Interview with Robert Van De Kerkhof, Amit Gautam, S Jayaraman
Robert Van De Kerkhof, Amit Gautam, S Jayaraman
CCO, VP- Global bus mgmt textiles, Regional commercial officer respectively
Lenzing
CCO, VP- Global bus mgmt textiles, Regional commercial officer respectively
Lenzing
A study in sustainability
In the last week of May, Austrian speciality fibre-maker Lenzing announced its plans to launch EcoVero, a viscose with the lowest environmental impact in the industry. The new fibre, which Lenzing believes will set a new industry-wide benchmark in the sustainability of viscose fibres, should hit the market any time soon. Subir Ghosh spoke to Robert Van De Kerkhof, chief commercial officer and a board member at Lenzing, Amit Gautam, vice-president for global business management textiles, and S Jayaraman, regional commercial director for Asia-Pacific and South Asia, about the new product, and how it fits into Lenzing's scheme of things.
Please tell us about the backdrop to this new product.
Robert van de Kerkhof: We launched the new sustainability report in April. So the story was about how important sustainability is about Lenzing; how it is integrated into the Lenzing corporation. What are the four pillars of our sustainability strategy. And that resulted in what we call 'innovating for balance'. That's the background about what we are trying to do by driving new innovations into the market. We are trying much more to shift from being a B2B company to being a B2C company. We are trying to understand consumer insights and trends so that we can better in the market. Besides, we talk to and therefore as well understand brands and retailers.
How exactly are you planning to do that? That would be a huge task.
Robert van de Kerkhof: Yes, that's a huge task in itself. We are now doing much more market studies. We have significantly increased, in the last two years, our market research capabilities by actually talking to (end-)consumers.
Would you be doing this at a global level?
Robert van de Kerkhof: We are doing this in key markets. We did several panel tests, for instance, in 1-2 European cities and also in the US, besides six Asian cities. We are trying to take snapshots out of this (process). There are some 6,000-7,000 consumers who have been contacted by agencies for their insights. We also have to address different segments. We did this exercise for the denim industry, and so on.
How long will it take you to complete this?
Robert van de Kerkhof: We will continue to do so (do market research for insights).
Amit Gautam: It is a competency ... it is a capability that you develop and it is an ongoing process about trying to understand the market. One has to find where to focus, where not to focus, where to drive innovation. It's a segmented market intelligence.
Robert van de Kerkhof: A specific example can be from, say, the denim area. We invite a consumer for a one-on-one. We tell them bring your favourite jeans; we ask them why is it your favourite. How important is sustainability for you? What does sustainability exactly mean for you? We tend to think consumers don't understand sustainability.
Then, we test different concepts, and try to find out what indeed would a consumer understand (about sustainability). And 'recycling' comes up very high (on the responses). So, we ask 'why' (so). They do know how they can contribute, though they do not understand the recycling concept itself so well. But at least they say: I can contribute to this (towards environment). This was essentially the background to Refibra. [Note: Refibra fibres, the Tencelbranded lyocell fibres from Lenzing, are made from pulp that contains cotton scraps left over from cutting operations and wood.]
The other key thing we have identified when doing to the same to brands and retailers is that more and more of the younger people-I am talking about the 15-23 year olds-are very conscious about the environment. They really want to buy the right products; they really want to contribute to the environment.
Does this perception of (and attitude towards) the environment vary from region to region?
Robert van de Kerkhof: That's a very good question. Had I answered it before the research, I might have said that there's a huge difference. The younger people around the world are much more conscious about impacts on environment than, say the 25+ people.
Amit Gautam: That's part / result of education. We, on our part, never grew up being that conscious. But now that's part of education. Small kids are going out and planting trees. Schools are taking up the responsibility (of educating children on environment).
Robert van de Kerkhof: If you look at the younger people-our target audience-they are much more conscious. Take, for example, the case of women. The ones who are in the 30-40 age group do not look at the hang-tag; they do not care what is their garment. They look first at the aesthetics: oh, this looks good, the shape is good, the collar is good. They touch it and say 'I want it'. But the younger ones-sure, they do first look at the design, they still touch, and then the third thing they want to know is what it is made of!
My own daughter-and it's not because I work for Lenzing-is 23, and if she is going to, say, a hot country, she says I will wear this product because it is viscose. Those kinds of insights are what is going to keep us innovating and prioritising. That's why sustainability is integrated into all aspects (of the company's work and operations).
If you look at our work, 70 per cent is textiles, and that's a segment that continues to grow. There are more and more people on the planet, as also more and more people with disposable incomes. The middle-class is one of the fastest growing segments of the population. And that's the target audience we need to reach.
So, are you planning any kind of awareness campaign?
Robert van de Kerkhof: Our EcoVero branding story is exactly that.
Amit Gautam: Let me just briefly speak about EcoVero, and how it fits into our own viscose story. People tend to think of viscose as one market in itself. Our starting hypothesis is this: viscose constitutes multiple markets at the same time. If you look at the sustainability value pyramid, at the very top-end you have the greenest and cleanest viscose that one can make; not just conversion of wood to fibre, but also other elements. At the very bottom you have parts of China where plants are being shut down even as we speak. Even the Chinese government are telling them that you are too polluting. It is to that extent that there is a challenge in terms of how wastewater that is led into the rivers, sulphur emissions, how the wood is being sourced, etc.
What we are trying to do with EcoVero is claiming that space at the top of the sustainability value pyramid with a fibre that we are saying is the greenest and cleanest viscose that you will find on the planet. This stands on three pillars. The first, as you know, is the very question of sourcing of the wood. Most of our wood is certified by the Programme for the Endorsement of Forest Certification (PEFC) and the Forest Stewardship Council (FSC). But most of the industry stops there.
Something that is as important, if not more, is the conversion of wood into fibre. The production process is energy-intensive, chemicals-intensive, water-intensive. Moreover, there is an Eco EU Label certification, which is a very difficult standard to achieve in the production process. EcoVero has 50 per cent lower emissions and water impact than any viscose that you can find in the market. This again shows the level of impact that you can achieve if you do the conversion in the right way. The Eco EU Label is awarded only to products which have a significantly lower net environmental impact than comparable products in the market.
The third factor is about transparency and traceability, because if you don't do that, the first two steps are meaningless. We have now made a change in the manufacturing process. For the first time in the cellulosic industry, at the garment stage we can identify relatively quickly with guarantee whether the certification has been done. At our testing and certification centres, we can test and tell a brand that it is EcoVero viscose and not any Chinese viscose claiming to be eco-viscose. That's an assurance for brands/retailers. It is not just a question of clamping down on fakes, but also to give confidence to a retailer.
You know the story of Welspun and what happened with Egyptian cotton. Their whole business was at risk at some point; they were apparently selling Egyptian cotton while it was not (so). There was a huge chain effect there. So here, in this case, if you claim that you have the most sustainable viscose in your garment, you cannot prove it. With this new technology that we have introduced in EcoVero, we guarantee that it is our own viscose and not anyone else's. This was not possible till this point. We have now made changes in our manufacturing process to be able to do that. And finally, we offer a package of marketing solutions around EcoVero.
How are things now going to work out within your company? Because, everything that was done earlier in a particular way will now have to be in sync with this new policy.
Robert van de Kerkhof: Yes, it is going to be a very complicated exercise. Let me give you an example, EcoVero. We had set a target, and we knew exactly what we are going to do with the product. Ok, we want to have the cleanest viscose in the world. But what does it mean in terms of emissions, water consumption, etc? Now, say, Amit wants 200,000 tonnes by 2030; but what does it mean for operations? He has already set a target for our manufacturing facility in China saying you need to make this much investment in order to make this standard. So, they will now need to take steps for the same kind of environmental protection on emissions control as we have at Lenzing. Therefore, we are setting targets, and some capital expenditure would be required; some other modifications might be required; we might need to change our sourcing policy for chemicals or whatever. So, the targets are being set, and the site managers would have to go and implement them. For EcoVero, having set the targets, the Chinese site can start producing in Q1 or Q2 next year. Amit Gautam: What this means is that we have the ability to supply that much. The export market (from here in India) to retailers in Europe-we are convinced-already is a strong market.
How and when did the EcoVero story start? What made you think that you need to go in for a new fibre?
Robert van de Kerkhof: Whenever we are on business trips, we talk to the market. Personally, I talk very little to spinners, but more to brands and retailers, and I ask them: what are your problems, what are your opportunities? The market research that I was talking about gives me opportunities to ask questions. What you asked about younger buyers, I ask them (brands and retailers) the same question: are you targeting the 18-year-old, or the 25-year-old; they are completely different from each other. There are also people who are concerned about using wood. The brands and retailers know and understand the story; they in turn need to convey to their customers. Now, that's the message that we get. It's not the product story that comes with it (i.e. EcoVero), but the guarantee.
How long did it take from the conceptualisation of the product to its launch (in the last week of May 2017)?
Robert van de Kerkhof: Eighteen months.
That's not too long, I guess? Sounds a reasonable timeframe.
Amit Gautam: Actually, it is reasonable. But the biggest element was the traceability part. So, the R&D took much longer (than usual). We revived the entire manufacturing process change. If you look at just that R&D element, it is probably a five-year-project in itself. We had to revive the process, and that is what made it take 18 months.
Robert van de Kerkhof: Yes, some fundamental R&D work had been done earlier. The concepts then went to the market and came back. Then we wondered: hey, maybe to achieve this, we can do that. And that's how the project got started. There was some information already available (in terms of R&D).
And where was this developed?
Amit Gautam: At our Austrian facilities. Initially, we will be producing there, and then gradually move on. Early next year, we will start offering the product from China.
How are you positioning all your different (fibre) products? You have Tencel, Modal, Refibra, and now EcoVero. Won't they compete with each other?
Amit Gautam: But those are all different products, right?
Robert van de Kerkhof: If you are in the industry, would all those be the same for you?
Amit Gautam: I will tell you about a discussion we had with a customer today. We were talking to a big US retailer. Viscose is largely going into the ladies segment and into knits-broadly, the dresses and the tank tops. This is a nice fabric for the ladies segment. When you have to upgrade your viscose, since there are lots of challenges, the only option would be EcoVero. The moment you do (that upgrade) with something like Tencel, it becomes a different garment altogether. It's a different drape, and becomes too heavy on the skin. They did multiple tests, and they wanted to do exactly as you said. But it (conversion of viscose to Tencel, for the fabric) didn't work out for them. Tencel is very good for denim and home textiles, and it is very important in certain areas like Pakistan and Bangladesh. It's a question of going after different segments in the market.
So, what prospects do you see in the Indian market?
S Jayaraman: You know how the viscose is being produced here. With sustainability issues catching up and consumers into responsible shopping behaviour, there is a good scope for EcoVero to pick up. Later this year, we will bring this product from Austria to the Indian market. In the coming years, we will roll out in a bigger way.
Coming back to the question of sustainability itself, when was your sustainability policy developed?
Robert van de Kerkhof: The latest sustainability document came out in April this year. We launched three new things in April. One, of course, is the sustainability policy. The second was strategy: where we want to go, and this is how we do it. Where are we today, what are all the facts, and all the things that Amit mentioned about emissions and pollution-all those things are elaborated in details in our sustainability report. The sustainability report addresses everything from procurement to R&D.
What were the thoughts that went into producing this report? Was it made to dovetail with the Sustainable Development Goals (SDGs) of the United Nations?
Robert van de Kerkhof: Yes, absolutely. In fact, that was the basis of what Peter Bartsh (sustainability director at Lenzing) presented at Planet Textiles. From what we talked about earlier, who knows what sustainability is? Everyone has a different opinion. So we had to choose a methodology. We do believe that the 17 points from the UN (i.e. the 17 SDGs) are to be kept in mind.
So, if you look at the management chapter in the report, you will see we have incorporated all of them (i.e. the SDGs). We took all the elements of sustainability from there, and then started prioritising. Some, of course, were not relevant to Lenzing at all. Then, we started fine-tuning. If you see the chapter on 'materiality analysis', you will see all the factors were ranked right from the environmental impacts to the impacts on stakeholders. These then resulted in the marking of the top priority areas. So, it started from the UN, going through a very detailed process, and then finally saying: this is what we want to do. And to be able to publish this document, everything had to be audited as well.
For how long did you work on it?
Robert van de Kerkhof: A year. Peter has his own sustainability team, with a core group of six around him. Then he needs to work with the others-the report includes human resources (HR), operational excellence, etc. He orchestrated all the efforts. The sustainability team was formed in October 2014. That year, after becoming a board member, I asked: why does Lenzing not have a sustainability strategy and a sustainability team. After a few months, I started the team and inducted Peter, and then we started working on the methodology. Once the methodology was finalised, it still took the team 18 months to put it all together.
Therefore, do you expect some kind of chain reaction, or chain demand, so to speak?
Amit Gautam: Yes, this would have an impact on the ecosystem. When a garmenter is making something for export, he might want an Indian retailer to drive it in the local market. But to begin with, far more will happen with European retailers sourcing from India, Bangladesh or China, than an Indian retailer here asking for EcoVero. And a lot would depend on Jay (Jayaraman) driving the local market and building the demand in the domestic market.
S Jayaraman: India is a huge cotton-consuming market. Viscose is now 10 per cent of all cellulosic fibres. We consume some 6 million tonnes of such fibres, with only a tenth of that being viscose. So, overall there is a huge possibility for wood-based cellulose to grow. And with the middle-class segment growing too, these are going to be very exciting times for us.
How expensive is this product (EcoVero) going to be? Can you give a price comparison?
Amit Gautam: We don't want to talk about the price point right now. But yes, it is a specialty product; it is a premium product. What we are sure is that we are not going to link EcoVero to the China Chemical Fibre (CCF) market (which drives the entire viscose market prices). The second thing is all the prices of viscose are weekly or monthly. If you are a buyer in India, you will look at the CCF index and try to negotiate based on that. So, we will do quarterly pricing and conduct direct negotiations with the customers.
Published on: 27/09/2017
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.