Indian Textiles Make a Big Sustainability Leap, But a Hidden Challenge Is Growing

India’s textile industry—one of the country’s most water-intensive and globally scrutinised sectors—is undergoing a quiet but significant shift. According to the latest ICRA ESG Ratings report, nearly 74% of textile companies have now adopted Zero Liquid Discharge (ZLD) systems in FY25, marking one of the sector’s most ambitious transitions toward sustainable water management.

Zero Liquid Discharge is more than a compliance checkbox. For an industry that guzzles millions of litres of water across yarn, fabric, dyeing and integrated operations, it signals a structural move toward resource efficiency, circularity and environmental accountability. And with global and domestic ESG norms tightening every year, the pressure to transform has never been greater.

ICRA’s review, which evaluated 191 listed companies across apparel, yarn & fabric, and integrated segments, looked beyond headline claims to understand how deeply sustainability practices have taken root.

The findings, however, are a study in contrasts.

On one hand, water management is clearly strengthening through widespread ZLD adoption. On the other, waste generation intensity has risen by nearly 19% in FY25. This spike, ICRA notes, may partly reflect better disclosure, but it also underlines a persistent challenge: waste streams are still growing even as water discharge falls.

DARK CLOUDS & A SILVER LINING

There is, however, a silver lining. Waste recycling rates improved from 77% in FY23 to 80% in FY25, signalling steady—though still gradual—progress in resource circularity.

Governance practices are also maturing unevenly across the value chain. More than 57% of integrated textile companies now have formal ESG committees, and 71% have set explicit emission-reduction targets. Apparel and yarn/fabric companies are progressing more cautiously, suggesting a widening maturity gap within the industry.

But the biggest concern highlighted by the report is energy transition. Despite ambitious decarbonisation rhetoric globally, renewable energy accounts for just 8% of the textile sector’s energy mix, mostly from solar and biomass systems used to offset thermal loads in dyeing and finishing. Even more telling: just 21% of companies disclosed their Scope 3 emissions, signalling how far the industry is from full value-chain transparency.

The timing could not be more critical. With the European Green Deal and Carbon Border Adjustment Mechanism (CBAM) set to impose stricter checks on carbon-intensive imports, Indian textile manufacturers face escalating scrutiny — and rising competitiveness risks — unless they accelerate decarbonisation.

As Sheetal Sharad, Chief Ratings Officer at ICRA ESG Ratings Limited, puts it: “The textile sector’s sustainability transition is underway, but the pace must quicken.” She notes that while compliance-driven practices laid the foundation, the next leap will demand advanced technologies such as low-liquor-ratio dyeing, hybrid RO systems, and scaled renewable energy adoption.

The industry has taken a big step forward on water. The next battle—waste, energy, and emissions—will determine whether Indian textiles can compete in a carbon-constrained world.