Indian Textiles have invested regularly in sustainable practices over the past two decades. But the thrust on sustainable practices like new rules like the EU’s CBAM and complying with ESG norms call for a paradigm shift in supply processes.
Among the positives, the textile and apparel sector in Tamil Nadu contributes more than 50 percent of installed renewable energy capacity in the State; nearly 300 textile processing units in Tiruppur are connected to common effluent treatment plants with zero liquid discharge; in Panipat, Haryana, open-end spinners use only recycled fiber; and India recycles almost 90percent of its used PET bottles into fiber.
There is a palpable concern in India’s textile sector, dominated by small businesses – the Micro, Small, and Medium Enterprises (MSMEs), about the impact new rules like the EU’s Carbon Border Adjustment Mechanism (CBAM) would have, aside from complying with the ESG standards. But there is also recognition that this might be the moment to attempt a paradigm shift in sourcing, production, pricing, and supply processes to cement the sector’s position as a top global supplier.
Experts say exporters can leverage the benefits of India’s potential free-trade agreement with the EU only if they invest in sustainability. It also requires considerable documentation of various sustainable and inclusive social practices the sector has already achieved. Indeed, some of it, like the social indicator of employing rural women in large numbers, has helped the industry.
Clusters like Tiruppur are showcasing their collective green footprints. At Heimtexil in Frankfurt next month, exporters from Karur will showcase carbon credit data and sustainable home textile products, and the AEPC plans to curate shows of sustainable garments.
Representatives of global clothing brands have already begun visiting garment and fast fashion clusters to deliberate on ESG compliances. A leading garment exporter in Coimbatore said compliance with ESG norms is mandatory “just to continue to be a supplier.”
India exports 16 percent of its cotton textiles to the EU, 40 percent of its synthetic fabric, and about a third to 28 percent of its total apparel exports to European countries.
The Indian Ministry of Textiles has formed an ESG task force and is considering supportive interventions for the industry; industrial associations are joining hands with organizations that will enable exporters to put systems in place, document the measures taken, and get the required certifications; the Cotton Textiles Export Promotion Council (Texprocil) is promoting Indian cotton brand Kasturi that comes with traceability; and some of the financial institutions are reaching out to MSMEs to fund green and sustainable projects.
Despite these positive strides, significant hurdles remain for the sector to meet various mandates, as almost 90 percent of garment exporters are MSMEs and 50 to 60 percent of cotton and synthetic exporters. And these compliances and documentation come with additional costs, thinning the units’ margins.
Rakesh Mehra, Chairman of the Confederation of Indian Textile Industry (CITI), pointed to challenges in complying with supply chain sustainability norms. “Orders will go to those who are compliant. But, big companies may not manufacture products that smaller ones do,” he said.
SK Sundararaman, chairman of the Southern India Mills’ Association, points out that labor issues vary in each textile/garment-producing State. “ESG talks about ‘living wages.’ It will be different in each State, leading to differences in labor costs,” he says.
Another example is the use of recycled fibers. Tiruppur already sees imports of hosiery waste from Bangladesh as demand increases for recycled fiber. But the quality of regenerated cotton differs from fresh cotton, so it can only be blended in specific quantities, say garment producers.
Overseas buyers are helping the suppliers with inputs to meet mandates, and currently, they are insisting on norms only with tier-one suppliers. But, norm compliance increases the product price significantly, and buyers are not supportive.
The Synthetic and Rayon Textiles Export Promotion Council (SRTEPC) advocates exemption for MSMEs from ESG norms in the proposed FTA with the EU. The EU has exempted its MSMEs from ESG norms, and the Indian government must ask for a similar treatment for India’s textile producers, they say.
There are other concerns, like the increasing use of recycled or regenerated material across the production process, but domestic consumers need to be made aware of such developments. Retailers do not sell them in the local market as sustainable products, reducing the premium price from domestic consumers.
Exporters say another fallout of implementing ESG norms would be reducing the fashion seasons. Some brands have more than ten fashion seasons in a year, which is likely to reduce with an emphasis on circularity and reuse.
Exporters also apprehend the possible linking of ESG norms to trade negotiations. “The world is moving towards recycling. However, when policies related to social and environmental concerns are linked to trade policies, they could become barriers,” said Siddhartha Rajagopal, Executive Director of Texprocil.