Navigating Sustainability: Insights from ICRA ESG Ratings on India’s Textile Industry
The Indian textile industry is at a pivotal crossroads, grappling with the complexities of sustainable practices amidst increasing Environmental, Social, and Governance (ESG) alignment pressures. A recent report by ICRA ESG Ratings, titled Sustainability Unstitched – Indian Textile Industry’s Green Gauge, sheds light on how businesses in this sector are responding to the clarion call for environmental responsibility.
The Resource-Intensive Nature of Textiles
Textiles are notorious for their high resource intensity, particularly in segments like yarn, fabric, and integrated operations. The ICRA report evaluates 19 leading companies in the industry, selected based on their market capitalization, within three core segments: Apparel, Yarn & Fabric, and Integrated. By focusing on critical ESG issues such as water stewardship, waste management, and renewable energy integration, the report underscores the urgent need for resource-efficient practices.
Water Management and Circularity Initiatives
One of the standout findings from the report is the commitment to sustainable water practices. A remarkable 74% of the evaluated companies have embraced Zero Liquid Discharge (ZLD) processes, particularly notable within the integrated segment. This indicates a proactive approach to tackle the increasing challenges posed by water withdrawal and scarcity.
On the waste management front, however, the situation is more complex. The report notes a 19% increase in waste generation intensity in FY2025—a trend attributed partially to improved disclosure practices. While this might seem concerning, a notable increase in waste recycling rates—from 77% in FY2023 to 80% in FY2025—serves as a beacon of hope, demonstrating the sector’s potential for enhanced circularity.
Governance Structures Evolving for Sustainability
An encouraging aspect of this sustainability transition is the maturing governance frameworks across textile companies. Integrated segments show leadership, with 57% having established ESG committees and 71% setting targets for emissions reduction. Meanwhile, the Apparel and Yarn & Fabric segments are slowly moving towards more structured governance frameworks. This growing focus on accountability and governance is essential for aligning Indian textiles with global best practices, particularly as the spotlight on climate responsibility intensifies.
Energy Intensity: The Challenge of Adoption
Despite progress in governance and water management, the industry still faces significant challenges, particularly regarding energy intensity. The report highlights that while renewable energy adoption is on the rise, it remains relatively low at just 8% of the total energy mix in FY2025. This underscores a pressing need for accelerated decarbonization efforts. Companies are increasingly turning to solar installations and biomass solutions to mitigate their thermal energy consumption during dyeing and finishing operations.
The report also reveals a concerning limitation in Scope 3 emissions disclosures, with only 21% of companies participating. This indicates a nascent stage in implementing comprehensive value chain measures essential for addressing overall sustainability.
Competitive Pressures and the Way Forward
As global frameworks such as the European Green Deal and the Carbon Border Adjustment Mechanism (CBAM) place stricter scrutiny on carbon-intensive industries, the Indian textile sector must act swiftly to enhance its decarbonization and circularity practices to maintain its competitiveness. The report emphasizes the need for a structured implementation of sustainability governance, particularly as the integrated sector sets an example with its commitment to dedicated ESG committees and decarbonization targets.
Insightful commentary from Ms. Sheetal Sharad, Chief Ratings Officer at ICRA ESG Ratings Limited, encapsulates the urgency of the matter: “The textile sector’s sustainability transition is underway, but the pace must quicken.” This statement serves as a clarion call for the industry to catalyze its efforts in embracing sustainable practices.
Conclusion
The journey toward sustainability is both challenging and necessary for the Indian textile industry. As companies navigate resource management, governance, and energy efficiency, the insights from ICRA ESG Ratings provide a comprehensive overview of the progress made and the hurdles yet to overcome. The textile sector, rich in heritage and potential, stands at the brink of transformative change, driven by the dual imperatives of environmental responsibility and market competitiveness.