From Cost Center to Profit Driver: Strategic ESG Implementation and Economic Returns in Bangladesh’s RMG Sector
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Abstract
Purpose To explain whether, how and under what conditions environmental, social and governance (ESG) investment in Bangladesh’s ready-made garment (RMG) sector converts from a compliance cost into a source of economic return, in the context of LDC graduation and shifting EU and US regulation.
Design/methodology:Embedded explanatory case study of the Bangladesh RMG sector based on structured analysis of 56 sources, comprising legislation, standards, programme evaluations, peer-reviewed studies and official industry data. Return evidence was coded against a People–Planet–Profit–Governance framework and graded on a three-level evidence scale.
Findings:Resource-efficiency investment shows the fastest documented returns: in IFC’s PaCT programme, about 200 factories reported US$39 million in savings against US$16.3 million invested (indicative benefit–cost ratio 2.39), and more than 450 factories now save 3.8 million MWh and avoid 723,617 tCO2e per year. Quasi-experimental evidence links better working conditions to a 25% higher revenue-to-cost ratio after four years, although entry costs can be temporarily negative. Buyers do not pay green price premiums; returns therefore flow through cost efficiency, risk reduction, market access, green finance and order stability. LEED-certified factories increased by 51.9% (187 to 284) between February 2023 and May 2026, while RMG exports fell 1.64% to US$38.70 billion in FY2025–26, with 49.25% destined for the EU. Omnibus I narrowed EU due diligence scope, but forced-labour and product-passport rules keep market-access pressure high.
Originality/value Provides the first integrated cost-to-profit conversion framework for Bangladesh’s RMG sector that combines 3P and Governance, post-Omnibus regulation and graded return evidence, and identifies ‘no-regret’ ESG investments for the post-LDC era.
Practical implications:Firms should sequence efficiency, traceability and verified data ahead of reporting-specific certifications; policymakers should widen access to green finance and build shared ESG data infrastructure.
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