'There Is A Clear Business Case For Adopting Sustainable Business Practices'

Rendezvous

'There Is A Clear Business Case For Adopting Sustainable Business Practices'

Amit Spinning Industries, from being a manufacturer of conventional yarns, has, over the years, moved completely into sustainable cotton and spinning programmes - organic, Better Cotton Initiative, REEL cotton. In a free-wheeling interview with Reena Mital, Amit Shah, Director, Amit Spinning, speaks about the emerging trends in sustainable cotton, the cotton supply chain, and the green movement.

How are the Indian cotton and spinning sectors doing currently?

These are interesting times for the cotton sector. Hopefully, bans on cotton exports are a thing of the past. Even as Bt cotton rules the roost, there is a perceptible shift towards sustainable cotton production. Some domestic players have started to get listed on the MCX, this is an emerging trend. Area under cotton is increasing, states like Rajasthan and Orissa are becoming serious cotton growers.Of course, some problems persist. Cotton yield still remains low at around five quintals per acre. In organic cotton, my farms in Gujarat have achieved 10 quintals an acre, some Bt farmers have achieved 14 quintals an acre. There are farmers in Gujarat who have even gone upto 22 quintals an acre in Bt. This shows the sheer potential to increase yields. The cotton supply chain remains inefficient, due to the logistics costs and lack of infrastructure. It is almost five times more expensive for me to get cotton from Vidarbha to the north or south of the country, compared to shipping the same amount of cotton from JNPT to Shanghai.Cotton consumption, over a period, has increased by 200,000-300,000 bales per month, indicating that India's spinning sector is growing. China's cotton policy has also helped Indian spinners.But post-spinning, we have a problem, which impacts apparel exports.

You have moved into sustainable cotton. How is the market for this?

We are witnessing exponential growth in this market. I believe that sustainable cotton and sustainable textiles lend a USP to the companies in this niche segment. There used to be organic cotton, with its limitations on yield, so convincing farmers to move into organic was not easy, especially as minimum support prices for conventional cottons was quite high.Today, a lot of sustainable programmes are available, which I would say are watered down versions of organic, but are still good as they look holistically at the various factors in farming. These sustainable programmes allow Bt, pesticides, but in a controlled manner, they address social aspects, water and soil management. So if organic is heaven and conventional cotton is hell, then all the sustainable programmes are somewhere in the middle. And these programmes appeal to farmers, they don't loseproduction and productivity, these programmes follow a practical approach - uplifting economic level of farmers in a sustainable manner. That to me is a very big thing.

How much is your cotton production?

In 2013-14, we produced 100,000 bales of organic cotton, and an equal quantity of Better Cotton. Next year, BCI will triple to 300,000 bales, by increasing the area in Gujarat, and also we will start producing in Maharashtra. We also did REEL cotton, for one brand. Our farms are in Gujarat, Maharashtra, Orissa.

How important is the Bangladesh market for your sustainable cottons?

It is a very important market for us, for both cotton and cotton yarns. As you know, we have moved completely into green cotton, and have been nominated by brands to whose supply chain we supply. These brands source huge amounts from Bangladesh, and consequently this becomes a very important market for us.Bangladesh is getting a lot of orders for sustainable apparel. And the country has a lot of facilities that match up with the most prevalent standards in organic and sustainable textiles. Bangladesh boasts of some very good textile and apparel factories complying to international standards and more. Unfortunately, it is the bad examples that stand out.

To what extent was your business in Bangladesh impacted due to the cotton policy turmoil in India?

That affected us greatly. There is a cost advantage for Bangladesh to source cotton from India, and a lead time advantage. But those two years, when the Indian government banned cotton exports resulted in a lot of companies in Bangladesh losing money as they were too dependent on India. That has tarnished India's image. So, India, as a cotton sourcing destination now comes as a fourth alternative after Brazil, Africa, Uzbekistan.Our yarn exports were not impacted, as policies did not change, and Bangladesh still does not produce enough yarn to meet its local demand.

What are your views on the Roadmap to Zero Discharge of Hazardous Chemicals? How achievable are the targets?

We've had a lot of time to clean up our act, the industry has made a lot of money in the last few decades, running the way it was, now it is time to invest in running sustainably. And the top 10 percent of the industry that is doing this, has reaped immense benefits. So cleaner production practices, social and environmental practices are doable, and they are doable by 2020, if the industrymakes a conscious effort. There is a clear business case for investing in sustainable practices, and the industry will eventually have no option but to comply. Those who continue with the age-old practices, and term `sustainability' as a fad, will receive a nasty jolt, like Tirupur.

Brands like M&S, and others have made a lot of commitments, but not really started much work on the same in India...

I think they are pretty aggressive. Indian businessmen need to understand that if we don't fall in line, we will be out of business. Following sustainable business practices is not a luxury, it is a necessity. The pressure is from the consumers. And there are quite some brands who have been working towards sustainability for many years.

The industry talks of higher investment costs for becoming compliant, even as buyers keep their prices unchanged...

We need to look at this as a USP. Today, India has no basic USP left for its textile commodities, so why not take this as an opportunity. That is how we started at Amit Spinning. And in six years, our turnover grew from Rs 10 crore to Rs 300 crore. We realised that the value is at the farm and at retail, everything else is conversion process. So we went to the farm. Then we started approaching brands. The story was sustainability. We connected two of the farthest chains of the spectrum, and got retailers to come to the farms, and in sustainable cotton the supply chain is transforming phenomenally. And first movers are reaping a lot of monetary benefits too, they are flooded with orders.In one of my deals this year, the brand negotiated with me directly on the cotton prices, and though the L/c was opened by the spinner, the price was decided by the brand, and I was told how much cotton goes to which spinner. That is the level of involvement that brands have in the supply chain today.

Is this better than negotiating directly with spinners?

For me, in some sense I would say yes, because I am assured of sure deals, and large quantums going through, uncertainty is reduced, so is volatility.Retailers are following a cost plus approach here, and sustainable cotton is a good starting point. From a brand's perspective, they don't really care if you are selling cotton five cents cheaper or higher, per se, their concern is once they announce the retail prices for a season, they cannot change it for four-five months, whatever be the price of the raw material. So they would like to lock the prices of the variables for six months. Conversion charges don't change drastically. This year they really nailed it, they placed orders for six months when the cotton prices were at the lowest. So they got very good deals. I expect next year, that my buyer will probably even open the L/c for cotton. This trend could catch on.