Markets that have freedom to source are more competitive; trade barriers create distortion: Lenzing CEO

Textiles is one of the few industries where supply chains can move extremely fast, which means depending on geopolitical tensions, market competitiveness, trends, and fibre types, you do see certain shifts take place in supply chains. Therefore, it’s very important for the textile sector to be able to source material, work through the supply chain, and stay competitive. Two, sustainability has always been on the agenda but in the last three to five years, it has grown multifold. It’s not just climate change concerns or regulations to meet carbon emission targets, but it’s also consumers getting much more aware. From a trend standpoint, that’s going to accelerate even further, which is why industry needs to be able to source environment friendly fibres. Three, innovation and access to innovation is going to be key. To stay competitive, industry not only has to do more of what they’re doing in a more cost efficient way, but access to innovation allows them to do things differently and better. Among these three parameters, the industry has to make choices on how to remain competitive.

India brought in a QCO on the import of viscose fibre in 2023 to ensure that poor quality imports do not enter the domestic market. There have also been concerns around dumping of viscose fibre from ASEAN. Now, your units in Europe got the Bureau of Indian Standards (BIS) certification needed to export to India but your Indonesian and Thai units are yet to receive it, making it difficult for them to access the Indian market. How do you look at this situation?

Lenzing Group operates to the same standards everywhere. We do not differentiate in terms of what and how we produce in our sites in Europe or in Southeast Asia. We have strived very hard to not only meet regulatory standards, like the BIS standard for viscose fibre, but we have our own standards that are compliant or even higher than those standards. Our customers continue to ask why they can’t get our fibres from Southeast Asia and it becomes a challenge for Lenzing to not be able to participate and help the industry gain access to them.

I would appeal to the regulators and the industry that they will be in a better place and not in a lesser place by allowing the approval of our two sites. Any kind of trade barriers create, in the end, a distortion of free market economics. While it may seem initially that it is helping the industry, in the mid- to long-term that always creates other challenges for industry competitiveness. We do see that markets which have the freedom to source and to choose are going to be more competitive and that’s just because they have access to a better choice available.

There has been a lot of focus on increasing foreign direct investment (FDI) into India and strengthening domestic manufacturing supply chains. Does Lenzing see itself setting up a unit in India?

With Lenzing being a global company, we are always going to look at markets which are attractive and India would be no different. The challenge that we have is that if today we are not even able to participate well, then it makes it very difficult for us to think about investments. If we were able to trade, that’s the first step always, that allows us to ensure that we are able to serve customers, and when we build the business, the investment case becomes very attractive. India remains a key market for textiles, and we believe that Lenzing should be there as long as we are able to trade in an open and free environment that allows us the opportunity to assess our investment case.

In India, the textile industry is still heavily tilted towards cotton and among man-made fibres, polyester dominates. Where is the scope for viscose in terms of demand and growth?

Cellulosic fibre will remain a preferred fibre in many areas of articles that human beings consume. Coming from India myself, I’ve seen that cotton was always a preferred fibre of choice. The challenges with that are that cotton continues to diminish in its ability to increase production because the acreage is limited. It’s also very much affected as a natural crop with challenges around climate control and so on. The industry has to look for a similar fibre to fill what we call a cellulosic gap, which is going to be filled by man-made fibres. Today, man-made fibres are plant-based, they align with the sustainability angle and also give the comfort, feel, and touch that people get from cotton.

Countries and economic blocs are likely to begin enforcing sustainability standards in the trade of textiles. Is that a concern?

The regulation will come and it is not a bad thing because it brings more transparency and discipline. It also separates responsible companies from others and helps the end consumer with choices they should make for responsible fashion. We have FSC (Forest Stewardship Council) certification. We know the source of our raw material supplies. If all players do this, the industry will have a positive impact. In the end, transparency and traceability of the industry supply chain is a crucial issue. A few years back, a major concern among brands and retailers used to be water and energy utilisation. Now, concerns are around transparency, traceability, and their ability to say with confidence that the products they use have come from sustainable sources. It is important that the certifications and the regulatory framework allows the industry to move to a better place.