.

Supply chain concerns

The report warned that climate change is likely to intensify existing vulnerabilities through more frequent droughts, heatwaves and floods. Recent climate shocks in South Asia have highlighted the risks. Flooding in Bangladesh and extreme heat in India have disrupted production and affected communities already facing water pressures.

In textile-dependent economies, water insecurity is becoming an economic issue as well as an environmental one. Disruptions to water availability can affect factory operations, agricultural production and export competitiveness. Companies and investors are increasingly assessing water risks as part of broader supply-chain resilience strategies. The report said failure to manage water dependencies creates “operational, reputational and financial risks” for businesses.

Chatham House called for governments, companies and investors to rethink how water risks are managed across global textile supply chains. It said trade policies should incorporate water stewardship and circular economy principles, while governments should develop common approaches to measuring textile water footprints.

For emerging markets, the challenge will be balancing continued industrial development with more sustainable production methods. The report argued that transformation would require investment in areas including regenerative agriculture, forest conservation, recycling technologies and improved monitoring of supply chains.

“Addressing the water footprint of textiles demands a whole-of-value-chain approach, and collective commitment to more sustainable and circular practices,” it said.

For countries such as Bangladesh, Pakistan and Uzbekistan, textiles remain a vital source of jobs and export revenue. But the future competitiveness of their industries may increasingly depend not only on production capacity and labour costs, but also on their ability to manage one of the world’s most critical resources.