Report warns of wood fibre risks for packaging supply chains

As India’s eCommerce packaging and MMCF textile sectors (including rayon and viscose) become more reliant on imported wood pulp and recovered fibre, tightening global wood supply, climate-related disruptions, and new EU due diligence requirements can increase cost, continuity, and compliance risks for export-oriented manufacturers. 

With Asia’s paper production surging 60% from 2000 to 2021, Indian brands face urgent pressure to strengthen fibre security. The report encourages a pivot to low-risk alternatives such as textile waste or agro-residues, such as sugarcane bagasse and rice straw, where India holds a natural competitive advantage, for more resilient and circular supply chains.

The Brief, jointly developed by Canopy and Finance Earth, a social enterprise specialising in investment strategies for nature, climate, and communities, reveals how surging demand from bioenergy, construction, and packaging continues to outpace sustainable wood supply. Climate pressures — like worsening wildfires and intensifying competition for land — are tightening global pulp supply, echoing vulnerabilities in India’s Northeast forest regions and increasing the risks and exposure that come with greater reliance on imported pulp and recovered fibre.

At the same time, the European Union Deforestation Regulation (EUDR), effective December 2026, requires exporters to certify products as “deforestation-free,” posing material market access and compliance risks for Indian exporters across textile hubs like Tiruppur and Ludhiana, as well as fast-growing packaging clusters serving e-commerce, food, and FMCG sectors.

Key risks for the Indian industry

Rising Demand: Global wood demand driven by energy transition and eCommerce packaging is outpacing what forests can sustainably supply. This can intensify raw material price volatility for sectors like India’s USD 200-billion-plus textile and paper ecosystem .

Supply constraints: Climate stressors such as droughts, land competition, and ecosystem degradation are limiting wood availability and quality, which can exacerbate India’s low waste paper recovery rate and increase dependence on imported fibre.

Compliance pressures: Regulations such as EUDR and evolving human rights due diligence norms could add to compliance costs, potentially squeezing margins for Indian exporters serving EU markets.

Nicole Rycroft, founder and executive director of Canopy, said: “India has a remarkable opportunity right now. With the right partners around the table, waste textiles and agricultural residues like bagasse and straw can become the building blocks of lower-carbon, circular fibre supply chains — reducing pressure on global forests while strengthening industrial resilience in India. For Indian producers and brands, this is a chance to future-proof sourcing, stay ahead of rising expectations in key markets, and unlock new competitiveness through materials that are made to perform, made to scale, and made in India.”

The brief outlines a three-part framework that can strengthen India’s fibre resilience and export readiness:

Scale alternatives: Accelerate the adoption of circular fibres derived from agricultural residues and recycled textiles to reduce dependence on high-risk forest sources.

De-risk wood: Strengthen sourcing through FSC certification, full traceability, and screening for ecological and social risks, including impacts on Indigenous and forest-dependent communities.

Future-proof: Apply scenario planning to anticipate regulatory shifts, climate shocks, and demand surges, guiding capital towards sustainable fibre technologies and domestic fibre scaling.

Canopy will engage Indian brands, manufacturers, investors, policymakers, and innovators to accelerate the adoption of these solutions protecting forests while strengthening India’s position as a competitive, low-risk supplier to global markets.